Shares of oil to telecom conglomerate Reliance Industries had underperformed the broader markets through 2024; the stock declined 6 per cent for the year, compared with the more than 8 per cent gains for the Sensex. On Friday, however, RIL shares were the biggest gainers on the benchmark index, gaining over 2.8 per cent, even as the Sensex was down 366 points or 0.5 per cent in afternoon trading, signalling a big thumbs up from investors for its third-quarter earnings performance.
Over the years, RIL has emerged as the country's largest retailer. The performance in this segment, which disappointed investors in July-September, pleasantly surprised many in the October-December quarter. Reliance Retail reported a gross revenue of Rs 90,333 crore in the third quarter, a 9 per cent year-on-year rise, while net profit was up 10 per cent from a year ago at Rs 3,458 crore. In comparison, in the second quarter, Reliance Retail reported a 1 per cent decline in gross revenue at Rs 76,302 crore, while profit had grown 1 per cent to Rs 2,836 crore.
The strong performance in the third quarter was led by festive buying across consumption baskets, according to Isha Ambani, executive director of Reliance Retail Ventures.
Over the last year, there has been a rapid rise in quick commerce, with companies like Swiggy Instamart, Blinkit and Zepto seeing strong growth.
RIL invested in 2022 in the early quick commerce startup Dunzo. But, in the last few months, Dunzo has faced a lot of troubles. Reports in recent days indicated that the app has gone offline with the co-founder's exit.
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Reliance Retail is now looking to make amends and scale up what it calls "express delivery" at JioMart. The operating model leverages Reliance Retail's existing infrastructure enabled through a network of 2,100 stores.
"The proposition is being operated across 4,000 pin codes using a hyperlocal model capturing larger basket size through a full range of grocery, general merchandise, electronics and fashion categories, thereby resulting in industry-leading AOV (average order value)," the company said.
Separately, Reliance Retail continues to streamline its physical retail operations. The company says it opened 779 new stores in the third quarter, taking its total store count to 19,102, but its overall operational area has come down to 77.4 million square feet in Q3 from 79.4 million square feet in Q2.
Store closures remain elevated, with the company closing 623 stores in the third quarter, pointed out Sanjay Mookim, head of India equity research at JP Morgan.
Meanwhile, the company's premium brands business has entered into a franchise agreement to bring US luxury retailer Saks Fifth Avenue to India. It has also entered into a joint venture with mother and baby products retailer Mothercare to acquire the brand and its IP assets for the Indian subcontinent.
According to Mookim, RIL's retail earnings performance was better than the flattish outcome that was anticipated. The recovery at least "partially addresses concerns of weak overall consumption and the impact of quick commerce on traditional/ value retail," he said.
Mookim noted that the retail business accounted for around 40 per cent of RIL's valuation. While the growth deceleration had driven implied valuations down "materially," it can now reverse with better outcomes and commentary, he said.
Citi's Saurabh Handa noted the rebound in retail performance was the key highlight in RIL's strong third-quarter earnings.
"We are enthused by the strong performance in the third quarter, especially in retail. Softness in this segment had been a key drag on stock performance and investor sentiment, which we believe should now reverse," said Handa.
Within the retail segment, RIL's B2C grocery business grew 37 per cent year-on-year. Its consumer electronics business saw 12 per cent growth, fuelled by new product launches and promotions in the festive season. RIL's online fashion platform AJIO has expanded its product catalogue to 2.2 million. Reliance Retail is also expanding the presence of its consumer brands like Campa and Independence across general trade.
The company says both Campa and Independence are projected to cross Rs 1,000 crore in revenue each in the current financial year. Overall, its consumer brands, across categories, reported a Rs 8,000 crore revenue over nine months of April-December.
Analysts at Jefferies India believe "worst is likely behind" in the retail business.
"RIL stock has corrected 20 per cent since its July peak on slower earnings growth and concerns about retail's growth over the medium term. Recovery in retail's revenue growth to high single digits signals consolidation is largely behind, strengthening our case for an FY2026 growth recovery to 15 per cent," the analysts said.
How its business grows, especially quick commerce, where it faces competition from large startups like Blinkit and Instamart, who have had huge growth, and how its consumer brands continue to scale up will be something to watch out for in coming quarters.