The Gross Revenue of Reliance Industries Limited (RIL) for the Financial Year 2022 (FY22) has crossed the $100 billion landmark. 7.9 trillion). These revenues include goods and services tax (GST) and excise duty, which brings down RIL’s net revenue by $100 billion (approximately) for FY22. 7 trillion).
The segmental numbers show that a good proportion of RIL’s total gross revenue (including inter-segment transfers) has come from the oil-to-chemicals (O2C) segment. O2C revenue grew 56.5% year-on-year (YoY), helped by a favorable base as FY21 revenue declined. This segment contributed about 57% of RIL’s revenue in FY 2012. It is pertinent to note here that the revenue performance of the O2C segment was also driven by price rise on account of higher crude oil prices and higher price realization of downstream products. Additionally, volumes were higher by 7.5%, primarily due to transportation fuels. RIL’s revenue from the retail and telecom segments grew by about 27 per cent and 11 per cent year-on-year. Overall, these segments accounted for 34% of the revenue.
To be sure, the sharp recovery in revenue may not be too much as far as investor sentiment is concerned. “There is no point in looking at revenue for RIL. Higher oil prices play a bigger role in driving the company’s energy revenue, although tracking margin is more relevant to this business,” said one analyst requesting anonymity.
In fact, profitability is more important. Here, RIL’s consolidated income before interest, tax, depreciation and amortization excluding other income (Ebitda) grew 37 per cent year-on-year. 110,460 crore in FY12, while a growth of 11% on a two-year CAGR (Compound Annual Growth Rate) basis. Segment Earnings Before Interest and Taxes (Ebit) shows that the O2C business is equal to 57% of the company’s incremental YoY total segment Ebit.
It should be noted that while the O2C business contributes more than half of RIL’s revenue, the consumer businesses (telecom and retail) command higher valuations than O2C in analysts’ estimates. For example, in Nomura’s sum-of-the-parts (SOTP) valuation for RIL, retail and Jio account for 57% of the company’s estimated enterprise value. At the same time, O2C contributes 33% to Nomura’s estimated enterprise value. Retail and Jio together account for 68.6% of RIL’s Kotak Institutional Equities SOTP enterprise value, based on June 2024 estimates. The remaining 31.4% of EVs account for the entire energy business in Kotak’s estimates.