Reliance Industries Stock Analysis : Watch out for the growth!

Reliance Industries share price analysis (RIL)
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Reliance Industries: Introduction of the Ambani Dream

What can dreams and high aspirations achieve? A company that started with just 500 sq ft of land becomes the first Indian private company to enter the Fortune Global 500 List. Sitting in his office at Masjid Bunder, Mumbai, Dhirubhai Ambani dreamt of establishing India’s largest company. Many years down the line, his company has maneuvered successive challenges and has become a trailblazer in various business milestones. Reliance Industries Ltd. (RIL) morphed from a textiles company to a technology major accomplishing several firsts along the way. Reliance Retail becomes the largest retailer in the country, Reliance Jio disrupts the Indian telecom sector with its pan-India 4G service, and of course, the world’s largest petroleum refinery bears its brand. In 2019, RIL became the first Indian company to cross the ₹10 Trillion market capitalization. Over the years it has become one of India’s poster boys to usher in growth and rapid transformation by ushering in massive foreign investments and generating commendable shareholder value. All of it was a dream, made into a reality.

Reliance Industries Business Analysis

It is no surprise that the majority of its revenues come from the Oil to Chemical (O2C) segment. RIL is one of India’s largest exploration and production players and by far the largest in terms of market capitalization. Following O2C is Retail, with its host of offerings ranging from groceries to jewelry to footwear and gadgets. You name it and they have a brand associated. Mind you, these numbers reflect the FY 2020-21 Annual Report available on the website, the latest information could vary. 

Reliance Industries Revenues

Revenue has grown with a CAGR of 12.98% over the last 5 years. There is an increasing trend, except for FY21 where the decline was mainly from the Oil and Natural Gas segment’s low volume output.

 

Segments Overview For Reliance Industries (RIL)

 

Jio Platforms Ltd

  • Leader in the mobile broadband subscriber in terms of market share with 53.3% share.
  • Number 1 FTTH provider with more than 5 Mn homes connected within 2 years.
  • Invested $200 Mn in Glance, a leading AI-driven lock screen platform, shall invigorate JioPhone Next smartphones.
  • Purchased a 25% equity stake in Two Platforms Inc, an AR company that enables AI voice and video calls and life-like gaming.
  • A Joint Venture with SES satellites to augment satellite-based broadband connectivity to enterprises and retail consumers.
  • An Undersea cable system IAX shall be set to connect the Maldives with India and Singapore, positioning itself as a strong single solution provider in this part of the world. 
  • Average Revenue Per User (ARPU) jumped to ₹167.6 from ₹151.6, in FY22
  • Operating revenue grew by ~22% mainly due to the tariff hike this year.

 

Reliance Retail

  • Crossed 15000+ stores milestone, about 2500 added this year.
  • A boost in customer loyalty figures, 193 Mn loyal customers, up 24% YoY.
  • Revenues grew by a whopping 189% compared to that of FY18 in this financial year.
  • A majority of the revenues were from the Consumer Electronics and Fashion & Lifestyle basket, the grocery division recorded all-time high revenues, and digital and new e-commerce contributed 19%. 
  • Partnerships with certain marquee Indian designers including Abujani Sandeepkhosla and Rahul Mishra.

 

Customer Footfall Analysis For Reliance Retail

Customer footfall is a good indicator to measure how successful a company’s marketing efforts are. On the basis of this, you can measure the conversion rate, and average transaction level and can further help in determining demand and staffing levels. 

 

Customer footfalls were in tandem with the percentage of operational stores most of the time. Implying a rather robust marketing and promotional effort. 

 

RIL Oil to Chemicals (O2C)

The oil to chemical segment includes refining, chemicals, and bulk wholesale marketing businesses. While laymen remember Reliance on the above segments majorly, the old Oil to chemicals business continues to deliver the highest revenues for the conglomerate. Of all the segments, refinery and marketing (transportation fuel) remain their cash-generating machine. 

The tie-up with BP Plc. plans to expand up to 5,500 over the next 5 years. A majority of the O2C segment revenues come from refining i.e. 60%. The company also delivers aviation fuel with a market share of 10%.


 

Reliance Industries is the world’s second-largest producer of Para Xylene used in the production of other industrial oils. Given that the world is moving away from fossil fuels towards more green alternatives, Reliance is slowly gathering pace there. The petrochemical sector is expected to grow at 9.3% till FY25 with a wide use case scenario. So certainly, there is a lot of juice left to squeeze as far as revenues and market opportunities are concerned. 

 

Oil and Gas 

  • The significant production ramp-up of KDG6 production. The KDG6 block lies in the Krishna-Godavari basin of the Bay of Bengal coast wherein Reliance owns 66% of the block, the other is BP Plc with a 33% share.
  • Exit from US Shale business through disinvestment from Eagle Ford Shale Assets.
  • Reliance is installing 3 deep-water gas extraction plants. 
  • This implies that India’s share of World Natural Gas production can increase from 6% to 15% by 2030.

 

Reliance Industries Share Price Movement

 

As you might have observed, a bulk of Reliance’s revenues depends on its petroleum-related business. Hence, it's natural that crude oil prices have a major effect on the share price movement. Observe the increase in the share price during the Feb-Mar period, which was the time when crude oil prices soared to new highs due to the Russia-Ukraine war. It shall be interesting to see how Reliance stays true to its commitment to net-zero carbon emitter in the years to come. Check out the Reliance share price today

 

Analysts Review For Reliance Stock

Analysts in general are bullish regarding RIL amid increased revenue outlook from the refineries and upstream gas business as well as customer technologies’ businesses’ valuation holdings. We have done a detailed report of Analysts Review here.

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