For Mukesh Ambani-owned oil-to-telecom conglomerate Reliance Industries Limited (RIL), the financial year 2021-22 is going to be crucial. RIL, which recently posted a 58% year-on-year jump in revenue from operations to ₹1.44 lakh crore, is looking forward to expanding its revenue base.

The second wave of the pandemic has chipped its consolidated net profit by 7.3% to ₹12,273 crore, below the Bloomberg forecast of ₹13,022.90 crore in profit on net sales of ₹1.47 lakh crore.

What is driving the valuation of RIL?

As of now, it is a troika drawn by three horses: Jio, Retail, and O2C. They are pulling the cart in equal measure, with Jio lugging stronger.

Look at the valuation of India’s largest corporate giant. “Using sum-of-the-parts valuation, we value the O2C business at 7.5x FY23E EV/Ebitda, arriving at a valuation of ₹776 per share for the standalone business and assign ₹68 for its E&P assets. We ascribe an equity valuation of ₹875 per share to RJio (at 20x FY23E EV/Ebitda) and ₹771 per share to Reliance Retail (at 34x FY23E EV/Ebitda), factoring in the recent stake sale,” said Motilal Oswal in a research report, pegging the target price at ₹2,485 per share.

Jio has continued with its focus on subscriber-led growth. Thanks to the low-cost JioPhone Next, it has managed a higher net subscriber addition. During the quarter, Jio added 14.4 million subscribers, taking its total customer base to 440.6 million. Over the past 12 months, the company has added 42.3 million customers. Brokerages believe this, along with the digital opportunities, should drive valuations.

Kotak Institutional Equities Research said Jio’s results were ahead of their expectations. “Jio’s net income was 6% above our estimate at ₹35 bn [₹3,500 crore], up 4% quarter-on-quarter. Its gross subscriber additions stood at 26.7 million, a tad lower than 31.2 million in the previous quarter reflecting modest impact from the second Covid-19 wave. On the flip side, subscriber exits reduced to 12.4 million from 15.8 million in the previous quarter with monthly churn moderating to 0.9% from 1.3%.

The recent initiatives such as complimentary recharge offers for JioPhone users, free voice calls and emergency data loans, WhatsApp-based recharge options, and long-tenure Freedom Plans have all contributed to its growth. Its average revenue per user (ARPU) remained steady sequentially at ₹138.4. Data consumption per user increased 17% quarter-on-quarter to 15.6 GB per month whereas voice consumption per user declined 1% to 815 minutes per month.

A few other factors augur well for RJio. It has received approvals and trial 5G spectrum in 3GPP band n78 for initiating field trials and the Jio 5G Standalone Network has been installed in their data centres across the country. On the other side, JioFiber has connected 3 million homes and has installed fibre for 12 million premises so far.

Mumbai-based brokerage Motilal Oswal said given lesser constraints in its operating environment relative to the first quarter of 2020-21, revenue touched pre-Covid-19 levels of the Q1 of 2019-20. The strong Ebitda jump was due to investment income of ₹550 crore, with a 30-basis point margin improvement.

While RIL’s O2C and Jio businesses did well, its retail business saw a decline.

Despite the painful second wave of the pandemic, Reliance Retail has added 123 new stores while shutting down 31 stores. The company has 700-plus stores in various stages of fitouts and completion. JioMart scaled up further with orders increasing robustly by 25% quarter-on-quarter, kirana partners increasing by 30% and total coverage expanding to 218 cities. Online revenues rose to 20% (of core retail sales) from 10% in the Q4 of 2020-21 and 4% in Q1.

Its overall revenues declined 18% quarter-on-quarter to ₹38,500 crore, though it reported a 22% year-on-year jump on a low base.

Soon, RIL will have a new vertical contributing an equal might, going forward: Renewable energy. RIL has announced a massive ₹75,000-crore investment into the renewable energy sector. With a strong balance sheet, the company is expected to adequately fund the capital expenditure.

“We see RIL emerging as India’s most credible RE [renewable energy] player,” the global brokerage and research firm Jefferies said in a recent report.

It predicts a 50% surge in the stock price for RIL.

Follow us on Facebook, Twitter, YouTube & Instagram to never miss an update from Fortune India. To buy a copy, visit Amazon.