Why Reliance’s steepest profit drop in years isn’t the bad news it looks like

At first glance, a 25% drop in quarterly profit sounds like bad news for any company. But for Reliance Industries, which reported consolidated profit of Rs 23,196 crore for Q1 FY27 on Friday, the fall has a straightforward explanation: a year earlier, the company had booked a one-off gain of Rs 8,924 crore from selling its stake in Asian Paints, a gain that simply did not repeat this quarter.

Once that one-time item is accounted for, the underlying numbers actually beat expectations. Analysts had, on average, forecast profit of Rs 18,550 crore, well below what Reliance actually delivered. Revenue for the quarter rose 25% to Rs 3.1 lakh crore, powered by strong performances from the oil-to-chemicals (O2C) division and Jio’s digital services arm, while ebitda climbed 10% to Rs 51,403 crore even as expenses rose 27% to Rs 2.9 lakh crore.

Mukesh Ambani, the company’s chairman and managing director, struck an upbeat tone in his remarks on the results: ‘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.’

The O2C division, responsible for a third of Reliance’s total operating profit, grew ebitda 17% year-on-year to Rs 17,010 crore, aided by stronger fuel margins, cheaper crude sourced from Russia and Latin America, and lower-cost ethane feedstock. That was partly offset by higher freight and insurance costs and the reintroduction of the special additional excise duty on diesel, petrol and aviation fuel.

Meanwhile, Jio added to the group’s momentum with a 16% rise in ebitda to Rs 21,255 crore and 533 million customers as of 30 June, making it the world’s second-largest telecom operator by subscribers. Reliance’s cash balance of Rs 2.46 lakh crore remained well above its net debt of Rs 1.22 lakh crore, underlining the financial cushion behind the headline profit decline.

Image: Wikimedia Commons/by World Economic Forum