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With big-ticket stock sales in Jio Platforms and Reliance Retail, a mega-rights issue, and many acquisitions, Reliance Industries (RIL) was one of the biggest newsmakers in 2020. Not only was the corporation in the headlines, but the RIL stock was as well, with a wild roller-coaster journey throughout the year. The stock had fallen from its top of 1,610 in mid-December 2019 to about 880 by end-March, battered by the coronavirus effect; this had prompted a historic drop in oil prices and raised doubts about Saudi Aramco’s intended proposal to purchase 20% of RIL’s refining and petrochemical companies.
A thrilling rally and reversal
Despite the volatility in the oil market, the stock rose more than 50% in less than a month, due in part to RIL’s top-dollar share sale of roughly 10% in Jio Platforms, the digital business holding company, to Facebook in April. This was followed by a succession of rapid-fire share sales in Jio Platforms to other high-profile investors, culminating in a July deal with Google; in all, approximately Rs 1.5 lakh crore was raised by selling roughly 33% of Jio Platforms.
RIL also started selling big-ticket stakes in reliane industries share price in early September, raising roughly Rs 47,000 crore over two months by selling about 10% of the company. All of this, along with overall market momentum, saw the RIL stock rise from strength to strength, reaching a high of over 2,300 by mid-September.
Opportunity
The price drop, on the other hand, gives a chance for long-term investors to accumulate RIL shares. For starters, prices have leveled out. The company currently trades at around 30 times trailing consolidated earnings at $1,994, down from over 35 times a few months ago. The stock has likely been re-rated, even if it is still costly on a trailing basis (the prior three-year average is roughly 20 times). This is owing to the company’s improved financial sheet, which includes considerable debt reduction (debt-to-equity is less than 0.5 times as of September 2020) and the endorsement of major investors in the internet and retail sectors’ future potential.
WHY DID RIL SHARES INCREASE SO QUICKLY TODAY?
Reliance’s stock soared today after the firm said in a stock market filing that it will reorganize and repurpose its gasification assets, citing the board’s decision to undertake a Scheme of Arrangement to transfer the Gasification Undertaking into a Wholly-Owned Subsidiary. Positive growth in the Indian oil share price is also affected by the growth in the prices of Reliance industries.
“The Scheme will also enable RIL to evaluate unlocking the value of syngas through a collaborative and asset-light approach involving (a) induction of investor(s) in the gasifier subsidiary and (b) capturing the value of up-gradation in RIL through partnerships in different chemical streams,” the company said in a statement.
Conclusion
Despite the market recovery, the stock has lost roughly 14% since then, despite Reliance Retail continuing to sell stakes till November and Reliance Retail acquiring Urban Ladder for an appealing 182 crore. The reversal appears to be the result of a few things. While RIL’s digital business performed well, the coronavirus’ impact on the refining, petrochemicals, and retail businesses hurt the company’s total financial performance.
