RIL hits market cap of Rs 9.5 lakh cr, rallies 3% to cross Rs 1,500 mark
Reliance Industries gained 31 percent in last one year as earnings are strongly supported by its telecom (Reliance Jio Infocomm) and retail (Reliance Retail) businesses.
Image: Shutterstock
Oil-telecom-to-retail major Reliance Industries became the first company among listed entities on exchanges to hit a market capitalisation of Rs 9.5 lakh crore. The stock rallied 3.87 percent intraday and crossed Rs 1,500 mark for the first time on November 19, after the rival Vodafone Idea and Bharti Airtel decided to increase prices with effect from December 1.
Expectations are that the increase in tariffs by competitors could benefit Jio by adding more users as users generally prefer to go to telecom operator which has lowest tariff rate along with strong network. So far, Reliance Jio has not announced any price hike unlike rivals.
The stock touched a record high of Rs 1,514.95 per share intraday and hit a market cap of Rs 9,60,350.88 crore on the BSE. It closed at Rs 1,509.80, up Rs 51.30, or 3.52 percent.
In fact, the company's market cap in dollar terms stood at $133.20 billion, higher than Total SA's $131.44 billion and way higher compared to BP Plc's $103.22 billion. (1 dollar = Rs 71.85)
While maintaining its overweight call on RIL, global brokerage Morgan Stanley announced its bull case target price at Rs 2,000 (a potential upside of 37 percent from current levels) on hope of higher refinery margins, potential telecom tariff hike, bottoming P/E cycle, kickstart of gas production, lower capex and ongoing deleveraging.
Bharti Airtel, on November 18, said the telecom sector was highly capital-intensive with fast-changing technology cycles that require continuing investments. It is, therefore, extremely important that the industry remains viable to support the vision of Digital India, it added.
Accordingly, Airtel will appropriately increase price offerings in the month beginning December, it said.
"To ensure that its customers continue to enjoy world-class digital experiences, Vodafone Idea will suitably increase the prices of its tariffs effective December 1, 2019," Vodafone Idea said in its BSE filing.
Bharti Airtel share price gained more than 6 percent and Vodafone Idea shot up 30 percent intraday.
Reliance Industries gained 31 percent in the last one year as earnings are strongly supported by its telecom (Reliance Jio Infocomm) and retail (Reliance Retail) businesses.
The retail business has grown phenomenally, registering a seven-fold increase in revenue and a 14-fold increase in profit in the last six years. Jio has already become the largest operator in India and still signing up more than 10 million new customers each month.
On the strength of RIL's existing and new growth engines, the company is confident of growing this by 15 percent annually over the next five years, says Anand Rathi which has a buy call on the stock with a target price of Rs 1,610, implying 10.4 percent potential upside from current levels.
RIL has received strong interest from strategic and financial investors in its consumer businesses, Jio and Reliance Retail.
The company will induct leading global partners in these businesses in the next few quarters, and move towards listing of both these companies within the next five years, which will result in a significant value unlocking, said the brokerage.
With the investment cycle likely having peaked, Anand Rathi expects return on investment (RoI) trajectory to improve going forward.
"Jio is now prepared with the roll out of the other revenue engines – IOT, home broadband services, enterprise broadband service and broadband for small & medium businesses. The company will start generating revenue from these businesses from FY20," the brokerage said.
In October, the company approved the formation of a wholly-owned subsidiary (WOS) for its digital platform initiatives.
The company is going to invest Rs 1,08,000 crore in the subsidiary through optionally convertible preference shares (OCPS) while subsidiary will acquire RIL's equity investment of Rs 65,000 crore in Reliance Jio Infocomm (RJIL).
The board has approved a scheme of arrangement between RJIL and certain classes of its creditors including debenture holders for transfer of identified liabilities of up to Rs 1,08,000 crore to RIL and rights issue of OCPS aggregating up to Rs 1,08,000 crore for the purpose of payment of consideration for transfer of identified liabilities - WOS to subscribe to this issue, as per company release.
RJIL will become virtually net debt-free company by March 31, 2020, with exception of spectrum-related liabilities, it added.
Disclaimer: Reliance Industries Ltd, which owns Jio, is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.
Original Source: https://www.moneycontrol.com/news/business/markets/ril-hits-market-cap-of-rs-9-5-lakh-cr-rallies-3-to-cross-rs-1500-mark-4653241.html