August 30, 2024
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Stock Market

Will Reliance Industries cross ₹4,000 mark?

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Stock Market

Will Reliance Industries cross ₹4,000 mark?

As Reliance Industries Limited (RIL) continues to dominate India’s corporate landscape. Investors and market watchers are asking a tantalising question: When will RIL’s stock price cross the Rs 4,000 mark? In this article, we’ll dive deep into RIL’s diverse business segments, from retail to new energy, examining their performance and future prospects.

We’ll explore the factors that could propel RIL’s stock to new heights and the challenges it may face along the way. Let us unravel the complex tapestry of India’s largest private sector company and its potential for future growth.

Indian Economy

India’s economy has surged ahead. This has defied expectations with a remarkable 8.2% GDP growth in FY24, up from 7.2% the previous year. This robust performance, fueled by strong domestic consumption and a 25% jump in government capital expenditure, signals a new era of economic vitality.

Inflation has moderated to 4.9%, while core CPI inflation hit a record low of 3.2%. With a current account deficit below 1.5% of GDP and foreign reserves surpassing $600 billion, India’s economic foundation is stronger than ever. The services sector is booming, now commanding 10% of global exports.

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Energy demand is surging, with oil consumption up 4.6% to 233.3 MMT and natural gas demand rising 11.1% to 66.6 BCM. These indicators not only cement India’s position as the fastest-growing major economy but suggest that growth could accelerate even further, potentially outpacing current projections and reshaping global economic dynamics.

Company Overview Of Reliance Industries

Reliance Industries(RIL), was founded in 1957 by Dhirubhai Ambani. Now has grown from a textile trading company into India’s largest private sector conglomerate. Today, RIL’s diverse portfolio spans energy, petrochemicals, retail, telecommunications, and digital services, making it a cornerstone of the Indian economy.

The company’s major stakeholders include the Ambani family, with Chairman and Managing Director Mukesh Ambani at the helm. Institutional investors and the public also hold significant stakes, reflecting RIL’s broad market appeal.

RIL’s history is marked by transformative milestones. From establishing India’s largest refinery complex in Jamnagar to revolutionising the telecom sector with Jio, RIL has consistently pushed boundaries. The company’s recent ventures into retail and new energy underscore its adaptability and forward-thinking approach.

Segment Analysis

Reliance Industries operates across multiple sectors, each contributing significantly to its sturdy business model. Let’s examine the key segments, their performance, and their importance to the company’s future.

1. Retail Segment

Reliance Retail dominates India’s retail landscape with its 18,836 stores spanning 79.1 million sq. ft and over 300 million registered customers. Operating in a market valued at US$951 billion in 2023. The segment achieved impressive financials with gross revenue of ₹3,06,848 crore (17.8% YoY growth) and an EBITDA margin of 8.5% (0.7% YoY improvement).

The segment’s diverse portfolio, including consumer electronics, fashion, groceries, and digital commerce, positions it well to capture a big part of the projected US$1.4 trillion market by 2027. Reliance Retail is actively expanding its omnichannel presence. This is done by integrating AI and ML for personalised shopping experiences, and focusing on private labels to drive profitability.

2. Digital Services Segment

Jio’s digital services have revolutionised India’s telecom sector, boasting 481.8 million subscribers and 148.5 billion GB of data traffic. With revenue of ₹1,13,176 crore (11% YoY growth) and EBITDA of ₹56,697 crore (12.7% YoY growth), Jio is at the forefront of India’s digital transformation.

The segment is capitalising on the country’s growing internet economy, expected to reach US$1 trillion by 2030. Jio’s strategic focus includes accelerating its 5G rollout (already serving 108 million users), expanding JioAirFiber services, and developing indigenous 5G stack and AI solutions. The company aims to connect 100 million premises with high-speed internet, driving digital adoption across India.

3. Media and Entertainment Segment

With a 12.7% TV network viewership share and a digital news portfolio reaching 227 million monthly users, Reliance’s media segment is a key player in India’s $27.9 billion media and entertainment industry. The segment saw a 49.4% YoY growth in operating revenue, driven by JioCinema’s success (225 million average monthly reach). Looking ahead, the group is investing heavily in content creation, aiming to increase its digital content library by 13.5% annually. It’s also expanding its regional language offerings and exploring partnerships with global media giants to enhance its international presence.

