Reliance Q4 Results: O2C segment’s EBITDA slips 10% YoY to ₹15,080 crore, revenue surges 15.4%

Reliance Industries Limited (RIL), India’s largest private sector conglomerate, announced its financial results for the fourth quarter of fiscal year 2025 (Q4 FY25) on Friday, April 25, revealing a mixed performance across its diverse business segments. While the company’s overall numbers exceeded analyst expectations with modest profit growth, its flagship Oil-to-Chemicals (O2C) segment showed contrasting trends of robust revenue growth alongside declining profitability margins.

Overall Financial Performance Beats Street Expectations

On a consolidated basis, Mukesh Ambani-led Reliance Industries reported better-than-anticipated results for the quarter ended March 31, 2025. The conglomerate posted a net profit of ₹19,407 crore, representing a year-on-year increase of 2.41% compared to ₹18,951 crore recorded in the same quarter of the previous fiscal year.

The company’s revenue from operations showed stronger momentum, advancing 10% to reach ₹2,64,573 crore for the March quarter, up from ₹2,40,715 crore reported in the corresponding period last year. This double-digit revenue growth reflects the diversified nature of Reliance’s business model, with strong performances in retail and telecom segments helping to offset challenges in its energy businesses.

O2C Segment: Revenue Surge Masks Profitability Challenges

The Oil-to-Chemicals (O2C) segment, which has historically been Reliance’s core business and a significant contributor to its overall financial performance, presented a complex picture in Q4 FY25. The segment reported substantial revenue growth but faced considerable margin pressure:

Revenue Performance

The O2C segment’s revenue reached ₹164,613 crore for the quarter under review, marking an impressive 15.4% increase compared to the same period last year. This robust top-line performance was complemented by growth in exports, which rose 2.2% year-on-year to ₹73,749 crore from ₹72,172 crore in the March 2024 quarter.

The substantial revenue growth indicates strong volume expansion and possibly improved product pricing in certain categories, showcasing Reliance’s continued dominance in India’s petrochemical and refining sectors despite a challenging global environment for energy companies.

EBITDA and Margin Contraction

Despite the significant revenue growth, the O2C segment’s profitability metrics told a different story. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) dropped 10% year-on-year to ₹15,080 crore, compared to ₹16,762 crore in the March 2024 quarter.

This decline in absolute EBITDA was accompanied by a substantial compression in operating margins. The segment’s EBITDA margin declined 260 basis points (bps) year-on-year to 9.2%, down from 11.8% in the corresponding quarter of the previous fiscal year.

Factors Behind Margin Pressure

Reliance attributed the decline in O2C profitability to several specific factors:

1. Sharp fall in transportation fuel cracks: Global refining margins for transportation fuels were significantly lower compared to the same period last year, affecting the profitability of Reliance’s refining operations.
2. Lower polyester chain margins: Compressed margins in the polyester value chain impacted the petrochemical component of the O2C business.

These negative factors were partially offset by:

1. Higher volumes: Increased production and sales volumes helped mitigate some of the margin pressure.
2. Feedstock cost optimization: Efficient sourcing and optimization of raw material costs provided some cushion against declining margins.
3. Higher PP and PVC delta: Improved spreads in Polypropylene (PP) and Polyvinyl Chloride (PVC) segments offered partial relief.

The divergence between revenue growth and profitability highlights the volatile nature of the petrochemical and refining businesses, which remain highly sensitive to global commodity price movements and demand-supply dynamics.

Annual Performance of O2C Segment for FY25

Looking at the full fiscal year 2024-25, the O2C segment demonstrated similar trends of revenue strength coupled with margin challenges:

• Revenue for FY25 increased by 11% year-on-year to ₹626,921 crore ($73.4 billion), primarily driven by higher volumes and increased domestic product placement. Particularly notable was the growth in domestic sales of key products: Gasoline (+42%), Gasoil (+33%), and Aviation Turbine Fuel (ATF) (+62%).
• Segment EBITDA for the full year was lower at ₹54,988 crore ($6.4 billion), which the company attributed to “significant weakness in transportation fuel cracks and subdued downstream chemical deltas.”
• Reliance noted that its O2C earnings were supported by higher operating rates, operational flexibility, efficient feedstock sourcing, and better margin capture for domestic sales, highlighting the company’s ability to partially mitigate adverse market conditions through operational excellence.

