Reliance AGM: Reliance Industries Limited (RIL) Post AGM 2021 Updates & More

Reliance AGM: The 44th AGM of Reliance Industries took place on 24th June 2021. Some of the key expectations were around the Saudi Aramco deal, launch of Jio Phone, 5G progress, New Energy and Bonus shares, among others. Read our key expectations here

We look at the key highlights of the AGM and the hits and misses.

Reliance AGM highlights

New Green Energy Business: One of the biggest announcements came around Green energy. The company aims to bridge the green energy divide in India and globally. The company will invest Rs 60,000 crore over the next three years to build 4 factories to manufacture and integrate critical components. The components include a solar photovoltaic module factory, electrolyzer factory, energy storage battery factory, and fuel cell factory. The company plans to invest additional Rs 15,000 crore in the value chain, future technologies, and partnerships.

Saudi Aramco Deal: The deal has been pending for a year now and it was acknowledged by Mukesh Ambani in the AGM. The good news for the investors is that he confirmed that 'substantial progress' has been made on the deal. He added, the deal is likely to be completed this year. In line with this, he announced that Yasir Al-Rumayyan, chairman of Saudi Aramco and the governor of the Public Investment Fund, will join the Reliance Board as an independent director.

'JioPhone Next' Coming Soon: The company has been working with Google to build a low-cost smartphone. Reliance Industries has  announced that the company plans to launch it in September this year. Some of the features of this budget Jio phone are - fully featured smartphones, will support the entire suite of applications from Jio, Google, and Android PlayStore, it will be powered by an Android OS which is developed by Google and Jio. It will also have automatic read-aloud, language translation, voice assistant, smart camera with augmented reality filters, and many more advanced features.

5G Launching: The company said that Jio will be the first company to launch 5G in India. However, when it will start was not announced in the AGM. Reliance has recently received regulatory approvals and trial spectrum for 5G field trials. The company has plans to take the 5G technology to other countries. 

Update on JioMart: Ambani gave updates on the progress of JioMart - It has partnered with 3 lakh shops across 150 cities last year. The JioMart platform received 6.5 lakh peak orders in a single day. The company plans to add a 1 crore partner over the next three years. The retail business will focus on strengthening the sourcing ecosystem and acquiring businesses.

Reliance Retail: Reliance Retail is targeting more than 3x growth in revenues in the next 3-5 years. Reliance Retail added 1,456 new stores last year when most of the other brands were closing their business. It is now 6 times larger than the nearest competitor. 

What led to the fall in Reliance Industries shares post AGM?

• Following the AGM, the shares declined to end the week nearly 5% lower. Analysts noted that while the AGM announcements were encouraging, some developments were below expectations, leading to the decline. 
• One of the possible reasons is that the Saudi Aramco deal has not yet been finalised. 
• Further, the company has planned a Rs 75,000 crore investment into New Energy. The street is viewing it as New Energy taking precedence over Jio platforms and retail.
• Global brokerage firm Macquarie has pointed out that the Free Cash Flow outlook remains suppressed against expectations of a material sustainable turnaround. While Reliance Industries remains a ‘Consensus Buy,’ Macquarie’s fundamental fair value is 25%-35% below consensus. The brokerage continues to have an ‘Underperform’ rating on the shares.

Outlook

Reliance Industries shares had been on a rising spree in the month, after global brokerage firm Jefferies upgraded the stock price earlier this month. Given this rally over the last few weeks, there has been some weakness post the AGM. 

Going forward, the company is clearly moving into a new capex cycle. Any progress around the Saudi Aramco deal, take-up of new smartphones, and developments in Omni-channel retail could be important triggers for the shares. As it stands today, the future growth and the roadmap of the company is oriented towards its consumer businesses (Reliance Retail, Jio and Jio Platforms). As the economy improves further, Reliance Industries would continue to see improvement in its business in the upcoming quarters.