Responding to a question on how he was reading Reliance’s results across its major verticals, Choksey said, “Reliance results were in line with the estimates on the Street. Two divisions, specifically led by oil-to-chemicals, did very positively. Jio was stable and positive. Retail was a little disappointing because GST changes had an impact for one month and the festive season had shifted to Q2.”
He added that, taken together, the overall performance remained on track. Highlighting the strength of the core refining business, Choksey said, “I was happy that the oil-to-chemicals division throughput was exceeding 20 million and GRM was on a stable note. The cash cow continues to energise the entire expansion of Reliance, which started with retail and Jio and is now moving into the new energy business.”
According to him, management commentary suggests that the new energy vertical is beginning to take shape and could see visible traction over the next six months. On the consolidated picture, Choksey noted, “If you combine all the divisions, the yearly EBITDA without other income at Rs 1.85 lakh crore and debt nearing around Rs 1 lakh crore seem to be on track.”
He also pointed to valuation comfort based on a sum-of-the-parts approach. “If you put a sum of parts of all the four divisions – 600, 600, 450 and 250 for the new energy business – it seems that 1,700 to 1,850 is the target which most brokerage houses would give out,” he said, adding that currency dynamics and high replacement costs for similar global complexes further strengthen Reliance’s position.
“If you are invested in the stock, times may be positive because the rupee-dollar is nearing 91, import parity products plus some processing and exports are helping, and the capex for a similar kind of complex would be nearly two times what Reliance’s gross block is,” Choksey said. He cautioned, however, that global challenges remain an overhang even as refining margins and product cracks stay supportive.
On the retail business, which has seen margin pressure this quarter, Choksey believes the weakness is transient. “Expansion mode is on track. As I said earlier, GST changes led to an impact for a month. If you align that, it would not have much of an impact,” he said. He added that margins are largely in line with peers and recent results from Trent and DMart offered a fair indication of what to expect from Reliance Retail.“On a pan-India basis, the number of stores nearing 20,000, the square footage and per square foot sales all seem to be on track. It is a matter of time before you get the real picture of what Reliance Retail is,” he said.
Turning to Jio, Choksey identified tariff hikes as the single most important lever for earnings growth, especially as the company prepares for a potential listing. “Tariff hike is the only way because Reliance’s capex is becoming more captive with its own technology and rollouts on fibre-to-home and other initiatives,” he said.
He noted that Bharti Airtel’s ARPU remains about 20% higher than Jio’s, and even narrowing that gap partially could materially lift earnings. “If they even bridge up to a 10% differential, that would work well. Tariff will come first and then the IPO, or rather the listing, in whatever form it comes out,” Choksey said.
According to him, the Street is already factoring in a small IPO size. “The market is estimating that the IPO size would be only 2.5% of equity, which means a scarcity premium,” he added.
Overall, while near-term global uncertainties persist, Choksey believes Reliance’s diversified business model, strong O2C performance and potential ARPU-led upside in Jio leave the long-term outlook constructive.