Mukesh Ambani’s Reliance Industries Ltd. (RIL) has seen improved interest from foreign portfolio investors in the last one year. Foreign Portfolio Investor’s (FPI) shareholding in RIL has jumped 1.59% in the January-March quarter, from a year-ago period. Meanwhile, mutual funds have trimmed their stake in the oil-to-telecom conglomerate by 1%, for the duration of the identical period. This is in line with a current report by international investment bank Jefferies, exactly where it says that overseas investors are more constructive on the stock. Jefferies has maintained a price tag target of Rs 2,600 per share on RIL stock. Currently, RIL trades at Rs 2,018 per share.
“Our interactions with 100 investors upon assuming coverage of RIL indicate overseas investors are significantly more constructive compared to their domestic counterparts,” the report mentioned. Foreign investors continue to see RIL as the nearby champion with a sturdy footing in the retail as effectively as telecom market. On Jio Platforms, Jefferies mentioned that most foreign investors are focused on its telecom operations rather than digital services. “With most investors not paying attention to digital services, their scale-up could be a source of positive surprise,” the report added. Coming to RIL’s standard money cow, the oil to chemical compounds small business, investors are patiently waiting for a timeline of the stake sale to Aramco and the anticipated Capex strategy in RIL’s new cracker technologies.
RIL also maintains an edge more than competitors in the retail segment. “Reliance Retail’s lead over the competition is evident from the fact that its retail area footprint is ~2x that of Future Retail and ~4x of DMart which are other large & formidable players in the retail space,” Jefferies mentioned. At $6 billion in revenues, Reliance Retail accounts for a third of India’s organised electronics retail.
Jefferies sees 3 essential triggers ahead for the stock. The initial triggers, according to the report is the launch of an inexpensive smartphone by Jio in partnership with Google. “We expect this to coincide with the AGM. The recent large spectrum acquisition to overcome congestion in some tier 1 circles, tariff cuts in the feature phone segment and the affordable smartphone will allow them to accelerate subscriber adds,” they mentioned.
Further, the Future Group deal is a different essential trigger for RIL. Reliance Retail and Future Group could combined account for 10% of organised sector FMCG sales, according to the report. The last trigger is anticipated to be the oil to chemical stake sale. Analysts at Jefferies anticipate the transaction to close this economic year if crude sustains at present levels.
Reliance Industries stock price tag has corrected 16% from its 52-week higher and has underperformed the Nifty 50 by 40% because October last year. “Covid-related restrictions are expected to weigh on Jio and RR earnings in the first quarter of this fiscal year but decade-high polymer margins provide near-term support,” the report mentioned. Jefferies has a ‘Buy’ contact with a target of Rs 2,600 per share on RIL. Reliance Industries will report its January-March quarter earnings on April 30.