Reliance Shares Slide After Q3 Profit Miss as Retail Growth Slows and Energy Weakness Persists

Shares of Reliance Industries fell sharply on Monday after the conglomerate posted a third-quarter profit that missed market expectations, reinforcing concerns that its key growth engines are losing momentum at a time when investors are already uneasy about the pace of its long-promised shift away from hydrocarbons.

The stock dropped as much as 2.7% in early trade and was among the top five losers on the Nifty 50 index, trading around 1,426.60 rupees by mid-morning. The sell-off followed Reliance’s disclosure on Friday that it earned 186.45 billion rupees ($2.06 billion) in profit for the October–December quarter, below the 196.44 billion rupees analysts had expected, according to LSEG data. This marked the group’s third consecutive quarterly profit miss, a rare run for a company long regarded as one of India’s most reliable earnings compounders.

At the center of the disappointment was Reliance Retail, which has been positioned by management and investors alike as a core pillar of future growth. While revenues continued to rise, profitability came under pressure as margins narrowed and earnings growth slowed sharply. Core margins at the retail unit slipped to 8% from 8.6% a year earlier, reflecting heavy festive discounting, continued investment in hyper-local delivery and quick-commerce capabilities, and a one-off hit linked to the rollout of India’s new labor code.

Core earnings from retail grew just 1.3% to 69.15 billion rupees, a dramatic slowdown from the 9.5% growth recorded in the same quarter last year.

Analysts at Emkay said the softer showing was partly due to timing effects, noting that the festive season was brought forward this year, pulling some demand into the previous quarter. They also highlighted the one-month impact of the consumer products demerger, which distorted year-on-year comparisons and weighed on reported growth.

Still, the results have reignited debate about whether Reliance’s retail business is entering a more mature phase, where sustaining double-digit earnings growth will be harder amid intense competition from both organized rivals and fast-scaling digital-first players. Reliance has been expanding aggressively across formats, from neighborhood stores to online and quick-delivery platforms, a strategy that strengthens its long-term footprint but comes at the cost of near-term margins.

The weakness in retail was compounded by a further deterioration in the oil and gas segment. Earnings from the business fell 12.7%, while revenue declined 8.4%, hit by lower output and weaker price realizations from the ageing KG-D6 fields, alongside higher maintenance costs. The performance underscores the structural challenges facing Reliance’s upstream operations, even as energy continues to provide a substantial portion of group cash flows.

Reliance’s broader Oil-to-Chemicals (O2C) business, which includes refining and petrochemicals, remains profitable but increasingly cyclical, leaving investors focused on how quickly the company can tilt its earnings mix toward more stable, consumer-driven segments. UBS said it had trimmed its near-term estimates for both O2C and retail, but maintained that the group still offers scope for a valuation re-rating as earnings before interest and taxes increasingly shift toward digital and retail, reducing dependence on oil and gas.

That longer-term view is echoed by analysts at Systematix, who forecast that between FY25 and FY28, Reliance’s O2C, retail, and Jio businesses will deliver revenue compound annual growth rates of about 5%, 12%, and 9%, respectively. In contrast, oil and gas revenues are expected to shrink by around 12% over the same period, reinforcing the narrative of a business in transition rather than decline.

Investor sentiment, however, appears cautious in the near term. Reliance has enjoyed a premium valuation for years on the back of its scale, balance sheet strength, and execution track record. Repeated earnings misses now raise questions about the timing and cost of its transformation, particularly as it continues to spend heavily to defend market share in retail and expand its digital ecosystem.

For now, the market reaction suggests that investors are willing to give Reliance credit for its long-term strategy, but are becoming less forgiving of short-term slippage. Analysts believe these key issues: how quickly retail margins stabilize, whether digital growth accelerates, and how the company manages the decline in its oil and gas business, will be critical in determining whether the stock can regain momentum after its latest stumble.