RIL, RIL partly paid shares hit all-time high; combined m-cap tops Rs 14L crore

Shares of Reliance Industries (RIL) closed 4.15 percent higher at Rs 2,146.20 while those of Reliance Industries PP (partly paid) closed 8.77 percent higher at Rs 1,284.50 on BSE on July 24.

Both RIL and RIL PP hit their all-time highs of Rs 2,162.80 and 1,299, respectively, in intraday trade.

The m-cap of RIL stood at Rs 13,60,562.99 crore and that of RIL PP at Rs 54,262.45 crore on BSE on July 24.

With this, the combined market-capitalisation (m-cap) of RIL and RIL PP stock stood at 14.15 lakh crore on BSE.

Brokerages and analysts are bullish on Reliance Industries following its debt-free status, a healthy balance sheet and a strong growth outlook.

Brokerage firm BNP Paribas has maintained a 'buy' rating on the stock with a target price of Rs 2,317.

business in light of the potential growth outlook," said the brokerage.

"We now value RIL on an FY23E basis to better capture the growth outlook for all the businesses. Despite its recent run, RIL still has multiple catalysts in place in terms of a stake sale in retail and a potential sale in oil-to-chemical (O2C) even at a lower valuation (as it tries lower its dependence on O2C)."

The brokerage believes that Jio has played its role in reinventing RIL and now the focus will be on the consumer retail business.

"We do not think RIL is in a rush to start off-loading in retail also, but if it does, it will be a positive (according to media reports, RIL is looking to sell its stake in consumer retail). That said, retail by itself over the years will be a growth engine for RIL and something that will enable Jio also for cross-selling, in our view," BNP Paribas said.

While FY21 growth would be impacted by COVID-19, BNP Paribas expects RIL to regain the lost ground in FY22.

The brokerage said RIL weathered the weakness in global refining and chemicals due to its diversified businesses.

Japanese brokerage firm Nomura also has a 'buy' recommendation on the oil-to-retail conglomerate, with a target price to Rs 2,200.

"RIL is our preferred pick in India oil & gas. RIL is now outperforming the benchmark Nifty for the sixth year," Nomura said.

"While the run has been very strong, and valuations are getting rich, we believe the outperformance may sustain. Despite a subdued FY21F (weak energy business, COVID-19 impact), we expect a 29 percent CAGR in consolidated earnings over FY20-23F. Also, investor appetite is strong for consumer business. While institutional holding in RIL has been rising, we believe there is under-ownership, given the sharp rise in RIL’s weight in Nifty," Nomura said.

It said as RIL's very large CAPEX cycle drew to a close, earning increased for the energy business initially followed by sharp rises for Jio and retail.

Nomura said RIL's outperformance has also been driven by a sharp growth in new consumer businesses of Jio and Retail.

"With nearly 49 percent year-on-year (YoY) growth in FY20, consumer businesses’ contribution to RIL’s aggregate EBITDA grew from 3 percent in FY17 to 35 percent in FY20. Further, we expect the share of consumer businesses in RIL’s consolidated EBITDA to increase to 52 percent by FY22F," said Nomura.

RIL will announce its June quarter earnings on July 30. Brokerages expect the company to report an improvement in the margin for Q1 due to flexible feedstock utilisation and better O2C integration.

"RIL is expected to report GRM at $9.0/bbl, helped by inventory gain as well as discounts offered to Indian refiners at the beginning of the quarter," said Motilal Oswal Financial Services.

Outlook on full economic utilisation of petcoke gasifier will be in focus when the company announces its June quarter scorecard, Motilal Oswal said.

Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.