Why Reliance Stock Surged Today, What Drove Its Record Q2 Results?

Reliance Industries shares surged around 8% today after the company reported strong Q2 FY27 results. Higher earnings from its oil-to-chemicals business and steady growth in Jio helped outweigh weaker profits in retail.

But the results need a closer look. A large part of the improvement came from Reliance earning more on the fuel and chemicals it sold, rather than producing significantly more. Here is what drove the record quarter and what it means for investors.

Reliance Q2 Results at a Glance

Reliance reported consolidated revenue of ₹3,62,268 crore, up 27.8% from the same quarter last year. Consolidated figures combine the performance of the parent company and its subsidiaries.

Its profit after tax, including its share of profits from associates and joint ventures, increased 33.8% to ₹29,550 crore.

EBITDA measures earnings before interest, tax, depreciation and amortisation. It helps investors compare business performance before financing costs, taxes and certain accounting expenses, but it is different from final profit or cash generated.

Why the Oil-to-Chemicals Business Was the Biggest Driver

Reliance’s oil-to-chemicals business, or O2C, processes crude oil into products such as petrol, diesel and aviation fuel. It also makes chemicals used in products such as plastics and polyester.

The business reported EBITDA of ₹25,203 crore, up 67.9% from a year earlier. This was the largest contributor to Reliance’s overall earnings improvement.

Consolidated EBITDA increased by ₹12,042 crore, while O2C EBITDA increased by ₹10,195 crore. Based on these figures, O2C contributed approximately 85% of the net increase in Reliance’s consolidated EBITDA.

This helps explain the positive market reaction. Stronger earnings from this business more than offset the decline in retail earnings.

How Earnings Rose Without a Big Increase in Production

O2C throughput slipped to 20.6 million tonnes from 20.8 million tonnes a year earlier. Throughput means the quantity of raw material processed by the business during the quarter.

Meanwhile, production meant for sale remained unchanged at 18.1 million tonnes. In simple terms, Reliance did not need to produce substantially more output to earn much more money.

The bigger difference came from stronger margins. A margin shows how much of a business’s revenue remains as earnings after the relevant costs.

O2C’s EBITDA margin increased to 10.9% from 9.3%. This means the business generated ₹10.90 in EBITDA for every ₹100 of revenue, compared with ₹9.30 a year earlier.

Why Fuel Margins Improved

Disruptions to global fuel supplies and low inventories supported higher prices for products such as diesel and aviation fuel. Reliance also benefited from adjusting where it bought crude oil and where it sold finished products.

For a refinery, higher crude oil prices alone do not guarantee higher profits. What matters is the gap between the cost of buying and processing crude oil and the money earned from selling the finished fuels.

That gap became more favourable during the quarter. Reliance’s ability to change its raw material mix and supply different markets helped it capture the opportunity.

The risk is that these unusually favourable conditions may ease. If global fuel supplies recover and refining margins narrow, Reliance would need other improvements to sustain the same level of earnings.

Jio Delivered Steady Growth

Jio Platforms’ operating revenue increased 11.4% to ₹40,475 crore. Its EBITDA grew faster, rising 16.6% to ₹21,879 crore, while profit after tax increased 13.7% to ₹8,387 crore.

The business benefited from a larger customer base and higher average revenue per user, or ARPU. ARPU measures the average monthly revenue earned from each user.

Jio’s ARPU increased to ₹218.8 from ₹211.4 a year earlier. Its total customer base also rose to 542.4 million from 506.4 million.

Together, these trends supported growth because Jio was serving more customers and earning more per user. This provided another source of earnings growth alongside the sharp improvement in O2C.

Why Retail Profits Fell Despite Higher Revenue

Reliance Retail’s gross revenue increased 6.4% to ₹91,716 crore, using the previous year’s comparison adjusted for the Consumer Brands demerger. However, profit after tax fell 24.3% to ₹2,611 crore.

Management attributed the pressure partly to festive shopping shifting into the next quarter. Investment in online commerce and higher input costs also affected earnings.

Retail recorded a ₹108 crore one-time impairment charge related to 7-Eleven. An impairment charge is an accounting expense recognised when the value of an asset or investment is reduced.

However, the charge does not explain the entire decline. EBITDA before this charge still fell 8.6%, showing that the pressure extended beyond a single accounting expense.

For investors, the next test is whether stronger festive sales and a larger online business translate into better profits. Revenue growth alone will not establish that the recovery is complete.

Lower Net Debt Added Support

Reliance’s net debt declined to ₹1,17,140 crore from ₹1,22,914 crore in the preceding quarter. Net debt broadly means borrowings after subtracting cash and relevant liquid investments.

The reduction came despite capital expenditure of ₹38,153 crore. Capital expenditure is money spent on assets such as factories, equipment and business infrastructure.

This strengthens the results because Reliance continued investing while reducing net debt. However, finance costs still increased 24.2% from a year earlier, making the cost of funding another factor to watch.

Author’s Take

Reliance’s Q2 results explain why investors responded positively. O2C delivered a sharp earnings improvement, Jio continued growing and net debt declined despite ongoing investment.

However, record group earnings do not mean every business performed equally well. Much of the improvement depended on stronger fuel margins, while retail profits remained under pressure.

The durability of this performance will depend on how much of the O2C improvement Reliance can retain, whether Jio sustains its growth and how quickly retail investment starts producing stronger earnings. Those factors will help determine whether this record quarter becomes a more lasting improvement in profitability.