Reliance: Decoding Disney Deal! Mega Stock Hits Highest Price Rs 3,000; Jefferies, Moitilal, JM Recommend BUY

Time after time, India's largest company, Reliance Industries (RIL) has swept sectors off their feet, creating dominance with its business strategies and executions. Apart from being the largest oil and gas company, a sector that contributes massively to the economy, Reliance has dominated telecom, and retail in recent times, and let's not forget e-commerce which is another segment where Reliance is moving swiftly to bag leadership. What else could be left out? Well, competition is about to intensify in the media sector as Reliance has announced a strategic joint venture with American multinational mass media, Disney.

This comes at a time when ZEE Entertainment, the second largest media house in terms of market capitalisation, is struggling after Sony officially withdrew a $10 billion merger deal. SUN TV is currently the largest media and entertainment company in terms of market value.

But Reliance has its eye on the title because a deal with Disney is expected to give the billionaire Mukesh Ambani a larger pie in the media and entertainment business. And hence, brokerages like Jefferies, Motilal Oswal, and JM Financial have recommended buying Reliance stock. The highest target set for Reliance is Rs 3,210 by Motilal Oswal.

Investors have already given a thumbs-up to the Disney deal by taking Reliance stock on a bull run.

Reliance Industries Share Price:

Reliance has touched the Rs 3,000 mark, which is its highest price. That being said, Reliance is at an all-time high. From its 52-week low of Rs 2,012.14 apiece, Reliance is up by 49% currently on BSE.

The largest company in India continues to hold this title with a market cap of Rs 20,16,750.44 crore. In a year, the stock has gained by 36%. While in 5-years, Reliance is a multi-bagger with gains of 158.5% on the exchange.

Reliance-Disney Deal!

On February 28, Reliance, Viacom 18 Media, and The Walt Disney Company signed a binding definitive agreement to form a joint venture ("JV") that will combine the businesses of Viacom18 and Star India. As part of the transaction, the media undertaking of Viacom18 will be merged into Star India Private Limited ("SIPL") through a court-approved scheme of arrangement.

Under the deal, Reliance has also agreed to invest approximately Rs 11,500 crore into the JV for its growth strategy. The transaction values the JV at Rs 70,352 crore (~US$ 8.5 billion) on a post-money basis, excluding
synergies. Post completion of the above steps, the JV will be controlled by RIL and owned 16.34% by RIL, 46.82% by Viacom18 and 36.84% by Disney.

Notably, Disney may also contribute certain additional media assets to the JV, subject to regulatory and third-party approvals.

Nita M. Ambani will be the Chairperson of the JV, with Uday Shankar as Vice Chairperson providing strategic guidance to the JV.

As per the filing, the JV will be one of the leading TV and digital streaming platforms for entertainment and sports content in India, bringing together iconic media assets across entertainment (e.g. Colors, StarPlus, StarGOLD) and sports (e.g. Star Sports and Sports18) including access to highly anticipated events across television and digital platforms through JioCinema and Hotstar. The JV will have over 750 million viewers across India and will also cater to the Indian diaspora across the world.

Decoding Disney Deal:

According to Motilal Oswal, this deal will give RIL a larger pie in the media and entertainment business. The JV will have exclusive rights to distribute Disney films and productions in India.

Viacom18 is a subsidiary of TV18 Broadcast Ltd. (market cap INR110b), which in turn is a subsidiary of Network18 Media & Investments Limited (market cap INR120b), in which RIL holds a 73.15% stake.

Further, Motilal's note added, that the JV will also be granted exclusive rights to distribute Disney films and productions in India, with a license to more than 30,000 Disney content assets. Viacom18 has a portfolio of 40 channels and an OTT platform - JioCinema. Viacom18 Studios produces and distributes Hindi and regional films in India. Star India has a reach of over 700m viewers and an OTT platform - Disney+ Hotstar.

Reliance Share's Next Target Price:

Motilal added, "We value the standalone business at 7.5x Dec'25E EV/EBITDA to arrive at a valuation of INR955/share. We ascribe an equity valuation of INR889/share to RJio and INR1,547/share to Reliance Retail (factoring in the recent stake sale) as well as INR37/share to the new energy business. We reiterate our BUY rating with a TP of INR3,210."

Also, in its research note, JM Financial said, "We believe concerns on debt are behind us as we expect RIL's net debt to peak in FY24 and then decline gradually as capex will not only moderate (INR 1.2trln-1.4trln p.a. vs. INR 2.3trln in FY23) but, importantly, also be fully funded by a gradual increase in internal cash generation. Further, RIL could still drive a robust 14-15% EPS CAGR over the next 3-5 years with Jio's ARPU expected to rise at 10% CAGR over FY23-28 with ARPU being on a structural uptrend given the industry structure, future investment needs, and the need to avoid a duopoly market - A Giant Digital Leap."

Moreover, JM added, "Strong growth momentum continues in the company's retail business as RIL is driving omni-channel capabilities across segments. Hence, we reiterate BUY (unchanged TP of INR 3,050/share). At CMP, the stock is trading at FY26E P/E of 19.9x (3 yr avg: 24x) and FY26E EV/EBITDA of 10.6x (3 yr avg: 13.1x)."

Finally, after the Disney deal announcement, Jefferies maintained a buy on Reliance for a target price of Rs 3,140. The outlook is positive.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.