Reliance Industries hits 10-month low, stock slips 15% since December

Shares of Reliance Industries (RIL) fell 3 per cent to hit 10-month low of Rs 2,312 in Friday’s intra-day trade, on the back of heavy volumes, as the sharp sell-off was seen across equities. The stock of country’s largest company in terms of market capitalisation traded its lowest level since March 2022. It had hit a 52-week low of Rs 2,181 on March 8, 2022.

At 02:39 pm; RIL quoted 2.5 per cent lower at Rs 2,323.70, as compared to 1.9 per cent decline in the S&P BSE Sensex. Since December, the stock price of the company fell 15 per cent. It has corrected 19 per cent from its 52-week high level of Rs 2,855, which it had touched on April 29, 2022.

The Mukesh-Ambani-led RIL cautioned against impact of global economic headwinds on energy demand, in a post-results conference call. Pointing to growing slowdown concerns internationally, including rising interest rates and contracting purchasing manager's indices (PMIs), the company's management warned in its post-results call that these factors could hurt overall oil demand in the future. CLICK HERE FOR FULL REPORT

RIL’s consolidated gross debt increased to Rs 3.03 trillion at end of December quarter (Q3FY23), against Rs 2.95 trillion at the end of September quarter (Q2FY23), with cash & cash equivalents of Rs 1.93 trillion. Net debt, meanwhile, stood at Rs 1.1 trillion (as per the company).

Analysts at Emkay Global Financial Services expect RIL’s earnings to improve as petchem recovers (from China), MJ1 commissions, and Jio is likely to see tariff hikes. However, FCF would be constrained by high capex and monetization of verticals and development of new energy projects are likely to be key triggers, said analysts.

Segment wise, the consumer business saw soft growth in both retail and telecom as retail was hit by soft discretionary spends and telecom business saw high churn and limited ARPU levers, said analysts at Motilal Oswal Financial Services (MOFSL).

"Further, 5G investment should intensify with the target to achieve pan-India rollout by December 2023. The Oil and Gas segment has seen tailwinds with better margin as well as higher and sustained production coupled with opening up of China that could sustain earnings," the brokerage firm said.

According to analysts at ICICI Securities, meanwhile, the prospects for Q4 can further improve for the OTC (oil to chemicals) business, helped by higher Russian crude and steady product spreads, while retail and RJio will likely continue to show growth.

However, analysts cautioned against any meaningful expansion in return ratios and/or any major move to return cash to shareholders in view of the sustained capex momentum over FY22-FY24E.

“We continue to believe there is limited upside hereon due to stronger capex momentum, which would further push back FCF generation and dampen return ratios; limited signs of return of capital to shareholders,” the brokerage firm said as it reiterated ‘ADD’ rating on RIL, with a target price of Rs 2,802 per share.