Why Reliance Industries AGM failed to lift stock

Moneycontrol Bureau

Positive takeaways from Reliance Industries' 39th annual general meeting have failed to lift company stock. Despite the firm drawing up Rs 1.5 lakh crore capex for three years, the stock has moved only 0.39 percent to Rs 793.50 in morning trade

Analysts say, despite chairman Mukesh Ambani highlighting aggressive expansion plans, there is very little clarity on how much will be spent in each segment. There is also no update on probable projects which the company will take up, apart from upping KG-D6 output and aggressive expansion in telecom, which is not so new a development.

Also, revision in capex from Rs 1 lakh crore announced last year was on expected lines and nevertheless little clarity on fund raising programme is critical. Read This:Mukesh Ambani: RIL to reward shareholders once investment cycle completes

Reliance, India's fourth-largest company by market value, has been under pressure on worries ranging from slowing natural gas business and its entry into consumer sectors such as telecom and retail.

In the year-to-date period, the stock has declined over 5 percent against a 0.37 percent rise in Sensex.

Independent analysts SP Tulsian told CNBC-TV18 that currently, the firm has Rs 25,000 crore cash on hand. It is yet to be ascertained, whether the company is expecting to earn a cash profit of Rs 1.5 lakh crore for capex by FY16. There needs to be more clarity on why the firm has lined up aggressive capex, he said.

He further said that though the company has high hopes from its three joint venture shale gas projects but a bigger concern is the declining KG-D6 output.

Prakash Diwan from Altamount Capital Management added that the company will undertake equity raising programmes for its grand telecom business plan. But investors are disappointed with exploration and production segment which has been a drag for quite some time now and price revision is not seen happening in 2014. He further said that one can look at around 25 percent returns in next 12 months from RIL stock.