---
endpoint: analytics
pattern: Energy
status: done
latency_ms: 215568
conversation_id: 18f4304e-3b56-4f33-8101-cc30285be2b1
citations: 11
created: 2026-05-31 20:55:44Z
---

# What’s the bull case bear case for Reliance Industries?

**Reliance Industries (RELIANCE IB) — Bull / Bear Case**

Based on internal CLSA coverage (most recent dedicated note: *"Reliance Industries – O-PF (Triggers ahead)"*, 24 June 2025; rating **Outperform**, TP **Rs1,650**, implying ~14% upside from Rs1,450).

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### BULL CASE

**1. End of the FY25 "lull" — KPIs inflect from 1QFY26**
- FY25 was muted because of two self-inflicted drags: (a) operational streamlining/store rationalisation in Retail and (b) post-tariff-hike subscriber consolidation in Jio. Both are now behind the company. Management said at the 4QFY25 analyst meet that "the streamlining is completed" [11].
- CLSA expects **Retail to resume high-teens YoY EBITDA growth from 1QFY26** as the benefits of rationalisation flow through [4].
- **Jio to add c.9–10m net subscribers in 1QFY26** (broadband + mobile) — vs. only +6m for *all of FY25*. April 2025 alone saw +2.6m mobile adds, the cleanest monthly print since the tariff hike [4].
- O2C tailwind: CLSA's proprietary GRM marker shows a **US$1.1/bbl QoQ gain** for 1QFY26-to-date vs. 4QFY25 refining margins [4].

**2. Multiple AGM-driven catalysts in Aug–Sep 2025**
The annual general meeting is the single biggest event-driven trigger over the next 12–15 months. Expected announcements [5]:
- **Jio IPO timeline** — the most powerful re-rating lever; the SOTP currently values Jio at Rs454/share (~28% of TP) and an IPO would force the market to mark this stake to market.
- **Quick commerce scale-up** — JioMart already at <30-minute delivery across 4,000+ PIN codes, daily orders +62% YoY.
- **FMCG (Campa Cola) ramp** — Campa hit **Rs11,500cr revenue in FY25**, claimed as India's fastest-growing FMCG player; new launches (Campa Energy, Spinner sports drink) and ME/Asia exports planned.
- **New energy commissioning timelines** — solar gigafactory, electrolyser, battery manufacturing.
- **JioStar OTT** — post-merger FY25 revenue Rs9,497cr, IPL-driven ad growth.

**3. CLSA's catalyst list — explicit 12-month roadmap**
"Flow-through of recent tariff hike for Jio, recovery in retail's growth momentum and Jio AirFiber led positive momentum in broadband subscribers should drive improvements. Start of new energy projects and possible IPO of Jio are other triggers over next 12-15 months" [2].

**4. Conservative valuation in an extended market**
- CLSA's core thesis: "*The stock is trading in a narrow range to its conservative valuation, which builds in a depressed valuation for each of its business units… In an otherwise extended valuation of the Indian market, Reliance's conservative valuation makes it an attractive bet for most large cap portfolios*" [1].
- SOTP target Rs1,650 is built from: O2C Rs380 (8x FY27 EV/EBITDA), India upstream Rs35 (DCF, 10% WACC), Jio Rs454 (13.2x EV/EBITDA, in line with Bharti), Retail Rs525 (28x EV/EBITDA, 10% premium to peers), New Energy Rs235, other subs/investments Rs51, net of standalone debt [7].
- Implies **27.9x FY27 PE / 12.1x FY27 EV/EBITDA** — toward the lower end of recent trading bands.

**5. Read-across from listed retail peers re-rating**
Listed retail peers have outperformed Nifty YTD by 4–17% (Avenue Supermarts +22%, Vishal Mega Mart +22%, V2 Retail +11%). With Reliance Retail's profit growth set to return, "*this… should positively rub-off on valuations for Reliance Retail*" [6].

