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<keyword id="19938772" type="General" weightage="20" keywordseo="Reliance-Industries-Ltd" source="keywords" meta.keywordsubtype="org" meta.entityname="Reliance Industries Ltd" meta.hostid="267" meta.entityid="Reliance Industries Ltd">Reliance Industries Ltd</keyword> has won a vote of confidence from global rating agencies <keyword id="20043943" type="General" weightage="20" keywordseo="SP" source="keywords">S&amp;P</keyword> and <keyword id="19950093" type="General" weightage="20" keywordseo="Fitch" source="keywords">Fitch</keyword> after its robust earnings in the fiscal year ended March 31, 2024, supported its growth aspirations and kept leverage under check. S&amp;P Global Ratings and Fitch Ratings in separate notes spoke of its <keyword id="19957744" type="General" weightage="20" keywordseo="EBITDA" source="keywords">EBITDA</keyword> (loosely known as pre-tax profit) rising in the current fiscal year and next on rising revenue and past investments. "<keyword id="19896380" type="General" weightage="20" keywordseo="Reliance-Industries" source="keywords">Reliance Industries</keyword> Ltd's (<keyword id="20002939" type="General" weightage="20" keywordseo="ril" source="keywords">RIL</keyword>) strong earnings will keep leverage in check as the company continues to pursue growth ambitions. We expect the company's debt-to-EBITDA ratio to remain commensurate with the rating (BBB+/Stable/--)," S&amp;P said in a note. The oil-to-telecom-and-retail conglomerate's growth aspirations remain intact, it said, adding the company has ramped up investments in the media business in recent months. In 2024, it entered into binding definitive agreements with The Walt Disney Co for a media joint venture in which RIL will invest Rs 11,500 crore. The company subsequently agreed to buy Paramount Global's 13.01 per cent stake in local entertainment network Viacom18 Media Pte Ltd for about Rs 4,300 crore. "These investments are in line with RIL's strategy to diversify and have a strong presence in a few key industries," the rating agency said. Also, the company received government approval in 2024 to develop gas reserves in the KG-D6 block in the Bay Of Bengal. This could increase the company's gas production capacity by 13-17 per cent. RIL's earlier announced investments include a Rs 75,000 crore expansion plan over five years (starting 2022) for the oil-to-chemicals business. "RIL's earnings will benefit from past investments," S&amp;P said. "We project the company's adjusted EBITDA will rise 2-4 per cent in fiscal 2025 (year ending March 31, 2025)," it added. Just as in the past two years, the digital services segment (Reliance Jio Infocomm Ltd) will be the key growth driver, with segment's EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) increasing 10-12 per cent in fiscal 2025. Reliance Jio's wireless subscriber base and average revenue per user will gain from the company's investments in its 5G network since late 2022. Meanwhile, earnings in the oil and gas as well as retail segments will reap the rewards of increased production volume and a wider retail store network. "The EBITDA improvement that we expect in fiscal 2025 comes after a 14 per cent increase to Rs 1.6 lakh crore in fiscal 2024," it said. S&amp;P saw RIL's rising earnings providing it greater balance-sheet flexibility for growth. "We expect the combination of robust operating performances and continued spending to keep the company's debt-to-EBITDA ratio at 1.8x-2.0x over the next two years. This compares with our estimate of 1.7x for fiscal 2024 and our downgrade trigger of 2.5x," S&amp;P said. RIL's leverage has some distance from the upper end of the company's internal leverage target. RIL has reiterated its intention to keep its net debt-to-EBITDA ratio (by its own calculations) below 1x. The ratio was 0.65x as of March 31, 2024. Separately, Fitch Ratings said RIL's EBITDA net leverage is likely to remain below 1x in the medium term, supported by increasing cash flows and lower capex intensity, even as the conglomerate's absolute capex and investments remain high in the near term. "We expect RIL's EBITDA to increase by 8 per cent year-on-year in the financial year ending March 2025 (FY25) and 14 per cent in FY26, while capex intensity (capex/revenue) is likely to reduce below 13 per cent by FY26 (FY24: 15.3 per cent). Lower capex intensity would be driven by growing revenue and reduction in capex after FY25," it said. Fitch expected the conglomerate's Cash Flow from Operations (CFO) to be sufficient to fund its capex from FY26, which will limit additional debt funding and keep its EBITDA net leverage below 1.0x in the medium term (FY24: 0.9x, FY23: 1.1x). "Fitch estimates RIL's FY24 EBITDA net leverage at 0.9x, better than our expectation of 1.1x, driven by marginally higher EBITDA and Rs 20,900 crore of equity raised mainly from the sale of a stake in a subsidiary, even as its capex remained high at Rs 1.5 lakh crore (FY23: Rs 1.4 lakh crore)," the rating agency said in a statement. It rates RIL at 'BBB'/Stable, one notch above India's rating (BBB-/Stable). "We expect the EBITDA increase in the near to medium term to be driven by the telecom and retail businesses, supported by contribution from the upstream oil and gas segment and marginal recovery in petrochemical spreads in the oil to chemical (O2C) segment," Fitch said, adding EBITDA from digital services, largely telecom, is likely to benefit from a 10-15 per