Shares of Reliance Industries (RIL) hit an over six-month low of Rs 2,315.55 on the BSE in Thursday’s intra-day trade, as the stock price of the company fell 7 per cent during the past week. In comparison, the S&P BSE Sensex was down 4.6 per cent during the same period.
RIL is, now, trading at its lowest level since March 9, 2022. The stock had hit a 52-week low of Rs 2,181 on March 8. Thus far in the month of September, RIL has shed 12 per cent as compared to 2.7 per cent decline in the benchmark Sensex index. It has corrected 19 per cent from its record high level of Rs 2,855, touched on April 29, 2022. RIL’s market capitalisation has been eroded by Rs 3.66 trillion, from its all-time high level, due to the meltdown.
RIL is one of India’s largest conglomerate with its foray in oil refining & marketing, oil & gas exploration, petrochemicals, organised retail, media, and digital services (Jio). On a consolidated basis, at the EBITDA level in FY22, oil-to-chemical (O2C) and oil & gas contributed 49 per cent, while retail, digital, and others contributed 10 per cent, 34 per cent, and 7 per cent, respectively.
“Long term prospects and dominant standing of RIL in each of its product & service portfolio provide comfort for long term value creation. RIL’s consumer business will be the growth driver, going ahead. The company has a strong balance sheet while its traditional business will continue to generate steady cash flows,” analysts at ICICI Direct said.
On the traditional businesses front, O2C segment’s profitability is expected to remain steady in the near-term. However, any potential upside is likely to be capped owing to windfall taxes, it added.
The brokerage firm expects gross refining margins (GRMs) to stabilise in the near-to-medium term as the company plans to invest more into forward integration (petrochemicals business). “Higher global LNG prices and ramp-up in gas production over FY23-24 will drive growth in the oil & gas segment,” ICICI Direct said in recent report.
For Motilal Oswal Financial Services, the growth momentum and improved margin profile across the sector will drive RIL’s revenue/EBITDA growth of 25 per cent/32 per cent in FY23E, respectively.
“These, however, do not factor in any incremental growth from 5G capex, new energy and other segments. Over the next two-to-three years, RIL is likely to create the next engine of growth but it could put pressure on its near-term return ratios,” it had said in RIL’s annual report update.