Reliance Industries shares soar to fresh high

Reliance Industries shares soar to fresh high

Last updated: 19 Jun, 2020 | 02:12 pm

Reliance Industries shares soar to fresh high

Reliance Industries shares gained more than 6% on Friday afternoon to hit a new high of ₹1,788.60 after the firm announced that it has become a net-zero debt company much ahead of schedule. Chairman Mukesh Ambani had earlier promised to make the firm a net-zero debt company by March 2021.

How much has Jio Platforms raised in the last 60 days?

Jio Platforms has raised ₹1,15,693.95 crore from leading global investors including Facebook, Silver Lake, Vista Equity Partners, General Atlantic, KKR, Mubadala, ADIA, TPG, L Catterton and PIF since April 22, 2020. The remaining amount was raised through the recent ₹53,125 crore rights issue, which went to the parent firm Reliance Industries.

Why is this significant?

  • While the telecom sector has witnessed upswing in pricing and demand over the last year, the massive consolidation and dues owed to the government have left the industry with huge debt piles. The chart below shows the net debt of these three telecom players. Net debt shows how much debt a company has on its balance sheet compared to its liquid assets.
  • Reliance Industries, currently a market leader in terms of active users, becoming net debt free gives it tremendous financial firepower to grow within the telecom sector.
  • Overall, Reliance retail which consists of everything from Groceries, clothing to Electronics retail has been experiencing tremendous growth in the last few years. 
  • Reliance now has a war chest to expand its telecom, digital and retail operations alongside it’s refining business, a significant advantage in the fallout of an economy battered by COVID-19.

INDwealth Analysis

  • As at the end of the previous year, Reliance JIO was the market leader with 35% market share followed by Bharti at 31% and Vodafone-Idea at 27% and 7% others. According to Bernstein’s latest report, Reliance Jio could capture nearly 48% market share over the next 5 years. By then, ARPUs is expected to double. 
  • With one of the strongest balance sheets in the world, Reliance Industries is expected to come out on top in the telecom space. 

Our VGQM model continues to have a HOLD rating on Reliance Industries.