cent tariff hike and 15-20 million of additional subscribers in FY25 (FY24: 482 million subscribers). Digital services EBITDA rose by 13 per cent in FY24, as Reliance added 42 million subscribers and monthly average revenue per user increased to Rs 182. Monthly user data consumption increased by 24 per cent to 28.7 GB, one of the highest globally. Fitch expected retail EBITDA to increase by 20-25 per cent in FY25 (FY24: 28%) as Reliance continues to expand its physical stores and digital channels. EBITDA would be supported by a 22.2 per cent increase in its registered customer base to 304 million in FY24. Also, O2C segment EBITDA is expected to remain above Rs 60,000 crore in FY25 (FY24: Rs 62,400 crore), as a gradual improvement in petrochemical spreads from FY24 lows is expected as a supply overhang recedes. Upstream oil and gas EBITDA should stay at around Rs 20,000 crore in FY25 (FY24: Rs 20,200 crore), assisted by the expectation of a 10 per cent increase in gas production in the first full year of operation of three gas fields in the KG-D6 block, which should offset the potential reduction in price realisation with lower gas prices in international benchmarks. 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Reliance gets thumbs-up from S&P, Fitch as strong earnings keep leverage in check

<ul><li>Reliance Industries’ consumer businesses are expected to drive earnings growth going forward.</li><li>However, RIL’s aggressive expansion in its retail and 5G investments have led to its capital expenditure rising to an all-time high in FY23.</li><li>Brokerages maintained their bullish outlook on the company, noting that the leverage levels are expected to remain comfortable thanks to strong cash flows.</li></ul>In spite of its Q4 earnings beating analyst estimates, RIL stock traded flat on Monday as the street continues to remain cautious on account of its growing capex. In March, the stock touched a 52-week low of ₹2,180, and has been trading flat since the beginning of April. And, the recent earnings report hasn’t changed the trajectory. In the morning trade on Monday, its shares rose 0.2% to ₹2,354 and gave up most of the early morning gains due to profit booking. Reliance Industries Q4 <a href="https://www.businessinsider.in/business/corporates/news/reliance-industries-q4-net-profit-of-19299-crore-beats-analyst-expectations-driven-by-retail/articleshow/99673940.cms">net profit rose</a> 19% YoY to ₹19,299 crore due to steady growth in the consumer businesses, and its revenues grew 2% to ₹2.16 lakh crore. For the full FY23, RIL <a href="https://www.businessinsider.in/business/corporates/news/reliance-industries-q4-net-profit-of-19299-crore-beats-analyst-expectations-driven-by-retail/articleshow/99673940.cms">reported</a> a 9.9% rise in net profit to ₹66,702 crore, while the earnings before interest, taxes, depreciation and amortization (EBITDA) was ahead of brokerage estimates at ₹1.4 lakh crore. The oil-to-data giant’s FY23 revenue grew 23.7% to ₹8.93 lakh crore. <cmsannotation type="cmsannotation" annotationid="Capital expenditure at an all-time high, funded by strong cash flows" comment="subhead" text="Capital expenditure at an all-time high, funded by strong cash flows">Capital expenditure at an all-time high, funded by strong cash flows</cmsannotation> While the topline and bottomline growth was ahead of estimates, RIL’s capital expenditure also rose to an all-time high of ₹1.4 lakh crore due to acquisition of 5G spectrum and rollout of 5G services. This also led to a 43% YoY rise in depreciation to ₹11,456, which impacted the company’s bottomline. However, brokerages do not seem to be concerned even as the capex and EBITDA both came in at ₹1.4 lakh crore for the whole year. “Capex rose to $17.6 billion in FY23 but this was fully funded by cash profits,” said a report by Goldman Sachs, adding that this gives a “comforting leverage guidance”. Brokerages also maintain that going forward, Jio-related capital expenditure will climb down since the company has front-loaded it as it seeks to complete the pan-India rollout of 5G by the end of 2023. <cmsannotation type="cmsannotation" annotationid="Brokerages see a 25% upside in the next 12 months" comment="subhead" text="Brokerages see a 25% upside in the next 12 months">Brokerages see a 25% upside in the next 12 months</cmsannotation> Analysts believe that RIL’s consumer business will be a key growth driver going forward. A rise in gross refining margins will be key for growth in the company’s O2C earnings, and also help it finance the new energy ambitions while maintaining debt at comfortable levels. Brokerages maintain their bullish outlook on the company, with an average target price of ₹2,954 in the next 12 months, presenting an upside of around 25%. <table style="border-width: initial; border-style: none; table-layout: fixed; width: 468pt;" class="redcator-table-advance"></colgroup><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Brokerage house </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Rating </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Target price </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Jefferies </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Buy </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹3,125 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">JP Morgan </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Overweight </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹2,960 