Reliance Industries’ retail business is showing signs of accelerating, and as capex slows and future cash flows rise, it, along with the new energy business and digital services, will drive the conglomerate into its next growth phase.

All major brokerage firms, barring Citi Research, have the RIL stock on their shopping cart with ‘Buy’ and ‘Add’ as the stock is seen as cheap compared to the Nifty50 and has a potential upside of 2-16 per cent range.

“RIL trades cheap relative to Nifty,” said Jefferies in a post-earnings note. It has forecasted a 12 per cent growth in EBITDA in FY25, with Jio Platforms contributing the major share driven by tariff hikes.

Nomura, the most bullish on the stock, has upped the target price to ₹3,165 with a 16 per cent upside. It has forecast free ash flow in FY25 at ₹30,000 crore and debt levels to decline to ₹2.7 lakh crore. “Commencement of new energy operations will be a key event in coming quarters for RIL,” it added.

Citi, which downgraded the stock to Neutral from Buy, has a more moderate view of the stock. “Capex is likely to peak this year as the company completes its 5G rollouts. Jio should continue to benefit from consolidation and improved pricing in the Indian telecom market, while strength in retail and upstream gas are added positives. New energy investments over the next few years could be a long-term value driver if backed by strong execution and a favourable domestic market, though gains here are likely to be more back-ended,” it said.

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Reliance Retail Ventures has the highest enterprise value among all the businesses in the conglomerate, and though investments have moderated, the December quarter saw the slowest rollout of the retail network in the last two and a half years, the growth momentum is continuing. The lower capex will improve free cash flows. Morgan Stanley pointed out that the revenue per square feet has room to improve as it is still below pre-Covid levels.

Consumer electronics, fashion and lifestyle and groceries grew in the19-41 per cent range in the December quarter. The EBITDA grew faster than sales due to the benefits of operating leverage.

Both the consumer-facing businesses – retail and digital – are likely to be listed soon, and analysts expect their contribution to revenue to rise to 50 per cent from 40 per cent now. Retail, which currently contributes around a third, is already at a scale where its value can be unlocked.

Brokers have valued it at $91.6-$126 billion.

“Retail is benefitting from store expansion, rising footprint, and operating leverage,” said Centrum.

Nomura expects retail revenue at Rs 3.2 trillion in FY24 and likely to rise to ₹3.9 lakh crore next fiscal year. Over the next two years, it has seen an annual revenue growth of 22 per cent and an EBITDA growth of 25 per cent.

“We expect RIL to benefit from its investments to grow retail area, which will drive strong growth for the segment,” it added.

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