**6. Structural growth runway through FY30**
Management's stated aim is to **double Jio and Retail, and ramp New Energy to O2C's size**, doubling Reliance's overall scale by end-FY30 — the multi-year bull case [1].

**7. Deleveraging supports re-rating**
- Net debt/equity falls from **30.4% (FY23) → 12.1% (FY27CL)**.
- Net debt/EBITDA from **1.8x → 0.7x** over the same window.
- Capex/sales declines from 29% (FY23) to ~10% by FY27 as the heavy investment cycle eases — FCF turns sharply positive (Rs665bn FY25, Rs708bn FY26CL) [8].

---

### BEAR CASE

**1. CLSA's own enumerated investment risks** [3]:
- Delays in commissioning of key downstream expansion projects.
- Slower-than-expected pace of subscriber additions in telecoms.
- Decrease in refining and petrochemical margins.
- Lower crude price (hits upstream realisations).
- Continued increases in telecom capex (drags FCF).
- Delays in the start of new energy projects.
- Specific tariffs and restrictions that limit export margins for the new energy business.

**2. CLSA itself is below consensus — earnings risk skewed down**
- "*Our Ebitda estimates are 2-3% below consensus for FY26-27*" [9].
- Even sharper gap on net profit: **CLSA FY26 NP Rs754bn vs consensus Rs824bn (~9% below)**, and **FY27 Rs823bn vs Rs942bn (~13% below)** [10]. If consensus is the price-setter, EPS-cut risk is the dominant near-term de-rating mechanism.

**3. Low return profile for a "growth" name**
- **ROE only ~8.5–8.7% across FY25–27CL**; ROIC ~6.8–7.3% [8].
- For a stock trading at ~26x FY26 PE / 2.2x PB, the return-on-capital math is unforgiving — any growth disappointment exposes the multiple.

**4. Heavy capex cycle still ongoing**
- Capex was **Rs2,563bn in FY23**, Rs1,514bn in FY24, Rs1,323bn in FY25 — falling but still elephantine. FY27CL capex still Rs1,238bn.
- New Energy is a Rs235/share component of TP but capex-heavy and execution-dependent — any slippage hits both earnings *and* the SOTP.

**5. EPS growth is modest in absolute terms**
- FY25 EPS growth: **0.0%**. FY26CL: +8.3%. FY27CL: +9.0% [8].
- For a name with 27% upside narrative, the underlying earnings CAGR (~9% FY25-27) is unremarkable — the bull case relies on multiple re-rating + Jio IPO event-arbitrage, NOT compounding.

**6. Jio's tariff-hike-led growth has consolidation risk**
- Subscriber base actually FELL from 476.5m (Jun-24) to 460.0m (Oct-24) post tariff hike; only recovered to 472.4m by Apr-25 — back to mid-2024 levels after nearly a year. Continued ARPU push without volume could repeat the consolidation episode.

**7. O2C cyclicality and crude exposure**
- A US$1.1/bbl QoQ GRM gain is the bull setup, but the same lever swings down. The companion CLSA oil & gas notes ("Double whammy for oil", "Expensive LNG hurting demand", "A weak quarter") repeatedly flag refining margin and LNG demand pressure as ongoing concerns for Reliance.

**8. Geopolitical / tariff overhang on new energy**
- CLSA explicitly calls out "*specific tariffs and restrictions that limit export margins for the new energy business*" as a risk [3] — directly relevant given US tariff actions on Indian goods through 2025.