4. Oil and Chemicals Segment

Despite global volatility, Reliance’s O2C segment maintained resilience with 67.8 MMT production for sale and 78.2 MMT total throughput. While revenue declined 5.0% YoY to ₹564,749 crore, EBITDA remained stable at ₹62,393 crore. The segment’s diverse portfolio, including transportation fuels, polymers, and intermediates, positions it well to capitalise on growing Asian demand.

Reliance is investing ₹75,000 crore in expanding petrochemical capacity. Further they are investing ₹30,000 crore in developing a carbon fibre plant, anticipating India’s polymer demand to rise by 6-8% in FY 2024-25.

5. Oil and Gas E&P Segment

The E&P segment delivered strong performance, with EBITDA exceeding ₹20,000 crore, 242 BCF gas production, and 4.43 MMBBLs oil and condensate production. Revenue and EBITDA grew by 48.0% and 48.6%, respectively, driven by higher gas price realisation and increased production from the KG D6 block.

With an average gas production of 27.8 MMSCMD in FY 2023-24, Reliance is well-positioned to benefit from India’s goal to increase gas’s share in the energy mix from 6% to 15% by 2030. The company plans to ramp up KG D6 production to 30 MMSCMD and expand its coal bed methane (CBM) operations.

6. New Energy Segment

The segment is progressing rapidly, set to commission its first Module and Cell Manufacturing train in FY25 and having secured a 25-year PPA for 128 MW with MSEDCL. Reliance’s qualification for the government’s PLI scheme for electrolyser manufacturing and green hydrogen production further bolsters its position. As India targets 50% non-fossil fuel energy capacity by 2030, Reliance aims to become the country’s largest RE developer and a global leader in climate technology.

Future Plans Of Reliance Industries

Expand 5G network coverage and increase 5G subscriber base. Leveraging their position as the largest 5G subscriber base outside China with 130 million users.

Continue to push AirFiber offering across India. Targeting pan-India demand including tier II and III cities, aiming to connect more homes in the coming quarters.

Strengthen enterprise business by expanding wallet share beyond connectivity. Offering cloud, chatbots, CPaaS, and vertical solutions to clients across various sectors.

Grow IoT services by combining connectivity, devices, and software platforms, targeting sectors like education, manufacturing, hospitality, and BFSI.

Expand Reliance Retail’s store footprint. Focus on new formats like Yousta, Azorte, and Gap, while scaling up premium brands and luxury offerings.

Enhance JioMart as a multi-category horizontal platform, expanding non-grocery categories and leveraging hyperlocal presence for customer acquisition and cross-selling.

Sustain and potentially increase oil and gas production from KG-D6 field. Also Plans on ramping up production from Coal Bed Methane (CBM) fields.

Continue to optimise O2C (Oil to Chemicals) business operations. Focusing on maximising throughput and adapting to market conditions in refining and petrochemicals.

Invest in technology platforms, supply chain capabilities, and distribution networks across all business segments to maintain growth momentum in the near and medium term.

Financials Of Reliance Industries

Revenue: Soared from ₹876,396 crore in FY23 to ₹899,041 crore in FY24, marking a steady upward trajectory over the past five years

Net Profit: Has climbed to ₹79,020 crore in FY24, reflecting a 6.7% increase from the previous year, the highest by any Indian conglomerate.

OPM: The company improved its operating profit margin (OPM) from 16% to 18%, indicating enhanced operational efficiency.

Debt: the debt-to-equity ratio rose slightly to 0.60 in FY24 from 0.52 in FY23, suggesting increased leveraging. Despite this, Reliance has significantly reduced its debt burden compared to FY20’s 0.79 ratio. showcasing improved financial health and strategic debt management.

Some notable financial changes are as follows:

RIL’s consolidated capex declined 7% year-on-year to Rs1.3 tn (US$16 bn).
Jio’s capex decreased by 10% to Rs88.5 bn, excluding spectrum capex of Rs937 bn in FY2023.

After a sharp 275% increase to Rs14 bn in the previous year. Retail capex declined 62% to Rs24 bn (US$3 bn) in the reported period.
Capex for other businesses (including new energy, media, and others) increased sharply by 96% to Rs 47 bn. This was likely driven by investments in new energy (Rs 30-35 bn) and real estate acquisitions.