Why investing in RIL is a good idea

Written by: Shoaib Zaman

Why investing in RIL is a good idea
Reliance Industries: Quotes, News
BSE 1059.90BSE Quote3.65 (0.34%)
NSE 1060.85NSE Quote2.45 (0.23%)
Reliance Industries in its latest annual general meeting with its shareholders, stated that the company will go debt-free by the end of the year. Going debt free by the end of the fiscal year was the major announcement, along with many others like focus on retail, and developing the broadband martket since it has the largest bandwith in the country.

Critiques have pointed out that going debt free in a fast growing economy like India, means that the company is not able to find new avenues of growth. Although there is some truth to this argument but put it in another way, RIL is at least not squandring away the money in high priced merger and acquisition.

Most of all, with the world economy being in an unpredictable stage, it makes senses for any company to be debt free. If RIL is the first one to proceed in this direction then its a good thing.

In my opinion even at the price range of Rs 950, the stock is worth a buy.

The company's business.

In the refinery divison, the company will be debt free. It will gain the expertise in drilling and exploration from BP. Its refining margins are at par with the best in the world.

Reliance Industries also bought shale gas reserves in US and intends to build capacity in the sector. Shale Gas is being affirmed as the next big source of energy in the world.

The petrochemical business of the company is also on its path to recovery. Plus RIL will be expanding its petrochemical by 2013. It also plans to consolidate its position as the world's largest integrated polyester producer.

The company's love for the telecom industry has not subsided. With the non-competance act scrapped between the two brothers, Mukesh Ambani bought the 4G spectrum in all 22 circles. This made the RIL, the company with the highest telecom bandwith in the country.  

The company, RIL, also entered the financial market of the country udner a joint venture with DE Shaw. Very RIL like move, entering an industry under a JV. Once the business model becomes sustainable, the company would buy make it a wholly owned susidiary. 

On the downside the company the biggest risk is on policy front, from the government. Slowdown in the global economy is also another risk for the company. But unlike others, RIL's zero debt will make it a safer company to invest in during tiems of turmoil.

On the business front there are two subsidiaries where the story should be followed carefully. Mukesh Ambani, chairman of RIL plans to become the leader in the retail segment. Then, the company's construction business under its subsidiary Reliance Ventures Limited (RVL).

The author of the article does not have any stake on the above-mentioned company.

OneIndia Money DISCLAIMER: OneIndia Money provides you with information covering shares, futures and options based on broker's reports as stated on various media. Investors are, however, warned that they should NOT take any buy or sell decision based on these views expressed in the article. Investors should consult their own financial and share advisors before taking purchase or sale decisions. OneIndia Money does not take any responsibility for any losses incurred by investors who take their cues from the above article.

Read more about: ril, stock, investing, bse, nse
Story first published: Monday, June 6, 2011, 10:50 [IST]
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