Reliance Industries- 25% upside

Research Report on Reliance Industries – August 2025

by Motilal Oswal Securities Analysis – August 2025 Sector: Pvt Sector Bank Price on Analysis date: Rs. 1356 Target Rs. 1700 (25% Upside potential)

In the FY25 AGM speech, RIL’s chairman: i) reiterated his ambition to double RIL’s EBITDA by 2027 (vs. 2022 levels), ii) set a timeline of 1HCY26 for the IPO of Jio Platforms (JPL), iii) targeted 20%+ Retail revenue CAGR over the next three years, and iv) unveiled AI and FMCG as the new growth drivers. We reiterate BUY on RIL with TP of INR1,700.

Reliance Jio (RJio): Stage set for JPL’s listing by 1HCY26

–          RJio has reached the milestone of 500m subscribers (~498m at Jun’25 end) and accelerated the pace of home broadband net adds to 1m+ per month.

–          RIL’s Chairman announced that the company has made all arrangements to file for JPL’s IPO, with an aim to list the company by 1HCY26.

–          We currently value JPL at an Enterprise value of ~INR13.3t (~USD151b), based on ~13.5x Sep’27 EV/EBITDA, which implies an overall equity value of INR11.9t (~USD135b) for JPL (INR585/share attributable to RIL).

–          Based on our valuation and SEBI’s recent proposal for reducing stake dilution limit to 2.5%, JPL’s IPO could be the largest in India with a size of ~INR300b.

–          We believe the value creation through the JPL IPO could offset the negative impact of a theoretical holding company discount for RIL’s stake in JPL.

Reliance Retail (RRVL): Targets 20%+ revenue CAGR over next three years

–          Management is targeting a 20%+ revenue CAGR in RRVL over the next three years, driven by its retail footprint, robust LFL growth, and the scaling up of digital channels, as well as new categories and formats.

–          RRVL’s retail stores, which account for 70% of revenue, are likely to drive growth through high single-digit LFL growth and the addition of 2k-3k stores annually.

–          Online channel currently contributes high single-digit share of RRVL’s revenue, and management is targeting to ramp it up to 20%+ within three years.

–          Compared to the 20%+ growth target, we conservatively build in ~12% core retail (and ~14% overall RRVL) revenue CAGR over FY25-28.

–          RRVL is the biggest contributor (~35%) to our SoTP valuations for RIL, and the acceleration in its revenue growth is likely the biggest trigger for the stock.

Reliance Consumer Products: Targets INR1t revenue in next five years

–          Reliance Consumer Products (RCPL)—which houses FMCG brands such as Campa, Independence, and RR’s private labels such as Good Life and Snactac—will be demerged from RRVL and established as a direct subsidiary of RIL, with mirror shareholding to RRVL (~83.6% stake owned by RIL).

–          RCPL posted ~INR115b in revenue in FY25, with Campa expanding its market share to double digits across several states, and the daily essentials brand Independence crossing INR10b in revenue.

–          RCPL has forayed into West Asia, Sri Lanka, and Nepal, and is now exporting to West Africa, targeting to reach at least 25 countries in the next 12 months.

–          Management is targeting revenue of INR1t over the next five years, aiming to establish RCPL as the largest Indian FMCG company with a global presence over the long term.

Reliance Intelligence (RI): Democratizing AI for India

–          RIL has formed a new wholly-owned subsidiary, Reliance Intelligence (RI), with a focus on developing AI as the next growth engine, embedding AI across all of RIL’s businesses and democratizing AI for India.

–          RI will build gigawatt-scale AI-ready data centers in Jamnagar, which will be powered by RIL’s new-energy ecosystem and house RIL’s global partnerships with the world’s biggest tech companies for AI.

–          RIL has formed a JV with Meta to develop vertical and sector-specific AI solutions for Indian enterprises. RIL (70%) and Meta (30%) have committed to an initial investment of USD100m (~INR8.6b) to develop Llama-based AI platforms and tools.

–          RIL has also expanded its partnership with Google Cloud to establish a state-of-the-art, AI-focused cloud region dedicated to RIL in Jamnagar.

Energy: Resilient despite challenges; committed to INR750b investments

–          Despite supply chain disruptions, trade shifts, and challenges posed by petchem overcapacity, RIL delivered industry-leading performance in O2C in FY25 as it processed 72.2mmt crude (100% capacity utilization).

–          Management expects the O2C business to achieve substantial growth and deliver stable returns as geopolitical tensions subside.

