RIL's Rs 53125 cr rights issue opens today. What should investors do?

Billionaire Mukesh Ambani-owned Reliance industries mega rights issue opened on May 20 for subscription for existing shareholders.

The company proposed to raise Rs 53,125 crore through its biggest ever rights issue which will close on June 3, 2020, while the ratio is one rights issue share for every 15 equity shares held by existing shareholders as on record date (May 14).

The ex-date for rights issue was May 13, which implies that investors who bought Reliance shares before May 13 and hold those shares in their account before May 14 are eligible to apply for the rights issue.

The rights issue price has been fixed at Rs 1,257 per share, of which 25 percent of the amount i.e Rs 314.25 will be paid by the investors at the time of application. Another 25 percent i.e. Rs 314.25 per share will be paid by the investor in May 2021 and the balance 50 percent i.e. Rs 628.50 per share will be paid in November 2021 on-call by the company at the relevant time.

Analysts advise existing investors to subscribe to the rights issue given the current and expected healthy growth in Jio Platforms and Retail.

We advise existing shareholder/investors to exercise the rights and 'Subscribe' to the issue offered by RIL which is similar to that of investing in a company future growth and remain invested in the stock for at least 2-3 years to see the benefit colouring," Prashanth Tapse, AVP Research at Mehta Equities told Moneycontrol.

"Availing rights just because the offer is at discount to market price is not the only parameter to consider," he said, adding investors should also look at factors such as growth prospects and the reason behind the company's decision to come out with a rights issue and so on.

Vineeta Sharma, Head of Research at Narnolia Financial Advisors also advised investors to apply for shares in the rights issue.

Experts feel the company's consistent investment in lot of technology related firms, and big investment from lot of marquee investors recently in the Jio Platforms clearly indicated that company has been marching towards becoming a tech giant with the aim to move beyond normal telecom operations.

Promoter and promoter group with 50.07 percent stake have pledged to buy the full extent of their entitlement and also subscribe to all unsold shares in the rights issue, which shows the promoters commitment and confidence in the company's future growth prospects, Tapse said.

Also its aim to become net debt-free by March 31, 2021 will be achieved well before the deadline. This will strengthen the balance sheet of the company and is one of reasons that induced experts to advise investors to subscribe the rights issue.

Marquee investors like Silver Lake, Vista, General Atlantic and Facebook Inc invested Rs 67,195 crore for 14.81 percent stake in Jio Platforms within last four weeks, ahead of this rights issue.

We believe subscribing to the issue makes sense after looking at the recent value unlocking deals like investments by Facebook, Silver Lake, Vista, General Atlantic and few news reports also say Saudi Arabia's Public Investment Fund (PIF) is also considering to buy a minority stake in Jio in coming days," Prashanth Tapse said.

"The Saudi Aramco deal investment is also still at the due diligence stage, we believe Aramco deal would also be closed before FY21 thus making it to get debt-free status," he added.

Gaurav Garg, Head of Research at CapitalVia Global Research Limited – Investment Advisor also said investors should try to grab opportunity and should apply for the right issue. "Reliance Industries is making good moves to make itself debt-free. Recent deals might act as a catalyst and provide liquidity to the giant. For mid to long term, Reliance is worth investing."

The company is expected to complete the capital raising programme totaling over Rs 1.04 Lakh crore by Q1 of the current financial year. This includes the investment by Facebook in Jio Platforms (already garnered Rs 43,574 crore), the upcoming rights issue and the previous investment by British Petroleum in FY19-20.

All the incubated businesses of Reliance - Reliance Retail, Reliance Jio are performing well and leaders in their segment. Reliance Digital services i.e Jio margins have improved from 18 percent to 20 percent in FY20 with topline growth of 40 percent. Similarly, the organized retail margins have improved from 4.2 percent in FY19 to 5.1 percent in FY20 with revenue growth of 25 percent in FY20.

