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RIL AGM 2021 | Mukesh Ambani seems flagging off RIL 3.0 with clean energy ventures; stock can hit Rs 2,650 next year: Experts

"What excites me is the growth in ARPU in the coming quarters. I expect this to increase by 25 percent in next one year, from Rs 138 per subscriber per month in March 2021 quarter," said Gaurag Garg, Head of Research at CapitalVia Global Research.

June 24, 2021 / 08:23 PM IST
 
 
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Billionaire Mukesh Ambani-owned Reliance Industries share price fell 2.35 percent to close at Rs 2,153.35 on June 24, the day when Chairman delivered an impactful speech at the company's 44th Annual General Meeting (AGM) focussing on new growth engine - clean energy combined with oil-to-chemical (O2C) business, and a plan of investment of over $200 billion in the coming decade compared to $90 billion spent in last decade.

But experts did not seem to be worried about correction in RIL's stock price. In fact, they prefer to largely focus on long-term growth opportunities explained by Ambani, which signals stock re-rating going ahead.

"Reaction to stock price indicates that people who are stuck at Rs 2,100-2,200 levels with expectations of juicy announcements to take stock price higher levels in AGM might have sold into now. But, expectation for rerating of stock going ahead can push these things behind," Prakash Diwan, Director at Altamount Capital told CNBC-TV18.

The stock, before today's correction, registered more than 12 percent gain in the last one month, and is 10 percent away from the high-water mark of Rs 2,369.35, touched in September last year. If we compare the stock with lowest levels of 2020 seen in March, then it has witnessed over 150 percent returns, supported by Reliance Jio and Reliance Retail.

"Based on announcements made and considering next year's performance of the stock, the scrip is likely to outperform Nifty50 space, as I expect the stock to touch Rs 2,650 level in next year, i.e. 23 percent upside from current levels," Gaurav Garg, Head of Research at CapitalVia Global Research told Moneycontrol.

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"I believe RIL to do well in the coming quarters, firmly based on its core Oil & Gas business which might get support from increase in prices of crude oil over the last few quarters, along with Retail and JIO arms," he said.

Clean Energy

Last year, Mukesh Ambani had shared the vision to create the next big Value Creation Engine for Reliance and India – New Energy and New Materials business, and announced company's 15-year commitment to become net carbon zero by 2035.

Also readRIL’s Jio moment: To pivot to a clean energy company

Continuing with the same, Ambani today presented an ambitious strategy and roadmap for implementing this vision, with an aim to make its New Energy business a truly global business with a target to establish 100GW of solar energy capacity, out of India's target of 450GW of renewable energy capacity, by 2030.

Over the next three years, Ambani said Reliance would invest over Rs 60,000 crore in these initiatives, thus intending to create and offer a fully integrated, end-to-end renewables energy ecosystem. "Our first Integrated Solar Photovoltaic Giga Factory will create solar energy, and second initiative — an Advanced Energy Storage Giga Factory will solve the storage problem for solar energy. Solar energy is available only during the day, while power is needed round the clock," he said.

He further said, "Besides Electricity, Green Hydrogen will be a unique energy vector that can enable deep decarbonisation of many sectors such as transportation, industry and power. One of the most common methods of generating green hydrogen is by electrolysis of pure water through Electrolysers, which brings the third initiative — an Electrolyser Giga Factory."

And, "finally, the fourth initiative will be the Fuel Cell Giga Factory. A Fuel Cell uses Oxygen from the air and Hydrogen, to generate electricity. This new Green Vision also has immense benefits for our existing O2C business," he added.

"It seems like flagging of RIL 3.0 after creating giants - Reliance Jio in telecom, and Reliance Retail in retail segments. It is absolutely a new clean energy area - green hydrogen fuel and not just solar. In fact, it is much more than that, significantly could be a factory to world. Internationalisation of O2C business is a very significant change, giving pricing power and bargaining strength. Net net it is very different trajectory ahead of us," said Prakash Diwan of Altamount Capital.

