Reliance Industries, India’s largest oil and gas company, has officially announced the record date for its highly anticipated 1:1 bonus issue. This development comes just in time for the Diwali festival, with the record date set for Monday, October 28, 2024. Under the terms of the bonus issue, shareholders will receive one new fully paid-up equity share of Rs 10 face value for each existing equity share of the same face value. This marks the company’s first bonus issue in seven years, the last being in September 2017, and it is expected to be the largest-ever bonus share issuance in the Indian equity market.
As of October 18, Reliance shares closed at Rs 2717.55 on the BSE, reflecting a slight increase, although the stock ended the trading week (October 14-18) on a bearish note with a decline of 1.2%. Despite this, the stock has seen a year-to-date rally of 4.93%, although it has dipped 7.6% in the last month. The company’s price-to-equity ratio stands at 50.33x, and its return on equity is around 6.97%.
In light of its recent Q2 results, brokers like JM Financial and BOB Capital Markets have recommended a BUY on Reliance, projecting a potential upside in the range of 26% to 30%. According to BOB Capital Markets, while there has been a pullback in margins for oil-to-chemicals (O2C) and retail, Reliance’s Q2 consolidated EBITDA still rose by 3% QoQ, driven by growth in digital services following a tariff hike in July. The company’s consolidated net profit for Q2FY25 was Rs 16,563 crore, a decline of 4.8% compared to Rs 17,394 crore in the same quarter the previous year. However, it is an improvement from the Rs 15,138 crore net profit recorded in Q1FY25.
Gross revenue for Q2FY25 showed a slight increase of 0.8% YoY, totaling Rs 258,027 crore, compared to Rs 255,996 crore in Q2FY24. The growth was attributed to higher volumes and increased domestic product placement in the oil-to-chemicals sector. Looking ahead, BOB Capital Markets believes that Q3 earnings will benefit from further tariff hikes in digital services and retail growth during the festive season. They have adjusted their EBITDA growth forecast for FY25 to a mid-single-digit rate of 6%, down from 9%, while still projecting an 11% CAGR in EBITDA from FY24-FY27.
On valuation, BOB Capital Markets has revised its SOTP-based target price for Reliance to Rs 3,440 from Rs 3,585, reflecting changes in estimates and a lower target multiple for retail. The report maintains target multiples for other business segments: refining at 7.5x, petrochemicals at 8.5x, and Jio Infocomm at 11x. The stock offers a 25% upside, prompting the brokerage to reiterate its BUY recommendation.
Key catalysts for Reliance’s stock performance include:
- Jio: Progress in monetizing its standalone 5G rollout beyond Jio AirFiber.
- Retail: A recovery in growth trajectory towards achieving a threefold growth target over five years.
- New Energy: Increased visibility on delivering initial milestones by FY25-26.
- O2C: Guidance on cost reduction through new energy deployments.
- Public Offers: The potential listing of Jio and retail businesses.
This bonus issue and the favorable market projections for Reliance Industries come as a positive signal for investors looking to capitalize on the company’s growth in multiple sectors.
Disclaimer: This information is for informational purposes only and does not constitute financial advice, endorsement, or a recommendation to buy or sell any securities. Investing in stocks carries risks, and past performance is not indicative of future results. It is advisable to conduct thorough research and consult with a financial advisor before making any investment decisions. Reliance Industries is a publicly traded company, and its stock performance may be influenced by various factors, including market conditions, economic trends, and company-specific developments. The projections and estimates mentioned herein are based on current market analysis and are subject to change.
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