Fuel demand and ARPU expansion key to RIL growth
Reliance Industries gained 2.6% on bourses amid weakness in the broader market on Friday following better than expected performance in the third-quarter driven by the retail and O2C segments. On the retail front, the company continued to add stores on a net basis but the area declined reflecting focus on profitable growth. After a festive demand pull, the growth rates for the retail segment are expected to normalise in the fourth quarter. The O2C segment may face pressure given weaker oil and polymer cracks at the beginning of the March quarter.
The digital segment is expected to show normalisation in the net subscriber additions, which may limit the average revenue per user (ARPU) expansion.
The digital segment reported a sustained net subscriber addition and improved ARPU helped by tariff revisions. Of the 3.3 million net additions, two million were in the home broadband connections category implying increasing penetration. In addition, data traffic grew by 22% year-on-year and 3.3% sequentially to 46.5 billion. However, the ARPU growth at 4.2% sequentially missed analyst estimates of 5-5.5% increase reflecting a lower benefit of rising tariffs.
The next round of tariff increase is expected in December 2025, which means the ARPU improvement will depend upon the introduction of new plans and user adoption of 5G services. In the December quarter, 5G subscriber base expanded by 14.9% sequentially to 170 million and contributed 40% to data usage.
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