Why Reliance’s profit looks like it fell 25% – the real reason is one accounting quirk from last year

At first glance, Reliance Industries’ Q1 FY27 results look like a step backward: net profit of Rs 23,196 crore, down 25% from the same quarter a year ago. But the headline number hides a simpler explanation than a weaker business — a year earlier, Reliance had booked a one-off gain of Rs 8,924 crore from selling a stake in Asian Paints, and that gain simply did not repeat this quarter.

Strip out that comparison effect, and the underlying numbers point the other way. Revenue rose 25% to Rs 3.1 lakh crore, lifted by strong performances at the oil-to-chemicals (O2C) business and Jio’s digital services. Ebitda climbed 10% to Rs 51,403 crore, even as expenses rose 27% to Rs 2.9 lakh crore. The profit figure also beat analysts’ average estimate of Rs 18,550 crore, despite the year-on-year decline.

Jio, in particular, kept growing: Ebitda rose 16% to Rs 21,255 crore, with average revenue per user up 3% to Rs 216 on a better subscriber mix and seasonal gains, partly offset by broadband promotions. The telecom operator, launched in 2016, had 533 million customers as of June 30 — the world’s second-largest by subscribers — with data traffic up 27% and voice traffic up 2%.

The O2C division, which made up 33% of total operating profit, saw Ebitda rise 17% to Rs 17,010 crore on stronger transportation fuel and downstream margins, higher crude sourcing from Russia and Latin America, and lower-cost ethane feedstock. Higher crude, freight and insurance costs, along with losses from holding domestic fuel prices steady and the reintroduction of a special additional excise duty on diesel, petrol and aviation fuel, worked against those gains.

Chairman Mukesh Ambani framed the quarter as a steady start to the year: “Reliance has made a steady start to FY27, with all businesses delivering strong operating performance despite continuing geopolitical tensions and volatile commodity markets. This makes me optimistic about the year ahead as we advance our new energy projects and the Jio IPO.”

Retail Ebitda was roughly flat at Rs 6,309 crore even as revenue grew 8%, oil and gas Ebitda held steady at Rs 4,973 crore, and Ebitda from smaller businesses, including media and consumer products, fell 28% to Rs 1,856 crore. Reliance closed the quarter with cash of Rs 2.46 lakh crore against net debt of Rs 1.22 lakh crore, and capital expenditure of Rs 38,682 crore.

Wikimedia Commons/by World Economic Forum