Reliance Industries: revenue accelerated to +27%, but EBITDA margin fell to 12.6%

On August 25, Reliance Industries reported results for the first quarter of fiscal 2026: revenue rose 27.0% year on year to INR 3,094.7 billion, but EBITDA fell 11.8% and net profit dropped 22.4%. Given the margin compression and modest dividend yield, the shares look rather unattractive: the portal's model implies 14% downside.

Key takeaways

— Revenue rose 27.0% thanks to expansion across all segments, but EBITDA margin fell to 12.6% from 18.1% a year earlier

— Net profit declined 22.4% due to operating leverage and likely one-off items

— Leverage stands at 1.36 EBITDA for the last twelve months, while net debt rose by INR 891.4 billion during the quarter

— Capital expenditure and dividends: free cash flow remains under pressure, dividend yield is only 0.47%

— Valuation: EV/EBITDA of 11.3 versus a three-year average of 12.9, but the portal's model implies 14% downside

Attractiveness

Key figures, INR bn

Revenue rose 27.0% thanks to expansion across all segments, but EBITDA margin fell to 12.6% from 18.1% a year earlier

In the first quarter of fiscal 2026, Reliance Industries' revenue reached INR 3,094.7 billion, up 27.0% year on year. This is the strongest acceleration in the last four quarters, with previous growth rates ranging from 5.1% to 12.5%.

However, quarterly EBITDA stood at INR 389.7 billion, down 11.8% from a year earlier. EBITDA margin contracted to 12.6% from 18.1%, indicating that revenue growth was accompanied by disproportionate cost increases, possibly in retail and digital services where competition is intense.

Net profit declined 22.4% due to operating leverage and likely one-off items

Net profit for the first quarter was INR 209.5 billion, down 22.4% year on year. The decline was deeper than the EBITDA drop, suggesting higher financial expenses or non-operating losses.

Net margin contracted to 6.8% from 11.1% – the lowest level in the last four quarters. In previous quarters, the margin ranged from 6.4% to 11.1%, indicating volatility, but the current figure is at the lower end.

Leverage stands at 1.36 EBITDA for the last twelve months, while net debt rose by INR 891.4 billion during the quarter

At the end of the quarter, Reliance Industries' net debt stood at INR 2,370.9 billion, up INR 891.4 billion from the previous reporting date. Over the last twelve months, net debt decreased by INR 97.9 billion, but the quarterly jump is significant.

The ratio of net debt to EBITDA for the last twelve months is 1.36 – a moderate level for a company with large investments. Nevertheless, the sharp quarterly increase in debt warrants attention: it may be related to capital expenditure or changes in working capital.

Capital expenditure and dividends: free cash flow remains under pressure, dividend yield is only 0.47%

Over the last twelve months, operating cash flow amounted to INR 1,921.1 billion, covering capital expenditure, but free cash flow likely remains constrained due to an active investment program in new energy and digital projects.

The trailing twelve-month dividend yield is only 0.47% – a low level for income-oriented investors. The company pays dividends, but the payout is insignificant relative to market capitalization, making the stock more of a growth story than a source of current income.

Valuation: EV/EBITDA of 11.3 versus a three-year average of 12.9, but the portal's model implies 14% downside

The current EV/EBITDA multiple is 11.3, below the three-year average of 12.9. Formally, the shares look cheaper than their own history, but this does not account for the margin compression.

According to the portal's model, based on EBITDA growth and a target multiple, the downside potential is -14% from the current market price. This means that even with apparent cheapness relative to past values, the fundamental valuation does not support the current market capitalization.

Valuation on the latest reported figures

Bottom line

In the first quarter of fiscal 2026, Reliance Industries delivered impressive revenue growth of 27.0%, but this growth did not translate into profit: EBITDA and net profit declined, and margins fell to lows. Leverage remains moderate, but the quarterly debt jump and low dividend yield make the stock less attractive for conservative investors. At the current valuation, despite a discount to its own history, the portal's model indicates downside potential, leading to a 'rather unattractive' verdict.