---

### Summary Scorecard

| Lens | Bull | Bear |
|---|---|---|
| **Rating** | Outperform (O-PF) [1] | CLSA NP estimates ~9–13% below consensus [10] |
| **TP / upside** | Rs1,650, +14% upside [6] | ROE only ~8.7% at FY27 [8] |
| **FY26 growth** | EBITDA +11%, EPS +8% [8] | FY25 EPS growth = 0% [8] |
| **Catalyst window** | AGM Aug–Sep 2025; possible Jio IPO [5] | Streamlining only "just" completed [11] |
| **Margin direction** | Retail high-teens EBITDA from 1QFY26, +US$1.1/bbl GRM [4] | Risk of weaker refining/petchem margins, lower crude [3] |
| **Balance sheet** | Net debt/EBITDA 1.4x → 0.7x by FY27 [8] | Still Rs1.2tn+ annual capex through FY27 [8] |
| **Hidden value** | Jio + Retail re-rating + New Energy SOTP Rs235 [7] | New energy delay risk; tariff restrictions [3] |

**Verdict per CLSA**: The risk/reward is tilted to the upside because (a) operational drags of FY25 are now behind, (b) the AGM offers a dense catalyst window, and (c) the SOTP is built on conservative multiples for each business — but the ~14% TP upside is modest, the earnings CAGR is single-digit, and **the thesis rests heavily on the Jio IPO and successful execution in retail / new energy** rather than on through-cycle earnings power.

---

**Sources**
[1] Reliance Industries – O-PF (Triggers ahead) — CLSA (24 Jun 2025) — Investment thesis section — 607962717LinqAlpha.PDF
[2] Reliance Industries – O-PF (Triggers ahead) — CLSA (24 Jun 2025) — Catalysts section — 607962717LinqAlpha.PDF
[3] Reliance Industries – O-PF (Triggers ahead) — CLSA (24 Jun 2025) — Investment risks — 607962717LinqAlpha.PDF
[4] Reliance Industries – O-PF (Triggers ahead) — CLSA (24 Jun 2025) — 1QFY26 outlook (Retail high-teens, Jio +9-10m, GRM +US$1.1/bbl) — 607962717LinqAlpha.PDF
[5] Reliance Industries – O-PF (Triggers ahead) — CLSA (24 Jun 2025) — AGM catalyst window (quick commerce, FMCG, JioStar, Jio IPO) — 607962717LinqAlpha.PDF
[6] Reliance Industries – O-PF (Triggers ahead) — CLSA (24 Jun 2025) — Retail peer re-rating, O-PF reiterated, Rs1,650 TP, +14% upside — 607962717LinqAlpha.PDF
[7] Reliance Industries – O-PF (Triggers ahead) — CLSA (24 Jun 2025) — SOTP table (FY27 basis) — 607962717LinqAlpha.PDF
[8] Reliance Industries – O-PF (Triggers ahead) — CLSA (24 Jun 2025) — Financials at a glance table, FY23–FY27CL — 607962717LinqAlpha.PDF
[9] Reliance Industries – O-PF (Triggers ahead) — CLSA (24 Jun 2025) — CLSA Ebitda 2-3% below consensus — 607962717LinqAlpha.PDF
[10] Reliance Industries – O-PF (Triggers ahead) — CLSA (24 Jun 2025) — CLSA vs consensus net profit table (FY26/FY27) — 607962717LinqAlpha.PDF
[11] Reliance Industries – O-PF (Triggers ahead) — CLSA (24 Jun 2025) — 4QFY25 analyst meet — operational streamlining completed — 607962717LinqAlpha.PDF

## Citations

- [1] **607962717LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607962717LinqAlpha.PDF>
- [2] **607962717LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607962717LinqAlpha.PDF>
- [3] **607962717LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607962717LinqAlpha.PDF>
- [4] **607962717LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607962717LinqAlpha.PDF>
- [5] **607962717LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607962717LinqAlpha.PDF>
- [6] **607962717LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607962717LinqAlpha.PDF>
- [7] **607962717LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607962717LinqAlpha.PDF>
- [8] **607962717LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607962717LinqAlpha.PDF>
- [9] **607962717LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607962717LinqAlpha.PDF>
- [10] **607962717LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607962717LinqAlpha.PDF>
- [11] **607962717LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607962717LinqAlpha.PDF>

