Indian Premier League 2024: 2 Bonus, Rs 134.62/Sh Dividend; Buy Reliance Share As Mumbai Indians Rival In IPL?

Indian Premier League (IPL) has been dazzling at full swing with cricket lovers flooding stadiums in various regions of India to support their favourite teams. One of the biggest charms of IPL is that the sports event brings together a diverse group of talented cricketers both inside and outside India to form teams. One such is Mumbai Indians, owned by Reliance Industries which is India's largest company in terms of market share.

With the 2024 IPL season sending sensation across the country, is it the right time to buy Reliance shares to fetch hefty returns in the near term?

Currently, Reliance's share is at Rs 2,919.95 on BSE with a market cap of Rs 19,75,547.68 crore. YTD, Reliance shares are up by 12.75%, while in a year, the stock has gained by 36% on BSE. In the early 2024s, Reliance also crossed Rs 20 lakh crore market cap. The stock's 52-week high and low is at Rs 3,024.80 apiece and Rs 2,104.47 apiece respectively.

Motilal Oswal and Goldman Sachs have set a BUY recommendation and set the highest target price on Reliance.

Goldman Sach's latest report said, "RIL consolidated returns are at an inflexion point in FY24 and we estimate CROCI (cash return on cash invested) will expand by ~270 bps to 12% in FY27 (highest since 2011). We estimate capex to fall sequentially, alongside a change in the mix of capex (rising share of higher returns and faster capex gestation cycle businesses) and 17% EBITDA CAGR over FY24-27E (6-10% above Bloomberg consensus in FY25/26 driven mainly by energy business due to tight diesel and gas feedstock tailwinds for the petchem business)."

Goldman's analysis suggests RIL shares tend to outperform the Indian market during two scenarios: (1) expanding returns (eg. 2017-19), and (2) valuation discovery through stake sales in newer businesses (eg. Jio and retail stake sales in 2020-21). Over the last two years, both these drivers were largely absent, potentially driving the shares' underperformance. It added, "We expect rising returns ahead (101/75/92 bps CROCI expansion in FY25E/26E/27E) which could compound with further potential value unlocks through potential listings of consumer businesses."

Further, Goldman's note added, "Our 12-m SOTP-based TP is revised higher by 16% to Rs3,400. We see favourable risk-reward with a +54%/-13% upside in our refreshed bull/bear case scenarios. Reiterate Buy."

Additionally, Motilal Oswal's note said, " Reliance Industries (RIL) plans to establish a Giga-scale electrolyzer manufacturing facility and transition to green hydrogen by FY26," adding, " O2C earnings in 4QFY24 are expected to remain robust, driven by a recovery in refining margins and stable petrochemical spreads."

Also, Motilal Oswal added, " RIL aims to invest USD10b in new energy and materials business, with green hydrogen being a core part of its vision." While the company's retail business is expected to see a 29% CAGR in EBITDA over FY24-26, driven by store additions and digital expansion."

Hence, Motilal added, " The stock has a buy rating with a target price of INR3,210."

So IPL is kind of a big event for not just cricket fans but also Reliance as well.

As per the Brand Finance report, IPL emerged as the largest league, and 20 times bigger than other leagues with a valuation of $10.681 billion. And in terms of teams, Mumbai Indians top the charts with a value of $87 million in 2023.

Notably, IPL owners also make big bucks as well. Ambanis earn huge revenue from broadcasting rights, ticket sales, merchandise, team merchandise and sponsorships.

Apart from this, Reliance's Q3FY24 report revealed that its media business delivered strong operating performance across verticals. TV News business revenue was up 23% Y-o-Y, driven by the strong growth in advertising revenue across clusters. Digital News business delivered 20% growth in revenue, driven by IP events and video monetization across digital platforms.

But Reliance also revealed after the IPL season last year during its Q1FY24 quarter that revenue growth of 141.7% was driven by Viacom18, as IPL on JioCinema delivered record advertising revenues. The strong performance of JioCinema was driven by the scale, targeting ability, cost flexibility, measurement, and integration options, which offered significant advantages to advertisers on the platform. JioCinema's advertising revenue was higher than TV as the platform attracted more than 13 times the number of advertisers on TV. With a host of new benchmarks, Viacom18 has taken the first big step in its journey of becoming India's leading media company. In Q1, Reliance's media business earned revenue of Rs 3,239 crore, thanks to the frenzy in IPL.

In the 2024 IPL season, Mumbai Indians have rivalled four times against other IPL teams, however, has given a dull performance with 1 win and 3 losses. The latest win of MI is against Delhi Capitals. The next match of MI is scheduled on April 11 against Royal Challengers Bengaluru (RCB).

Among corporate affairs, Reliance has given hefty bonus shares and dividends to its shareholders apart from healthy returns in the long-term. The company has paid 2 bonuses in a ratio of 1:1 each in November 2009 and September 2017. Since 2009, Reliance has paid a breathtaking dividend of Rs 134.62 per share.

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