Reliance Stock Falls For 4th Day In Row As AGM Fails To Cheer Investors; Time To Buy?

Reliance Industries (RIL) share price dropped on Tuesday despite an aggressive growth plan announcement by its chief Mukesh Ambani at the 46th annual general meeting. The company is on track to meet its vision. Among some of the key announcements were RIL's plan to establish 100 CBG plants in the next 5 years across India, while the company assured that it is on track to launch Jio AirFiber next month. Further, significant changes were made in the board of directors, with the appointment of the three heirs of Ambanis, Isha, Akash and Anant, while mother Nita Ambani decided to exit. However, selling in RIL shares can be attributed to the absence of any announcements related to RIL's retail and digital business which was the most anticipated in the latest AGM.

But that has not stopped brokerages from liking RIL shares.

At the time of writing, heavyweight RIL's share price traded at Rs 2,425.75 apiece, down by Rs 16.80 or 0.7% on BSE. The stock ranged from Rs 2,452.15 to Rs 2,416.55 apiece. Overall, the stock recorded a drop of 1.06% in the day, which led to an erosion of nearly Rs 17,517 crore of market cap in a single day.

At the intraday low, RIL's market cap dipped to a little over Rs 19.35 lakh crore, compared to the previous day's m-cap of over Rs 16.52 lakh crore.

Nevertheless, at the current price of Rs 2,425.75, RIL has recovered some lost ground and currently holds a market value of over Rs 16.41 lakh crore. RIL continues to be the largest company in India in terms of market share.

Notably, RIL shares have witnessed a selling spree for the fourth day in a row now.

On the day of the AGM, RIL shares settled at Rs 2,442.55 a piece, down by 1.11%.

RIL shares have nosedived by 4.21% since August 23 till date.

Talking about the selloffs in RIL shares, Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said, "Absence of any announcements regarding the IPOs of Reliance Retail and Telecom dragged the RIL stock down. However, indications about the green energy business are positive. Volatility in the stock price on the AGM day is normal for RIL. Announcements regarding value unlocking through IPOs of retail and telecom businesses can come any time."

Here's what brokerages say about the RIL stock after the AGM:

In its research note, JM Financial said, "At RIL's annual general meeting (AGM) today, CMD Mr Mukesh Ambani announced that the board had approved the appointment of his three children into the Board of Directors. However, he will continue as CMD for the next 5 years with the responsibility to groom, empower and mentor the next-generation leaders. The CMD also highlighted that value creation over the next decade in RIL will be many times greater than the value created in the last 45 years."

On the Digital business, Ambani reiterated the target for pan-India 5G rollout by Dec'23 and made India 2G-must, and said Jio AirFiber will be launched on 19th Sep'23. Jio will tap the huge growth potential in the SME segment, he said and outlined the five frontiers for its growth - Consumer, Home, Enterprise, Jio Platform, and AI-powered solutions. Further, he said Reliance Retail will outpace other business segments in terms of Revenue and EBITDA growth, the brokerage took note.

Also, it highlighted that the company reiterated its plan to transition its O2C business into a sustainable, green, circular and consumer-integrated chemicals & materials business. It also restated its New Energy business roadmap and its Rs 750 billion capex commitment and announced its foray into wind power generation.

Hence, JM Financial said, "We reiterate BUY (unchanged TP of INR 2,900/share) because we believe concerns on debt are overdone as we expect RIL's net debt to peak in FY24 and then decline gradually as capex will not only moderate (Rs 1.3 trillion -1.4 trillion p.a. vs. Rs 2.3 trillion in FY23) but, importantly, also be fully funded by a gradual increase in internal cash generation."

It added, "RIL's guidance on keeping reported net debt to EBITDA below 1x (0.9x in Mar 23) also gives comfort. Be that as it may, we believe 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. Further, strong growth momentum continues in the company's Retail business as RIL is driving omnichannel
capabilities across segments."

Meanwhile, Prabhudas Lilladher analysts in their report said, "We believe RIL provides a good investment opportunity given 1) its transition towards new age technologies and 2) cash flow for growth serviced from traditional refining and petrochemical segment. The company is trading at 12.8x FY24 consolidated EV/EBITDA and 22.7x FY24 consolidated PE. We estimate consolidated EPS CAGR of 10.7% for FY23-FY25E and value Refining and petrochemical segment at 7.5x FY25 EV/EBITDA, Digital services at 15x FY25 EV/EBITDA and Retail at 37x FY25 EV/EBITDA. Maintain 'Buy' at SOTP-based TP of Rs2898. Key risks are project execution and technology risk in new energy."

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, znor 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.