–          RIL is investing INR750b in new projects in the O2C segment, which include 1.2mtpa PVC plant, expanded CPVC, 3mtpa PTA facility, and 1mtpa specialty polyester facility. Further, RIL’s Hazira carbon fibre facility will be one of the largest in the world.

–          RIL plans to add more new wells in the KG basin in the next fiscal, with fresh drilling scheduled to begin in 2026.

New Energy: Potential to become as big as O2C within the next 5-7 years

–          RIL’s chairman reiterated his ambition for the New Energy business to emerge as a major growth driver in the coming decades, with the potential to become as big as the O2C business within the next 5-7 years.

–          With an aim to achieve energy self-sufficiency, RIL is building world-scale giga manufacturing factories for delivering round-the-clock renewable power, producing green chemicals such as green ammonia, e-methanol, and sustainable aviation fuel.

–          The Solar PV manufacturing platform is already operational, with production of 200MW of HJT modules, which has delivered 10% higher energy yield, 20% better temperature performance, and 25% lower degradation.

–          In the coming quarters, RIL will expand to 10GWp per annum of fully integrated solar PV manufacturing capacity, which will scale further to 20 GWp capacity.

–          RIL’s battery giga factory shall commission in CY26 with 40GWh/year capacity, which will be expanded modularly to 100GWh/year.

–          The electrolyzer giga factory will be operational by CY26-end with the ability to scale up to 3GW/year to enable cost-competitive green hydrogen production.

–          RIL is developing the world’s largest single-site solar projects, spanning 550k acres of land in Kutch. At peak, RIL will deploy 55MW of solar modules and 150MWh of battery containers every day, which should enable the site to meet ~10% of India’s electricity needs within the next decade.

–          Though the initial focus is to meet RIL’s own large captive demand, the company plans to scale up to 3mmtpa green hydrogen equivalent production capacity by CY32.

–          As such, we are not building any contribution from the New Energy segment till FY27, though we believe that with scale and cost/technology superiority, New Energy could be the key profit growth driver for RIL in the longer term.

–          With ~INR600-700b operating cash flow generation for the standalone business and low capex (INR150-200b), we believe robust O2C cash flows can continue to fund New Energy capex.

Valuation and view

–          Our earnings estimates are unchanged. We expect RJio to remain the biggest growth driver with 19% EBITDA CAGR over FY25-28, driven by one more tariff hike, market share gains in wireless, and continued ramp-up of the Homes and Enterprise offerings.

–          Given the recent rationalization, a low base, and a scale-up of quick deliveries on JioMart and AJio, we expect growth to recover sharply in RRVL and build in ~14-15% CAGR in revenue and EBITDA over FY25-28.

–          After a subdued FY25, we expect earnings to recover in the O2C segment, driven by an improvement in refining margins. However, our FY28E consolidated EBITDA for O2C and E&P is ~4% lower than FY24 levels.

–          Overall, we build in a CAGR of ~11% in consolidated EBITDA and PAT over FY25-28, driven by a double-digit EBITDA CAGR in RJio and RRVL and O2C recovery.

–          We model an annual consolidated capex of INR1.3t for RIL over FY25-28E, as the moderation in RJio capex is likely to be offset by higher capex in New Energy forays. However, we believe the peak of capex is behind, which should lead to healthy FCF generation (~INR1t over FY25-28E) and a decline in consol. net debt.

–          For RRVL, we ascribe a blended EV/EBITDA multiple of 30x (32x for core retail and ~6x for connectivity) to arrive at an EV of ~INR10.1t for RRVL and an attributable value of INR605/share for RIL’s stake in RRVL. Sustained recovery in retail revenue remains the key for RIL’s re-rating.

–          We value RJio based on DCF – implied ~13.5x Sep’27E EV/EBITDA to arrive at our enterprise valuation of INR12.5t (USD142b) and assign ~USD9b valuation to other offerings under JPL. Factoring in net debt and the ~33.6% minority stake, the attributable value for RIL comes to INR585/share.

–          Using the SoTP method, we value the O2C/E&P segments at 7.5x/5.0x Sep’27E EV/EBITDA to arrive at an enterprise value of INR5.5t (or ~INR407/sh) for the standalone business. We ascribe an equity valuation of INR585/sh and INR605/sh to RIL’s stake in JPL and RRVL, respectively. We assign INR110/sh (~INR1.5t equity value) to the New Energy business and INR26/sh to RIL’s stake in JioStar. We reiterate our BUY rating with an unchanged TP of INR1,700.

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