MUMBAI: Shares of Reliance Industries Ltd (RIL) slumped 6.2% intraday on Wednesday, having hit a record high of ₹1,978.50 in early trade, as investors seemed disappointed about delay in Saudi Aramco deal.
The stock closed at ₹1,845.60, down 3.7% on the BSE.
Addressing the company's 43rd annual general meeting, RIL chairman and managing director Mukesh Ambani said due to unforeseen circumstances in the energy market and the covid-19 crisis, the Saudi Aramco deal has not progressed as per the original timeline.
The deal was expected to be completed by March 2020. Last year, Ambani had announced a 20% stake sale of his oil-to-chemical (O2C) business to Saudi Aramco.
"Nevertheless, we at Reliance value our over two-decade long relationship with Saudi Aramco and are committed to a long-term partnership. We will approach national company law tribunal (NCLT) with our proposal to spin off our O2C business into a separate subsidiary to facilitate this partnership opportunity. We expect to complete this process by early 2021," Ambani added.
The RIL stock had held on to gains while Ambani made several announcements about its digital asset Jio Platforms. US tech giant Google will invest ₹33,737 crore in Jio Platforms for a 7.7% stake.
“Besides the Aramco disappointment, the stock had been rallying ahead of the AGM. So, it could be a bit of profit booking as there is more clarity on RIL’s outlook and course of action for next one year. Also, most of the big announcements were already factored in," said Deepak Jasani, research head, HDFC Securities.
This year so far, Reliance shareholders have become richer by ₹3.2 trillion, with the gaining around 30% since January. Despite the crash in equity markets following the pandemic and the ensuing lockdown, the company has successfully raised funds.
On 23 March, when benchmark indices had seen single-digit decline Reliance shares had hit a low of ₹867.82 but since then have soared 126%.
The company's foray into digital business, successful fund raising to become a zero net debt company has boosted investor confidence about its growth prospects and the possible synergies that could be extrapolated to retail.
“RIL’s leadership in connectivity and retail businesses and recent strategic partnership with Facebook will enable it to further expand its presence in India’s digital ecosystem, which can create significant value in the long run. We expect the foray in digital commerce business to be the next big driver of RIL stock, with the valuation of legacy oil to chemical and digital services segments broadly established in a reasonable range for now," said Kotak Institutional Equities. It sees the stock rising to ₹2,150 apiece.
Motilal Oswal Financial Services Ltd has raised its target price to ₹2,000 from ₹1,743.
“Considering the company would become net debt free, we have raised the multiple for refining and petrochemical from 6 times to 7.5 times . Consumption of petroleum products also appears to be normalising. Making adjustments for the same, our valuation for refining and petrochemical increases from ₹617 per share to ₹791 per share," Motilal Oswal said.
Meanwhile, telecom major Bharti Airtel's shares ended 4.2% lower after Reliance Industries announced its 5G foray. “This made-in-India 5G solution will be ready for trials as soon as 5G spectrum is available... and can be ready for field deployment next year," said Ambani.
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