Oil and Gas Segment Performance: Facing Production Challenges

Reliance’s Oil and Gas (Exploration and Production) segment also reported subdued performance in the fourth quarter:

• Revenue in this segment slipped marginally by 0.4% year-on-year to ₹6,440 crore.
• EBITDA declined more substantially, falling 8.6% year-on-year to ₹5,123 crore.
• The EBITDA margin saw a significant compression of 720 basis points year-on-year, settling at 79.5%, though it remains at healthy absolute levels.

Factors Affecting Oil and Gas Segment

The company provided specific explanations for the underperformance in this segment:

1. Lower gas production: Reduced output from key fields affected overall volumes.
2. Lower oil offtake from KGD6: Decreased production from the KG-D6 block in the Krishna Godavari basin impacted both revenue and profitability.
3. Higher operating costs: One-time maintenance activities increased expenses during the quarter.
4. Natural decline in KGD6 volumes: The maturing of certain fields led to expected production declines.

These negative factors were partially offset by:

1. Improved KGD6 gas price realization: Better pricing for the gas produced helped mitigate some of the volume-related revenue decline.
2. Higher CBM (Coal Bed Methane) production: Increased output from CBM fields provided some relief.

Retail and Jio Segments: Bright Spots in the Portfolio

While the energy businesses faced headwinds, Reliance’s newer business verticals continued to demonstrate strength:

• Reliance Retail surprised analysts with an encouraging set of numbers, continuing its trajectory as one of the fastest-growing retail enterprises globally and reinforcing its position as a key growth driver for the conglomerate.
• Jio Results were reported to be in line with market expectations, highlighting the stability and growth potential of Reliance’s telecommunications business, which has transformed the digital landscape in India since its launch.

The strong performance of these consumer-facing businesses underscores Reliance’s successful diversification strategy, providing balance to the more volatile energy businesses and creating multiple growth engines for the conglomerate.

Market Implications and Future Outlook

The mixed performance across Reliance’s business segments reflects the company’s ongoing transition from a predominantly energy-focused conglomerate to a more diversified enterprise with significant stakes in retail, telecommunications, and digital services.

Several key implications emerge from these results:

1. Margin Pressure in Traditional Businesses: The compression in O2C margins highlights the challenges facing the global refining and petrochemical industry, with volatile feedstock prices and uncertain demand patterns creating a challenging operating environment.
2. Diversification Strategy Validation: The stronger performance in retail and telecom segments validates Reliance’s strategic pivot toward consumer-facing businesses that offer more stable growth prospects and potentially higher margins.
3. Balance Sheet Strength: Despite challenges in some segments, Reliance’s overall financial position remains robust, providing the company with the flexibility to continue investing in growth opportunities across its portfolio.
4. Energy Transition Focus: The challenges in traditional energy businesses may accelerate Reliance’s pivot toward renewable energy and new energy solutions, areas where the company has announced significant investment plans.

Looking ahead, investors will likely focus on several key aspects of Reliance’s strategy:

• New Energy Investments: Progress in the company’s ambitious plans for renewable energy, hydrogen, and other green technologies.
• Digital Services Evolution: The development of Jio Platforms beyond core telecommunications into a comprehensive digital services ecosystem.
• Retail Expansion: Continued growth in the retail segment, particularly in e-commerce and integration with digital services.
• Recovery in O2C Margins: Potential improvement in refining and petrochemical margins as global supply-demand balances evolve.

Conclusion: Navigating Transition Amid Global Volatility

Reliance Industries’ Q4 FY25 results illustrate the company’s position at an interesting juncture in its evolution. While its traditional energy businesses face margin pressures from global commodity cycles, its newer consumer-facing ventures continue to demonstrate robust growth potential.

The contrast between the O2C segment’s revenue growth and profitability decline encapsulates the challenges of operating in the global energy markets during a period of significant transition and volatility. However, Reliance’s diversified business model and strong financial foundation provide it with the resilience to navigate these challenges while continuing to invest in future growth opportunities.

As global markets continue to evolve and energy transition accelerates, Reliance’s ability to manage this complex portfolio of businesses across different sectors will remain central to its long-term performance and shareholder value creation. The company’s strategic direction under the leadership of Mukesh Ambani suggests a continued emphasis on digital transformation, retail expansion, and energy transition as key pillars of future growth.

Read more news on NiftyNews