IPO JIO: Reliance Industries Shares Surge to 52-Week High Amid Jio Financial Listing- Reliance Industries Ltd. witnessed a significant surge in its stock price, reaching a 52-week high. The rise in share value was attributed to the company's decision to decrease the equity share capital held by shareholders in Reliance Retail Ltd., as well as its plans to separately list its financial services business.
In an exchange filing, it was stated that the shares held by minority investors, excluding the promoter and holding company Reliance Retail Ventures Ltd., in the unlisted Reliance Retail Ltd. will be cancelled and eliminated. Investors will receive Rs 1,362 per share as compensation.
IPO JIO Reliance Industries Shares
Furthermore, the company has established a record date for the demerger of its financial services arm, which will be renamed and listed as Jio Financial Services Ltd (JFSL). Analysts from Morgan Stanley highlight that as the downgrade cycle reverses and net debt reaches its peak, the focus will be on the "rate of change" in RIL's earnings.
Rebuilding confidence in petrochem margins, fuel demand, and the monetization of retail investments are also crucial factors, according to the same source. UBS reiterated a 'buy' rating for Reliance Industries, setting a price target of Rs 3,000 per share, emphasizing that the capital reduction in Reliance Retail would enhance its valuation.
During trading hours, Reliance Industries' shares rose by 4.39% to reach Rs 2,749.2 per share, while the NSE Nifty 50 experienced a 0.55% increase at 1:58 p.m.
At its peak, the stock surged 4.65% to Rs 2,756 per share, which is approximately 100 points away from its all-time high of Rs 2,856.15 per share.
The total traded volume was 4.2 times higher than its 30-day average. The relative strength index suggests that the stock may be overbought, standing at 77.
Out of the 38 analysts tracking the company, 33 maintain a 'buy' rating, three recommend a 'hold,' and two suggest a 'sell' on the stock, as reported by Bloomberg. The average 12-month consensus price target implies a potential upside of 1.7%.
Morgan Stanley's analysis of Reliance Industries' June quarter earnings focuses on the transition from a downgrade cycle in the last four quarters to an upgrade cycle in Q1 FY24.
Additionally, the nearing peak of net debt is expected to contribute to earnings. Investors are anticipated to shift their attention from downside risks to factors driving upside for consensus estimates.
The company is projected to invest $17 billion annually, which aligns with its operating cash flow. However, there will be a shift in the investment mix from retail, upstream gas, and telecom to new energy and chemicals.
Estimates suggest that EBITDA and net profit in Q1 FY24 will experience a quarter-on-quarter decline of 0.5% and 19%, respectively. The decline can be attributed to lower diesel margins, although this will be offset by higher chemical margins and lower ethane costs.
The brokerage expects steady EBITDA growth and some margin expansion in consumer retail. Despite a significant correction in refining margins, RIL is expected to witness a 4% quarter-on-quarter decline in oil-to-chemicals EBITDA,
IPO Announcedinfluenced by headwinds such as windfall tax and the ending of the destocking cycle. Regarding telecom, no surprises are expected, with the average revenue per user remaining relatively unchanged at Rs 180 quarter-on-quarter, along with eight million net subscriber additions and flat EBITDA margins.
UBS maintains a 'buy' rating on RIL, with a price target of Rs 3,000 per share. Reliance Retail is set to decrease the non-promoter capital, making it a wholly-owned subsidiary of Reliance Retail Ventures Ltd.
The brokerage has determined a consideration of Rs 1,362 per share, which represents a 54-60% premium to the valuations obtained from two independent registered bodies.
Reliance Retail Ventures is valued at $110 billion, and RIL's 85% stake in it is valued at $93 billion. This sets a floor price for future value unlocking and is expected to increase the value of the retail business based on a sum-of-the-parts analysis.
In addition, Reliance Industries has revealed the demerger details of its financial services subsidiary. Shareholders of Reliance Industries will receive one share of Reliance Strategic Investments Ltd. for every one share they own in RIL.
The brokerage derives the price target through a sum-of-the-parts analysis, valuing refining and petrochemical based on EV/EBITDA, telecom and upstream using discounted cash flows, and retail based on a sum-of-the-parts basis.
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