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Reliance growth story: AGM Highlights

During the lockdown period, most of the world's businesses were struggling to survive but daily news headlines were filled with positive news about one company in India: Reliance Industries Ltd. (RIL). On the first day of lockdown, 24th March, 2020, RIL’s share was at 900 and as on today, it is trading at 1841 i.e. in roughly 3 months, Reliance has doubled its value. This has not only made Mukesh Ambani 6th richest in the world, but has also helped build many shareholder’s wealth. 


Below is a snapshot of RIL’s stock performance in the last 3 months

 

Highlights of the Annual General Meeting (AGM) of RIL


  

SEGMENT

ANNOUNCEMENT

WAS IT ALREADY ADJUSTED IN THE PRICE?

Jio

RIL has become debt free post 13 investments in 12 weeks. Investors include leading tech giants & VCs such as Facebook, Silver Lake, Vista Equity Partners, General Atlantic, KKR, Mubadala, ADIA, TPG, Qualcomm, L. Catterton and PIF. RIL has sold a total stake of 32.94% in Jio Platforms. (My commentary: During a crisis, debt free companies enjoy a higher PE as the chances of survival of these companies are much more than the companies which have higher debt in their balance sheet. This was primarily why RIL could give a 100% return in 3 months.)

Yes. (My commentary: Given the number of strategic investors in the Jio Platforms, it will become essential for Jio to be listed separately within a span of 5 years for providing a reasonable exit for the strategic partners. This space needs to be watched carefully by long term investors.)

JioMeet which is a competing platform to Zoom and Google Meet has over 5 million users

Yes

Google to invest Rs 33,737 crore for 7.7% in Jio Platforms. This is almost half of Google’s planned investment in India for the next 5 years. Google and Jio are partnering to build a smartphone operating system in India.

No. It was announced in the AGM for the first time.

Jio is ready with 5G. Field deployment to happen next year post allocation of spectrum.

Not completely priced yet. This is expected to be priced only when the spectrum allocation happens.

Jio TV+ to integrate OTT platforms such as Netflix, Amazon Prime, Hotstar, etc. into one platform with a single login.

Yes

Jio Glass- Mixed reality headset which enables holographic video calling

No. However, I do not expect the impact of Jio Glass on the revenue and profit margins to be substantial yet. It will take at least a few years before this becomes substantial.  The market and pricing for such a product needs to be seen.

JioMart- It integrates Reliance Jio Platform with Reliance Retail. (My commentary: This is expected to be one of the game changers for Jio. On the face of it, it looks like the investments in Jio by tech giants such as Facebook, Google, Qualcomm, etc. is to build and support the platform to integrate local kirana store via Whatsapp to a bigger retail network under Reliance Retail.) 

Not completely priced yet. For now, people have priced RIL based on the valuation at which various investments have been done in Jio. The integration of Reliance Jio Platforms with Reliance Retail is something to be watched in the future.

Retail

Strategic investments in the Retail segment can be expected in the near future.

No. Need to watch for more details to incorporate in the price.

Energy and Materials

Saudi Aramco deal has not progressed as per the initial timeline

No. This deal was anticipated by the market. Not getting this deal is a huge disappointment to the investors. With major deals such as this not coming through for their primary business, questions on whether Reliance is positioning itself as a technology company instead of an Energy company arises.

All Energy production at 90% capacity despite the lockdown. 

Yes 


As per the fundamentals, which includes the forward looking vision presented by the Management in the AGM, Reliance remains bullish despite the Saudi Aramco deal not coming through. However, Saudi Aramco deal is expected to have a short term negative effect. Further, it would be interesting to see how Reliance positions itself in the future: as a technology firm or an energy company.


 

Disclaimer: We are not SEBI registered advisors, so please consult your SEBI registered advisor, before taking any decision and we are not responsible for any loss or profit. Above is for educational purpose only.

  


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Comments

  1. Pankaj rayJuly 15, 2020 at 9:03 PM

    Thanks for the insight .. nice article

    ReplyDelete
  2. Lilac purpleJuly 15, 2020 at 11:35 PM

    YOU ARE MAKING WISDOM GO VIRAL 😁 Please explain what is meant by PE & also enlighten about Saudi ARMACO deal

    ReplyDelete
    Replies
    1. Money MattersJuly 15, 2020 at 11:46 PM

      Thank you.
      PE is put option
      CE is call option
      Saudi Aramco deal: Last year in the AGM, Mukesh Ambani had told that they would sell 20% of their oil to chemical business to the Saudi Arabian oil company called Saudi Aramco. The purpose was to raise equity. That deal for some reason didn't come through yet. That deal was worth $15 billion. Now, they are talking about spin off of that division.

      Delete
  3. Money MattersJuly 15, 2020 at 11:36 PM

    Thank you

    ReplyDelete

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