Company announced alliance with Microsoft by signing long-term agreement to accelerate digital transformation.
Reliance Industries chairman and managing director Mukesh Ambani made some important announcements as he laid out the company’s vision during the 42nd annual general meeting (AGM) on August 12.
Reliance will sell 20 percent stake in oil to chemical business to Saudi Aramco, he said. The company also announced a long-term agreement with Microsoft to accelerate “digital transformation of India to launch new cloud data centres, ensuring more organisations can access the tools and platforms they need to build their own digital capability”.
The stocks rallied from Rs 964, recorded on July 5, 2018 when RIL held its 41st AGM, to Rs 1,162 on August 9, translating into a gain of more than 20 percent.
The share touched its 52-week high Rs 1,413.75 and 52-week low Rs 1,017 on May 2, 2019 and October 25, 2018, respectively. It is trading 17.81 percent below its 52-week high and 14.26 percent above its 52-week low.
Here is what some experts/analysts’ say on how shares will react on August 13:
Gagan Dixit, vice president, oil & gas analyst, Elara Capital:
The combined value of Aramco’s refining and petchem at USD 75 billion (Elara: USD 73 billion) is positive. It will provide much-needed capital for oil-to-chemicals expansion plans in a phased manner over the next decade, as mentioned by RIL FY19 annual report. We estimate 12mnMT rise in petchem capacity should require another around $11bn in long term.
But in near term, it's a positive development that Rs 1.05 trillion available from Aramco and Rs 0.8-0.9 trillion/annum operating cash flow would help de-leverage RIL within two years.
We believe key trigger for conclusion of RIL-Aramco deal was declining probability of Maharashtra refinery of OMCs, where Aramco committed earlier as its cost jumped Rs 3 trillion to Rs 4 trillion due to delays and environment-related commitments.
Ajay Bodke, CEO at PMS Prabhudas Lilladher:
Market is going to heartily welcome the seminal announcement by RIL, India's largest and most respected company, of 20 percent stake sale in its oil-to-chemical (OTC) business to the world's largest oil company Saudi Aramco.
It reinforces Mukesh Ambani's reputation as India's top business leader, whose global vision has transformed the country's economic milieu. This is inarguably India's largest-ever FDI inflow and would help dissipate the gloomy sentiment pervading the economy and stock markets.
This programme to aggressively pursue deleveraging in businesses such as OTC, fibre and 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 continues to remain as the pre-eminent player on the Indian economic juggernaut that is likely to touch $10 trillion by 2030.
SP Tulsian of sptulsian.com:
The stock could open 4-5 percent, or Rs 50-70, higher on August 13, SP Tulsian said in an interview to CNBC-TV18.
He expects the stock to breach its Rs 1,400-mark and to see a new high in 2019. It is an excellent stock to buy given the kind of expected revenue increase with zero-net debt status in the coming 18 months.
He had said earlier that Credit Suisse concerns over $65 billion debt was not the right amount and had been bothering market a lot in the last few sessions, Tulsian said. With a net worth of Rs 4 lakh crore and businesses ranging from refinery, oil-to-chemical, retail to Jio, it would definitely cheer the market and profit will rise in next two or three years through asset monetisation and Saudi Aramco deal which is EPS accretive, he said.
Deven Choksey, MD of KR Choksey Investment Managers:
Those looking to invest in the company, could still put in money at current levels, as the stocks could reach a new high in 2019, and more than double in the next 2 years, Deven Choksey, MD of KR Choksey Investment Managers, told CNBC-TV18.
Sanjeev Jain, VP Equity Research at Sunness Capital India Pvt Ltd:
The chance of the stock touching new highs is strong in 2019. The Aramco deal as well as the joint venture with BP are the key positives. The company has 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.
Rajiv Sharma, SPICAP Securities:
From Vodafone Idea perspective, Jio aims to increase subscriber base from 340 million to 500 million, with a run rate of 10 million per month, which means no immediate respite in the Indian wireless space. Jio will continue to be aggressive on customer acquisition. After the Aramco deal, a tariff hike looks very unlikely. So, from a Vodafone-Idea perspective on the wireless side, I think this is negative as there will be no immediate relief, which they really needed, Sharma told CNBC-TV18.
Jal Irani, oil and gas analyst at Edelweiss Financial Services:
There is a vertical and horizontal integration to generate value. Retail and Jio are in the process of that value creation, Irani said in an interview to CNBC-TV18.
It is a game-changer AGM, given JioFiber's price plan at Rs 700 with potential revenue generation of Rs 14,000 crore under telecom business, focus on retail business, deal with the Saudi Aramco and plan to become a debt-free company.
Reliance generally invests in new-age businesses early, grooms them and monetises them early rather than wait for a long period of 20 years, he added.
Nitin Soni, Fitch Ratings:
Mukesh Ambani's whole presentation is quite compelling. The pricing plan for JioFiber at Rs 700, with speed from 100 Mbps to Ggbps is a game-changer with affordable rates, along with first day first show movies on Jio and cross-selling of various services, Soni said in an interview to CNBC-TV18.
Prakash Diwan, altamountcapital.com
As Reliance moved from B2B to B2C, Diwan expects more than 50 percent contribution from B2C to revenue in the years to come.
Also RIL moving from oil business to oil-to-chemicals (OTC) indicates that it is moving out of traditional business, hence thumbs up to its adaptability, Diwan said in an interview to CNBC-TV18.
Company started with telecom, then entertainment, media and now internet of things (IoT) technology, which is a strong conversion. For these things, valuations in China and the US are phenomenal. Hence, overall the AGM is very strong.
The stock lost more than 20 percent in last three months due to debt concerns. But with Saudi Aramco deal and Jio asset monetisation, its aims to be zero-debt company in 18 months will change a lot of calculations in terms of valuations and stock price in days to come, he added.
Also with dividend yield of 15 percent and expectations of reaching around 25 percent plus zone, the stock re-rating will be high.
The telecom business plan was an absolute killer for Vodafone Idea, but Bharti Airtel may not feel the pinch, Diwan said.
Sameer Kalra, founder, Target Investing:
Keeping buy rating, we believe this clearly lays down the path of divestment to repay the debt, which certain investors were doubting.Next 12 months of new products and launch will set a high-growth phase, which will generate higher cash flows as reduction of debt and only maintained capex will be required.Subscribe to Moneycontrol Pro and gain access to curated markets data, trading recommendations, equity analysis, investment ideas, insights from market gurus and much more. Get Moneycontrol PRO for 1 year at price of 3 months at 289. Use code FREEDOM.