He further said, "Three things come to my mind - First is a big clarity for existing shareholders with respect to deployment of incremental capital on green tech energy business. Second, Reliance is not only focussing on energy but also clean energy, so environmental, social, and governance (ESG) focussed investors will start considering the company. And Third thing is launch of Smartphone - JIOPHONE Next developed by Google and JIO."

JIOPHONE Next is available from September 10 this year, at an affordable price to tap 2G customers in India.

O2C Business

Gaurav Garg, Head of Research at CapitalVia Global Research opined that the major trigger from this AGM is O2C business which will benefit overall health of company, and intention to make Saudi Aramco as a strategic partner in O2C business.

H.E. Yasir Al-Rumayyan, Chairman of Saudi Aramco and the Governor of the Public Investment Fund, will join the Board of Reliance Industries as an Independent Director.

"Overall, introduction of Saudi Aramco chairman would pave the way for minority stake sale in O2C business to Saudi Aramco but there are no details on valuation while investment in new energy business hints towards cash utilisation strategy while target for growth in retail seems encouraging," Abhijeet Bora, Senior Analyst at Sharekhan by BNP Paribas told Moneycontrol. Sharekhan has a buy rating on RIL.

Retail

Reliance Retail, which added 1,500 new stores and has taken store count to 12,711, would tap Google's cloud and AI capabilities to scale up and aim to grow retail business 3x in the next 3-5 years, Bora said.

Reliance Retail, which currently employs over 2 lakh people, will further create employment for over ten lakh people over next three years.

"Retail has been leader in grocery, electronics, and apparel which helped company to generate handsome revenue in next year and has been major contributor in topline of RIL. Retail will be an important arm to look for RIL’s growth," said Gaurav Garg.

Jio and 5G

Ambani said, "Cloud and Cloud solutions is another area where we are collaborating with Google. JIO will use Google Cloud's cutting-edge technologies to power JIO's 5G Solutions and for powering the internal needs of key Reliance growth businesses like Reliance Retail, JioMart, JioSaavn and JioHealth.

Recently, Reliance received the necessary regulatory approvals... as well as trial spectrum for initiating 5G field-trials. "The entire 5G Standalone Network has been installed in our data centres across the nation and also at our trial sites in Navi Mumbai. We are confident of being the first to launch full-fledged 5G services," Ambani said.

Jio is working on 5G trials and collaborated with Google Cloud for 5G solutions, which is seen as first step towards Made-in-India technology, he said, adding JIO Fiber has become the largest and fastest-growing fixed broadband operator in India, which might be dark horse topline contributor for JIO.

Garg further said, "What excites me is the growth in ARPU (average revenue per user) in the coming quarters. I expect this to increase by 25 percent in next one year, from Rs 138 per subscriber per month in March 2021 quarter."

Reliance Jio added 37.9 million subscribers in FY21, taking the total to 425 million subscribers.

During recent spectrum auctions, Reliance invested Rs 57,123 crore to acquire significant additional spectrum and invested another Rs 15,183 crore for expanding network infrastructure.

"More importantly these investments have also created the capacity to on-board an additional 200 million customers on JIO's network thereby bringing digital empowerment to even more Indians," Mukesh Ambani said.

"Reliance is completely ready with 5G launch. Jio is the market leader with 425 million customers, and market share has been going to Jio. In fact telecom provided much more resilient to business," Nitin Soni, ACA - Senior Director at Fitch Ratings told CNBC-TV18.

He feels the telecom is growing faster. "Tariff hike will happen. In last 12-18 months they haven't done anything due to COVID crisis. Now good chance that tariff will increase. Market can afford Rs 200 ARPU and in longer term Rs 250 ARPU can be affordable," he said.

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Disclaimer: MoneyControl is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.
Sunil Shankar Matkar
first published: Jun 24, 2021 08:23 pm

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