Reliance Industries Ltd has diversified over the last 3-4 years and aims to be a digital services and consumer products behemoth in 2023 at least. The company’s mainstay and earnings driver will still be its core energy business, if its December quarter earnings are an indication.

Its consumer business and Reliance Jio have showed slowing growth in the third quarter of 2022-23 while all the indications are there that refining, petrochemicals, exploration and production will be its backbone in 2023, according to analysts, who said the company is consolidating its consumer-facing business for the next phase of growth.

In a note, JP Morgan said it assumed that there may not be any tariff hikes by the company in 2023-24. “Overall, we still see a healthy earnings environment for RIL with the O2C and E&P businesses benefiting from China re-opening and higher volumes,” said the brokerage adding that the listing of the company’s consumer business was unlikely this year.

JP Morgan also expects the overall spending levels to moderate, with the spectrum acquisition already behind and large immediate spending in the new energy business unlikely, besides what has been already announced.

Stating that the stock’s recent underperformance was part of the overall outflows by foreign portfolio investors, driven by macro factors, the brokerage is overweight on Reliance Industries Over the last one month, the RIL stock has moved down nearly 3 per cent, compared to the benchmark Nifty50 that has moved up 1.8 per cent.

Jio Financial Services, carved out last year through a de-merger process, should be a near-term growth catalyst, depending on how it is scaled up and its expansion strategies.

O2C business

Prabhudas Lilladher said the company’s O2C business would continue to be its bedrock of the future. RIL doesn’t give gross refining margin (GRM) figures any longer, but ICICI Securities said it expects refining margins to be at elevated levels with a tighter demand-supply balance over the next 12-18 months.

The company also saw strong momentum in its upstream business and has maintained its production guidance by FY24-end. With price realisations holding firm, earnings in this segment are expected to keep growing over the next two years, said ICICI Securities.

RJio muted

The company has been aggressive in its rollout of 5G wireless services but there was no hike in tariff during the quarter and subscriber additions were lower than in previous quarters. This has resulted in a flat monthly average revenue per user.

Savings on spectrum usage charge helped the company notch up a sequential rise of 4 per cent in operating profit in Q3. ICICI Securities said it has cut Reliance Jio’s operating profit estimates by 6.2 per cent in FY23 and 2.7 per cent in FY24, with an expected delay in price hikes.

Retail strong, but slower

Reliance Retail showed a slower growth compared to the previous two quarters. After a scorching pace of revenue growth of 52 per cent and 43 per cent in the first two quarters, Q3 saw a modest rise of 17 per cent in revenue.

The management said post the festival demand that came earlier this year, consumer sentiments had become subdued with retail inflation peaking and personal loan rates also rising. The large-scale job losses also soured buying sentiments to some extent.

The company is expanding its footprint by adding more stores, making strategic acquisitions, investing in omni channel strategies and analysts see all these paying dividends over the next few years.