Shares of Reliance Industries can surge 4-5 percent or Rs 50-70 higher on August 13 following some big bang announcement by Chairman and Managing Director Mukesh Ambani on August 12.
SP Tulsian of sptulsian.com expects the stock to breach Rs 1,400 mark and to see a new high in 2019.
“I said earlier that Credit Suisse's concern over $65 billion debt is not right. With a net worth of Rs 4 lakh crore and having businesses from the refinery, oil-to-chemical, retail to Jio, the announcements definitely cheer the market and profit will rise in next 2-3 years through asset monetisation and Saudi Aramco deal which is EPS accretive,” he said.
In the last one year, Reliance Industries became India's largest and most profitable company. It is the only diversified multi-sector Indian enterprise with three major growth engines in one single corporate entity – Oil-Chemicals division, Jio and Retail.
The Saudi Aramco deal will be closely watched. This along with deal with BP will create win-win relationships, generating significant strategic value.
“We expect to complete these transactions within this financial year subject to definitive agreements, due diligence, regulatory and other customary approvals. The commitments from these two transactions are about Rs 1.1 lakh crore,” Mukesh Ambani said.
Saudi Aramco and Reliance have agreed to form a long-term Partnership in our Oil to Chemicals (O2C) division. Saudi Aramco will invest in Reliance for a 20 percent stake in Oil to Chemicals division at an Enterprise Value of $75 billion.
"Market is going to heartily welcome the announcement of 20 percent stake sale in its oil-to-chemical (OTC) business to Saudi Aramco,” Ajay Bodke (CEO PMS Prabhudas Lilladher), told Moneycontrol.
“This is inarguably India's largest-ever FDI inflow and would help dissipate the gloomy sentiment currently pervading in the economy and stock markets,” he said.
Bodke further added that company's plan to aggressively pursue deleveraging in businesses such as OTC, fiber & tower and emerge as a zero debt company in the next 18 months will strengthen the consolidated balance-sheet leading to strong valuation re-rating of the stock.
RIL, which has invested over Rs 5 lakh crore in the last five year, will expand the oil-to-chemical business, create world’s largest greenfield legacy-free data network and fastest-growing retail company. This will take its EBITDA to $1 billion annually.
“Each of our best-in-class businesses is contributing to the transformation of our country, while also creating enormous societal value. On the strength of our existing and new growth engines, I am very confident that we can grow this by 15 percent annually over the next five years,” Mukesh Ambani said in the AGM.
Way ahead for investors:
For investors who are looking to invest in the company, they can still put in money at current levels as the stocks could reach a new high in 2019, and more than double in the next two years.
Deven Choksey, MD of KR Choksey Investment Managers in an interview with CNBC-TV18 said that given strong fundamentals if one is investing in the stock with a two-year view, it has potential to double returns from current levels.
"The chance of the stock making new highs is strong in 2019. The Aramco deal, as well as JV with BP, are key positives. The company laid out a plan to become debt-free by FY21. I expect the market may take it positively and a gap-up opening is possible on August 13," Sanjeev Jain, VP Equity Research at Sunness Capital India Pvt Ltd, told Moneycontrol.
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