Mukesh Ambani's RIL becomes sixth largest global energy firm by market cap

RIL hit a market cap of $130.76 billion on Wednesday compared with BP Plc’s $128 billion
In early deals today, shares of RIL traded at ₹1,466 on the BSE, having gained over 31% so far this year
 Mukesh Ambani led-Reliance Industries Ltd (RIL) has pipped British oil major BP Plc in terms of market capitalisation to become the world’s sixth largest energy entity. But the rise in market cap is largely thanks to Indian conglomerate’s retail and telecom businesses.
RIL hit a market cap of $130.76 billion on Wednesday compared with BP Plc’s $128 billion. In early deals today, shares of RIL traded at ₹1,466 on the BSE, having gained over 31% so far this year.
On Tuesday, shares of BP Plc, closed at $6.33, down 3.8%--the most in four weeks--in London trade, after dashing investor hopes of a higher dividend this year. The company’s market capitalization stood at $128.86 billion. Year to date, the BP Plc stock has declined 0.7%.
BP Plc reported adjusted net income of $2.25 billion for the September quarter, exceeding average analyst estimate of $1.77 billion. This compares with a profit of $3.84 billion a year earlier, when BP decided to buy a $10.5 billion package of US shale assets in cash rather than shares because it was confident oil prices would stay high.
Globally, in the listed universe, Exxon Mobil Corp is the biggest oil and gas firm, with a market cap of $290.42 billion, followed by Royal Dutch Shell Plc at $238.15 billion, Chevron Corp at $224.92 billion, Petrochina Co Ltd with $149.20 billion in market cap, and Total SA at $141.74 billion.
However, the world’s largest energy entity is Saudi Aramco, which pumps about 10% of the world's crude and emerged as the most profitable company in 2018. Saudi Aramco beat Exxon Mobil Corp in terms of earnings. The energy giant plans to launch its initial public offering in November.
BP is RIL's partner in its exploration and production ventures in India. Both companies also operate an equal joint venture called India Gas Solutions, and will partner to set up fuel retail outlets.

RIL's plan to become debt-free in 18 months: Credit Suisse upgrades stock

The brokerage factored in stronger balance sheet with debt reduction of $22 billion till FY21, and low capex intensity guidance and higher Jio valuation.

Global brokerage house Credit Suisse took a U-turn on Reliance Industries on August 19 after downgrading stock and cutting price target on August 5.

The brokerage upgraded its rating on Reliance Industries to neutral and also raised price target to Rs 1,210 from Rs 1,028 earlier after reading and analysing the speech of Chairman and Managing Director Mukesh Ambani.

The brokerage factored in the stronger balance sheet with debt reduction of $22 billion till FY21, and low capex intensity guidance and higher Jio valuation.

On August 5, the brokerage downgraded Reliance Industries to underperform (from neutral) and cut target to Rs 995 (from Rs 1,350) on rising debts and interest cost in last four years.

Its target price cut had factored in (1) higher liabilities of $10 billion from crude payables, JioPhone financing and East-West pipeline; (2) multiple cuts and lower earnings for refining; (3) slow enterprise roll-out and weak Jio ARPU in Q1FY20.

"RIL has been free cash flow (FCF) negative for six years and given margin pressure in refining and petrochemical (high supply), FCF should be negative for FY20-21. Total liabilities are already up from $19 billion (FY15) to $65 billion (FY19) (debt, higher crude payables, customer advances, capex creditors, spectrum liabilities, JioPhone financing and East West (EW) pipeline) and are 40 percent of enterprise value," it had said in its report earlier.

Total interest cost has increased to $4 billion in FY19 against $1.2 billion in FY15 and was equivalent to 44 percent of EBIT, it had added.
The reason for taking U-turn in rating as well as the target was the strong outlook from Mukesh Ambani in his speech while addressing the company's 42nd Annual General Meeting on August 12.

"We have a very clear roadmap to becoming a zero net debt company within the next 18 months that is by March 31, 2021. After around Rs 3.5 lakh crore spending on Jio, the investment cycle for Jio is now complete," he said.

Last year, Reliance had transferred telecom infrastructure assets to two separate infrastructure trusts for a consideration of Rs 1.25 lakh crore with the intention of raising this money from large global institutional investors.
For the same, it has received strong interest and commitments from reputed global investors and are confident that these transactions will be completed by the end of this Financial Year, Ambani said, adding post this, company ended last year with net debt of Rs 1,54,478 crore.

He said Saudi Aramco would buy 20 percent stake in RIL’s oil-to-chemicals (02C) division, at an enterprise value of $75 billion. Reliance also signed an agreement with BP for investment in KG-D6.

"We expect to complete these transactions within this financial year subject to definitive agreements, due diligence, regulatory and other customary approvals. The commitments from these two transactions are about Rs 1.1 lakh crore," he said.

The company also received strong interest from strategic and financial investors in consumer businesses, Jio and Reliance Retail, and it will also evaluate value unlocking options for real estate and financial investments, he added.