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Goldman Sachs </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Buy </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹2,890 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Kotak Institutional Equities </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Buy </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹2,800 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">JM Financial </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Buy </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹2,900 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Motilal Oswal </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Buy </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹2,800 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Nuvama Institutional Equities </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Buy </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹3,205 </td></tr></tbody><tbody></tbody><tbody></tbody></table> Source: Brokerages <cmsannotation type="cmsannotation" annotationid="Retail business steady, but softness observed in certain segments" comment="subhead" text="Retail business steady, but softness observed in certain segments">Retail business steady, but softness observed in certain segments</cmsannotation> <keyword id="58448" type="General" weightage="20" keywordseo="Reliance-Retail" source="Orion">Reliance Retail</keyword> <a href="https://www.businessinsider.in/business/corporates/news/reliance-retails-q4-net-profit-grows-12-9-on-the-back-of-rapid-expansion/articleshow/99673732.cms">posted</a> a 12.9% growth in net profit to ₹2,415 crore in the March quarter aided by growing footfalls, new store additions and high conversions. “In retail, with very sharp retail space growth, the rising share of new commerce and FMCG forays, growth will likely sustain at a fast clip,” said a report by Kotak Institutional Equities. In FY23, the company opened over 3,300 stores taking the total count to 18,040 stores. However, as they added more stores and warehousing space, depreciation went up by 91% to ₹1,188 crore during the quarter along with finance costs that shot up by 148%. <keyword id="58448" type="General" weightage="20" keywordseo="Reliance-Retail" source="Orion">Reliance Retail</keyword> is yet to fully ramp-up its operations from stores absorbed from Future Retail, which has led to its per square feet revenue to remain below the pre-Covid levels, said Jefferies. While Reliance Retail sounded excited about its foray into FMCG and beauty space, high capex due to expansion would have resulted in higher debt levels, say brokerages. “While we like Reliance Retail’s positioning in Indian retail, we remain perplexed with poor disclosures which leaves a lot to imagination,” it said. <cmsannotation type="cmsannotation" annotationid="Jio: Adding subscribers but with low yields" comment="subhead" text="Jio: Adding subscribers but with low yields">Jio: Adding subscribers but with low yields</cmsannotation> Reliance Jio <a href="https://www.businessinsider.in/business/telecom/news/reliance-jio-net-profit-grows-1-7-sequentially-at-4716-crore-in-q4-fy23/articleshow/99674353.cms">reported</a> a net profit growth of 1.7% sequentially to ₹4,716 crore in March quarter from ₹4,638 crore last quarter. Its revenue from operations also grew marginally by 1.7% sequentially to ₹23,394 crore as compared to ₹22,998 crore in the previous quarter. “Although subscriber additions were strong and higher than expected, revenue growth was sluggish, due to disappointing ARPU growth (flat QoQ). We believe lower ARPU growth could be attributed to Jio doing away with most of the low end users and absence of any direct tariff hike in the quarter,” said Nuvama Institutional Equities in a report. The telecom business is currently focused on 5G roll out across India by December 2023. So far Jio has extended coverage of its 5G services to over 2,300 cities/towns across India. “In Jio, the near-term focus will be 5G and accelerated fixed broadband rollouts. As customer engagement picks up, we believe there is a case for tariff hike, but we conservatively assume tariff hike only after 2024 general elections,” said a report by Kotak Institutional Equities. <div type="javascript" title="Custom" contenttype="Text"><cdata><![CDATA[]]></cdata></div> SEE ALSO: <a href="https://www.businessinsider.in/stock-market/markets/news/-some-sectors-will-benefit-from-lower-energy-prices-in-fy24-a-balasubramanian/articleshow/99722850.cms">Earnings to remain volatile in FY24, but some sectors will benefit from lower energy prices, says Aditya Birla Sun Life MF’s CEO A Balasubramanian</a> <a href="https://www.businessinsider.in/finance/banks/news/yes-bank-drops-nearly-5-as-high-provisions-drag-down-its-q4-net-profit/articleshow/99721698.cms">Yes Bank stock slips 5% as high provisions drag down its Q4 net profit</a> <a href="https://www.businessinsider.in/business/corporates/news/reliance-industries-q4-net-profit-of-19299-crore-beats-analyst-expectations-driven-by-retail/articleshow/99673940.cms">RIL’s Q4 net profit of ₹19,299 crore beats analyst expectations, driven by retail</a>

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Reliance gets thumbs-up from S&P, Fitch as strong earnings keep leverage in check

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RIL’s Q4 performance keeps brokerages bullish on the company’s prospects

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