RELIANCE - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 20 Dec 25, 11:16 pm

Fundamental Rating: 3.4

📊 Financials: Reliance Industries has reported quarterly PAT of ₹9,129 Cr vs ₹10,036 Cr previously, showing earnings moderation. EPS at ₹34.7 supports earnings visibility. ROE at 6.61% and ROCE at 7.57% reflect modest capital efficiency relative to scale. Debt-to-equity ratio of 0.37 indicates moderate leverage, manageable given diversified cash flows. Dividend yield of 0.36% is low, offering limited income support.

💹 Valuation: Current P/E of 54.2 is significantly higher than industry PE of 11.3, suggesting steep overvaluation. Book value ₹413 vs CMP ₹1,565 implies a high P/B multiple (~3.8x). PEG ratio of -14.7 highlights weak earnings growth relative to valuation. Intrinsic value appears lower than CMP, signaling caution despite strong business fundamentals.

🏭 Business Model: Reliance operates across energy, petrochemicals, retail, and telecom (Jio). Competitive advantage lies in scale, diversification, and strong market positioning. Risks include regulatory challenges, margin pressures in refining, and capital-intensive expansion strategies.

📈 Entry Zone: Technically, support lies near ₹1,400–₹1,450 (DMA 200 zone). CMP at ₹1,565 is close to its 52-week high (₹1,581), limiting upside. Entry is advisable only on dips closer to ₹1,400 for margin of safety.

📌 Long-term Holding: Strong fundamentals, diversified business model, and market leadership make Reliance attractive for long-term holding. However, valuations are stretched, so accumulation should be cautious and preferably on corrections.

Positive

• 📊 EPS of ₹34.7 supports earnings visibility.
• 🏭 Diversified business model across energy, retail, and telecom ensures resilience.
• 📈 Moderate debt-to-equity ratio (0.37) supports financial stability.
• 📈 Increase in DII holdings (+0.53%) shows domestic institutional support.

Limitation

• ⚠️ High P/E ratio (54.2) compared to industry average (11.3).
• 📉 Weak ROE (6.61%) and ROCE (7.57%) reflect modest capital efficiency.
• 💸 Low dividend yield (0.36%) offers minimal income support.
• 📉 PEG ratio of -14.7 highlights valuation ahead of earnings growth.

Company Negative News

• 📉 Decline in FII holdings (-0.56%) indicates reduced foreign investor confidence.

Company Positive News

• 📈 Increase in DII holdings (+0.53%) shows domestic institutional support.

Industry

• 🏭 Diversified conglomerate sector trades at industry PE of 11.3, highlighting Reliance’s premium valuation.
• 📊 Industry growth supported by energy demand, retail expansion, and telecom penetration.

Conclusion

⚖️ Reliance Industries is fundamentally strong with diversified operations and market leadership, but valuations are stretched. Entry is advisable near ₹1,400–₹1,450 support zones. Long-term holding is justified, but accumulation should be cautious unless profitability improves to justify premium multiples.

Would you like me to extend this with a peer benchmarking overlay against conglomerates like Adani Enterprises and Tata Group companies to highlight comparative valuation and efficiency?