- RIL shares have surged nearly 40% so far this year
- The group is also on a spree to monetize its assets and repay its debt and make RIl a zero debt company by March 2021
The Mukesh Ambani-led Reliance Industries Ltd (RIL) on Thursday became the first Indian company to cross the ₹10-trillion market capitalization. The stock was up around 1% at ₹1,581.60. The shares have surged nearly 40% so far this year.
“Higher refinery margins, potential for telecom tariff raise, bottoming PE cycle, start of gas production, lower capex intensity and path to deleveraging have led to investors asking if our bull case could play out despite above average forward multiples. Sequential rise in earnings quality keeps us OW”, said Morgan Stanley in a 19 November note.
The decision of RIL subsidiary Reliance Jio Infocomm Limited to hike tariffs next month has also spurred buying interest in the stock.
“With Jio too announcing its intention to hike tariffs and join incumbents, it appears now that any tariff increase from here on are likely to sustain. This development gives us a sense that a meaningful increase in tariffs and improvement in ARPU is quite likely, at least by 15-20%. Our analysis suggests that ARPU could possibly improve c40% to 50% if TRAI was to decide floor tariffs for both voice and data”, said brokerage firm SBI Caps in a 19 November report .
An SBI Cap report said another factor worth watching is whether Jio matches incumbents on pricing or continues to operate 20% below incumbents. “If Jio decides to match others’ on pricing, Bharti and Vodafone may benefit from lower churn, and Jio will likely emerge as the largest beneficiary on revenue increase,” the report said.
The group is also on a spree to monetize its assets and repay its debt and make RIl a zero debt company by March 2021. The monetization plan includes selling a 20% stake in RIL’s flagship chemicals and refining business to Saudi Aramco in a deal valued at $15 billion.