Reliance Industries will hold its annual general meeting on Monday, an event that’s known to always move the highest-weighted stock of the Nifty 50 index.
Investors and analysts have come to expect major announcements from the conglomerate. Last year, it was the entry into green energy, and the year before, it was the induction of Google as a minority investor. In 2016, it was the launch of telecom services.
Time and Date
The AGM will be held via video conferencing for the third consecutive year on August 29. The meeting will start at 2:00 pm IST, with addresses and presentations expected from chairman Mukesh Ambani and other members of the company’s board and subsidiaries.
Also Read | Reliance to hold its 45th AGM on August 29: All you need to know
The board of directors and shareholders will then vote on 11 resolutions. Six of them are special resolutions, including the appointment of Hital Meswani as a whole-time director, and the insertion of clauses in its articles of association with respect to its new energy business.
Stock Movement
Reliance shares tend to move considerably ahead of and after the AGM. The shares have averaged negligible returns a week prior to the AGM, based on data of the past 10 years. However, they rose almost 4 percent a week after the event, Bloomberg data showed.
Additionally, the shares gained 2.3 percent a month before the AGM and returned more than 6 percent a month after the event, the data showed.
Trading in the stock tends to pick up around the annual event. On average, daily volumes on the counter have spiked 317 percent on the day of the AGM over the past five years. AGM day is easily the most active for the stock.
Big Expectations
As with every Reliance AGM, investors have a set of expectations.
This year, the focus will be on the consumer retail business once again, after chatter that a time line is likely to be announced for the listing of Jio Platforms and Reliance Retail. The induction of private equity investors in both its consumer-facing subsidiaries in 2020 was seen as a stepping stone towards their eventual listing.
Brokerage JP Morgan India said in a recent note that Reliance has enhanced disclosures around related-party transactions, which is seen as a step towards greater transparency ahead of the listing.
“While it is too early to say if the increased disclosures on the large transactions between the subsidiaries are a step on the road to the listing of these businesses, it would be seen as a positive,” JP Morgan said.
Another key expectation will be around the new energy business, which emerged as the biggest takeaway at last year’s AGM. Reliance has since invested in acquiring companies in the segment and expanding capacity.
The company plans to build four gigafactories to manufacture solar panels, electric batteries, green hydrogen and hydrogen fuel cells with an investment of $80 billion. The company sees renewable energy and green hydrogen as tectonic shifts in meeting the world’s energy demands.
In the company’s annual report, Ambani said he expects the green energy business to be the crown jewel of the company in the next seven years, much like he heralded the consumer-facing businesses about seven years ago.
Brokerage JM Financial said investors will await any indication of the induction of strategic investors in the company’s oil-to-chemicals and green energy business as Relance steps up activity in the space.
Attention will also be on Reliance’s plan to roll out 5G mobile phone services after the company mopped up the most spectrum in the recent auction. Reliance invested $11.3 billion to acquire 25 gigahertz of spectrum from the government.
Investors will wait for indications of the pricing of the new 5G services that step-down subsidiary Reliance Jio will offer.
Traders can expect good moves in the stock if the company were to make announcements with respect to these expectations, said dealers.
Beyond AGM
Reliance’s June quarter performance was slightly underwhelming, given the expectations built up due to the surge in global refining margins. The introduction of a special additional excise duty on refining exports also dampened spirits, but analysts remain buoyed over the stock’s prospects.
Of 39 brokerages covering the company, 31 have an outright ‘buy’ rating on the stock while three have a ‘hold’ rating with an average upside of about 12 percent expected in the scrip over the next 12 months.
UBS Securities upgraded the stock recently to a ‘buy’ from ‘neutral’ as it factored in opportunities in the green energy business, which it said could create additional value of $35 billion for the company by 2030.
Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.
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