Experts are of the view that the RIL turning debt-free and the potential listing of Jio and Retail arm of the conglomerate is likely to result in a rerating of the stock in the near term.
Reliance Industries (RIL) market capitalisation skyrocketed to $150 billion in intraday trade on June 22, the first Indian company to achieve the feat.
The stock, which hit a fresh record high of Rs 1804.10 on the BSE on Monday, has more than doubled investors’ wealth since hitting a low on March 24.
The scrip has gained 20 percent so far in 2020.
At 10:00 am, RIL was trading 1.69 percent higher at Rs 1,789.
The rally seen in RIL was swift and largely backed by the deals which helped the Mukesh Ambani-led company become debt-free company well ahead of its target of March 2021.
The cumulative investment resulting from 11 deals struck by Reliance Industries for its digital unit, Jio Platforms, over the past nine weeks amounts to Rs 115,693.95 crore.
The recent RIL rights issue garnered Rs 53,124.20 crore. Together with Jio investments, RIL managed to raise Rs 1.68 lakh crore to become net debt-free.
“Within the short period of about 59 sessions, RIL had doubled the wealth of the shareholders especially during the time of the pandemic. RIL has become India’s first $150 billion company. In Indian currency, the valuation is more than Rs 11 lakh crores,” Gaurav Garg, Head of Research at CapitalVia Global Research Limited- Investment Advisor told Moneycontrol.
Experts are of the view that RIL turning debt-free and the potential listing of Jio and Retail arm of the conglomerate is likely to result in a rerating of the stock in the near term.
Expert: Jyoti Roy, DVP, Equity Strategist, Angel Broking Ltd
The company has built up a dominant presence in Refining, Petrochemicals, Telecom and Retail businesses. Jio Platforms which houses the telecom business has attracted investments from marquee investors like Facebook, Silver Lake Partners, General Atlantic, KKR, etc. of Rs 1,15,694 crore.
Investments by such marquee names in Jio platforms will not only help the company pay debt but also reinforces our confidence in the management’s ability to transform the company from a brick and mortar one to a digital play.
We believe that the digital and retail business will be key growth drivers for the company going forward and the proposed listing of the retail business over the next few years is along expected lines and will lead to a rerating for the company. We also expect a similar move by the company for its digital business in the future.
Expert: Siddharth Khemka, Head – Retail Research, Motilal Oswal Financial Services Ltd
Reliance Industries became the first Indian company to cross Rs11 lakh crore in market cap on Friday after it declared itself net debt-free, nearly nine months ahead of schedule.
The decline in overall debt is a major factor, can lead to the next leg of the rerating of the stock. Overall the company has raised more than Rs 1.68 lakh crore in two months since April.
Not only does this reaffirm Jio’s potential transformation as a technology giant in the eyes of global investors, but also helped in RIL’s goal of reaching its net-zero debt goal at a faster clip.
Jio’s dominant position should allow it to garner strong consistent growth over the long term. We are positive on Jio’s multiple monetisation avenues coming from increasing long-term ARPUs and other digital applications with the Facebook deal.
Reliance Retail too has maintained robust performance amidst a slowing economy. Its grocery segment is likely to support revenues during the lockdown phase and its strategic venture with Facebook to connect local Kirana stores should provide synergies and scale its online business further.
Expert: Umesh Mehta, Head of Research, Samco Securities
Fundamentally, the fundraising warrants for rerating of the stock as unlocking of value by listing Reliance Jio and Retail will create wealth for its shareholders from a 3 to 5-year perspective. However, the current 94 percent rally in the past 3 months is unsustainable as the human mind can easily extrapolate but markets act differently all the time.
Investors think stock prices will move in a straight line but realistically it has its own ups and downs. And a realistic growth path for Reliance although is higher in the long term but in the short, to medium term it will largely underperform and disappoint investors who invest at higher levels.
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