Report Published as on 11th July 2024
| Ticker | RELIANCE |
| Company Name | Reliance Industries |
| Shariah Compliance | PASS |
| DP-Ratio | 1.69% |
We have conducted a comprehensive review on Reliance Industries from a Shariah point of view and analysed its sources of income to know whether they are complying with Shariah principles.
Reliance Industries Limited is an Indian multinational conglomerate headquartered in Mumbai. Its businesses include energy, petrochemicals, natural gas, retail, entertainment, telecommunications, mass media, and textiles. Reliance is the largest public company in India by market capitalisation and revenue, and the 100th largest company worldwide.
The company’s petrochemical, refining, and oil and gas-related operations form the core of its business; other divisions of the company include cloth, retail, telecommunications, and special economic zone (SEZ) development.
As of March 2023, the company had 254 subsidiary companies and 15 associate companies.
Let’s have a look at the operating segments from which the company derives its revenue and apply the Shariah screens to them:
Operating Revenue: (In INR Crores)
for the year ended 31st March 2023
| Segments | Revenue | Non -Permissible Revenue | % of Non -Permissible Revenue | Non -Permissible Segment Classification | Comments |
| Oil to Chemicals | 5,69,894 | – | – | – | – |
| Oil and Gas | 10,564 | – | – | – | – |
| Retail | 2,26,014 | 974.2 | 0.43% | Alcohol | – |
| Digital Services | 17,928 | 2,988 | 16.67% | Music & Television | – |
| Others | 66,911 | – | – | – | – |
| Total | 891,311 | 3,962.2 | 0.44% | – | – |
Segment Breakup
Oil to Chemicals:
The Oil to Chemicals (O2C) business portfolio spans transportation fuels, polymers and elastomers, intermediates and polyesters. The O2C business includes world-class assets comprising refineries and petrochemical units that are deeply and uniquely integrated across sites along with logistics and supply chain infrastructure.
Oil and Gas:
The Oil and Gas segment includes exploration, development and production of crude oil and natural gas.
Retail:
Reliance Retail operates an integrated network of stores, digital commerce and new commerce platforms. Many brands like Reliance Fresh, Reliance Footprint, Reliance Time Out, Reliance Digital, Reliance Wellness, Reliance Trends, Reliance Autozone, Reliance Super, Reliance Mart, Reliance iStore, Reliance Home Kitchens, Reliance Market (Cash n Carry) and Reliance Jewel come under the Reliance Retail brand.
Digital Services:
The Digital Services segment includes provision of a range of digital services. Jio is augmenting India’s largest digital services platform with the introduction of 5G capabilities and cutting-edge Fixed Wireless Access (FWA) solutions.
Others:
Other business segments which are not separately reportable have been grouped under the Others segment.
Tricky Areas From a Shariah perspective
- The first key concern regarding Reliance Industries is the sale of alcohol through its retail sector. The highest percentage of its operating revenue is earned by Reliance Industries through its retail sector through the sale of a variety of items ranging from groceries to apparel to digital devices all the way to jewelry. These items are sold through different brands such as Jio Mart (Groceries), GAP (Apparel), Ancestry (Ethnic wear) etc. There are 29 such brands under Reliance’s Retail sector, out of which only 1 (Freshpik) was found to sell alcohol. In its catalogue too, alcohol (wines) was just 1 of 12 categories of items sold there. When appropriated, this comes out to be 0.43% and the same from the revenue from retail has been assumed as BNPI.
- In the Digital Services segment, Reliance provides various services under the “Enterprises”, “Small Merchants and Business” segment such as JioChat, JioMeet, JioAttendance, JioCloud, JioPOSlite etc. and under the “Home” and “consumers” segment such as JioFiber, JioHome, JioGate, JioTV, JioGames, JioSaavn etc. In total, these are 30 such services out of which 5 were non-permissible (JioFiber, JioTV and Jiotv+ for television, JioSaavnfor music and JioGames for violent games). 5 out of 30 amounts to 16.67% and the same from the revenue from Digital Services has been assumed as BNPI.
When the above two BNPI values are taken together, they make up only 0.44% of the total operating revenue.
Based on the above information, it is safe to assume that the business operations of Reliance Industries would be Shariah Compliant.
Let’s have a look at the non-operating income of the company
Non-operating revenue of the company: (In INR Crores)
for the year ended 31st March 2023
| Segments | Revenue | Non -Permissible Revenue | % Non -Permissible Revenue | Non -Permissible Classification | Comments |
| Interest Income | 11,240 | 11,240 | 100% | – | – |
| Dividend Income | 38 | 38 | 100% | Majorly NC | Debentures, Bonds |
| Other Non -Operating income | 1,758 | – | – | – | – |
| Total | 13,036 | 11,278 | 86.51% | – | – |
It is clear from the table above that the non-operating income of the company includes interest income and dividend income which are Shariah not compliant. This amount is included for the calculation of the Sector Compliance and Dividend Purification.
Sector Compliance Calculation:
| Total Revenue | 904,347 |
| Non-permissible operating revenue | 3,962.2 |
| Interest Income | 11,240 |
| % of non-permissible revenue | 1.68% |
| Sector Compliance | PASS |
Dividend Purification Calculation:
| Revenue Description | Non permissible Revenue (INR Crores) |
| Non-permissible operating revenue | 3,962.2 |
| Non-permissible non-operating revenue | 11,278 |
| Total Non-permissible revenue | 15,240.2 |
| Total Revenue Of The Company | 904,347 |
| Dividend Purification Ratio | 1.69% |
Financial Ratio Screen:
(All figures in INR Crore s for the Quarter ended 31st March 2024)
| Particulars | Amount | Remarks |
| 3 years Average Market | 16894389 | – |
| Total Debt | 3461420 | – |
| Adjusted Debts | 3461420 | – |
| LC Ratio | 0.204886 | – |
Conclusion
Given the above information, we at Ratings Intelligence believe that Reliance Industries is a Shariah-compliant company as per the Shariah screening criteria.
