RIL’s pre-tax profit was over ₹1 lakh crore; Is a split looming?

Reliance Industries Ltd (RIL), the largest Indian company by market value, posted a 7.3% increase in consolidated net profit to ₹79,020 crore in FY24, while gross revenue crossed ₹10 lakh crore. The two young companies in the conglomerate – Reliance Retail Ventures Ltd (RRVL) and Jio Platforms Ltd (JPL) – posted profits of ₹11,101 crore (up 20.9%) and ₹21,423 crore (up 12%) respectively ). Standalone profit of RIL, which houses its major oil refining and petrochemicals businesses, stood at ₹42,042 crore, compared to ₹44,190 crore in the previous year.

The question is what next. The group’s consolidated net debt stood at ₹1.16 lakh crore, despite the 5G rollout costing ₹2 lakh crore and massive retail and FMCG expansions. The exploration and production investments in KG Basin are also over. It still has a cash balance of ₹2.08 lakh crore on books. Given the current cash flow, the company will be able to repay the entire net debt portion with a profit of one and a half years.

There is currently only one major investment underway: the five gigafactories for solar panels and battery production. The earmarked investment for the project is ₹75,000 crore.

The investors are now expecting a bifurcation with IPOs of Jio and retail companies as this would provide better valuations for the companies. Both companies are run by two separate teams headed by chairman Mukesh Ambai’s children Isha and Akash. The companies have reached the size to generate cash flows to meet capital investments and manage debt.

RIL is valued at ₹20 lakh crore in the stock market at a price-to-asset of 44.83.

Mukesh Ambani in the FY24 results statement said that the initiatives across RIL’s operations have made a remarkable contribution in promoting the growth of various sectors of the Indian economy. He added that RIL became the first Indian company to cross the threshold of ₹1 lakh crore in pre-tax profit.

The digital services sector has been boosted by the accelerated expansion of the subscriber base, supported by both mobility and fixed wireless services. It has more than 108 million 5G customers. Reliance Retail, which started opening stores aggressively since 2016, has 18,836 stores across the country. It has also started its new FMCG business with the acquisition of brands and the launch of new ones. The KG-D6 block has achieved a production of 30 MMSCMD and now accounts for 30% of India’s domestic gas production.