Here's how to trade Indiabulls Housing, Tata Motors & RIL in coming days

By applying concepts like Time cycles, Channels and indicators like RSI or the Relative Strength Index, one can still derive amazing trades from these stocks.

Indiabulls Housing Finance, Tata Motors and Reliance Industries have been in news for different reasons in August. These stocks have been showing amazing trending moves in either direction.

By applying concepts like time cycles, channels and indicators like RSI or the relative strength index, one can still derive amazing trades from these stocks.

The most important thing to note is that long positions should be created on stocks that move from the bottom left corner to the top right, which means it is in an uptrend and short positions can be created in stocks that move from the top left corner to the bottom right which means it is in a downtrend. This is the most basic principle which I use for my proprietary trades.

RIL rallied over 20% since last AGM: Investors eye GigaFiber, Jio Phone 3 launch

The stock rallied from Rs 964 recorded on 5th July 2018 when RIL held its 41st AGM, to Rs 1,162 registered on Friday, 9 August, which translates into a rally of over 20 percent.

India’s second-largest company by market capitalisation, Reliance Industries will hold its 42nd annual general meeting (AGM) on Monday, August 12 in Mumbai which would be eyed by both investors as well as analyst community

The stock rallied from Rs 964 recorded on 5th July 2018 when RIL held its 41st AGM, to Rs 1,162 registered on Friday, 9 August, which translates into a rally of over 20 percent.
Investors could see the launch of Jio Phone 3, commercial rollout and pricing of Jio’s broadband service GigaFiber, and the triple play plan for GigaFiber that bundles broadband, landline as well as television services, are also expected to be announced at the RIL AGM, CNBC-TV18 said quoting market sources.

Jio Phone 2 was launched at the last AGM and carried a price tag of Rs 2,999. Its next iteration, Jio Phone 3, is expected to be priced at Rs 4,500, the report added.

Jio Phone 2 was launched at the last AGM and carried a price tag of Rs 2,999. Its next iteration, Jio Phone 3, is expected to be priced at Rs 4,500, the report added

AK Prabhakar, Head of Research at IDBI Capital expects the launch of triple play plan for GigaFiber which bundles broadband with DTH as well as a telephone in one package. Pricing is something which will be watched by the D-Street.

The pricing for the broadband plans is expected to be in line with peers but RIL will sweeten the deal by making it a triple play —a combination of broadband-landline-TV OTT service. A base price of ranging between Rs 500-600 for GigaFiber is expected, according to CNBC-TV18 report.

Apart from Jio broadband rollout as well as the launch of Jio Phone 3, some analysts will also keep a close eye on the deleveraging plan, expansion on the retail front, as well as any important development on the refining front.
AK Prabhakar, Head of Research at IDBI Capital expects the launch of triple play plan for GigaFiber which bundles broadband with DTH as well as a telephone in one package. Pricing is something which will be watched by the D-Street.

The pricing for the broadband plans is expected to be in line with peers but RIL will sweeten the deal by making it a triple play —a combination of broadband-landline-TV OTT service. A base price of ranging between Rs 500-600 for GigaFiber is expected, according to CNBC-TV18 report.

"Focus will be more on its retail, telecom business expansion plan, and fund mobilisation. Also, towards its oil refining business front some important announcement is expected," Sanjeev Jain, VP Equity Research at Sunness Capital India Pvt Ltd, told Moneycontrol.

Last week, Credit Suisse said that the company is expected to remain free-cash-flow negative over FY20-21, just as it has been for the last six years. The report further added that liabilities have dramatically gone up to $65 billion in FY19 from $19 billion in FY15.

Reliance Industries, the country's second largest company by market capitalisation, reported a consolidated profit after tax of Rs 10,104 crore for the June quarter, up 6.8 percent from a year ago. The net profit also beat a poll of analysts which had pegged the profits at Rs 9,852 crore.

“Investors would watch out for some news from RIL on how it can substantially deleverage its balance sheet through either induction of a partner in the refinery business because there were some talks of a deal with Saudi Aramco,” Ajay Bodke CEO- PMS Prabhudas Lilladher told Moneycontrol.

The analyst would watch out for a medium-term plan for monetizing their stake in the refinery, retail, fiber, and tower business because the company has become net debt company from a net cash company amid expansion plans.

The second thing that investors would watch out for would be the return ratios, said Bodke. He further explained that with increased contribution of consumer-focused business like retail and telecom – investors would expect the return ratio of the company to move northwards to just premium valuations compared to pure-play refining and Petro companies.