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The Annual General Meeting (AGM) of diversified conglomerate Reliance Industries Limited (RIL), the country’s largest listed company by market-capitalisation, is a landmark event every year.
It is keenly watched by not just shareholders but also investors.
The reason is the hefty capital expenditure and initiatives RIL has been making for several years in crucial areas – telecom, retail and oil – to drive earnings growth and become a key player in every segment and allied sectors, which will continue, say experts.
The 44th AGM is scheduled to be held on June 24 at 14 hours IST.
In the last one month ahead of the AGM, the stock gained more than 12 percent, and surged 28 percent in the last one- year period, to close at Rs 2,205.35 on June 23, 2021.
Overall, after hitting a record high of Rs 2,369.35 in September last year, it has been range bound and gradually inching towards that elevated level, being 7.4 percent away from the high-water mark.
Now all eyes will be on RIL Chairman, Mukesh Ambani’s speech, which is a very significant pointer towards the company’s next strategy.
According to experts, shareholders and investors could be looking for a hint about the demerger of the main company into Jio, retail and petrochemical businesses.
In addition, further progress on 5G with several tech products, and updates over the Reliance-Aramco deal, and Future Retail will also be closely watched.
In the past 12 months, Reliance Industries has not only mobilised funds aggregating Rs 2,16,400 crore to de-leverage its balance sheet but also inducted strategic investors, including Google, Facebook, and Intel, in its high growth businesses such as organised retail (Reliance Retail) and technology (Jio).
In this context, “RIL is expected to share the value added by each of these stakeholders to individual businesses, how the individual businesses are shaping up, and what should be the growth/investment outlook,” Harshvardhan Dole, Vice President at IIFL Institutional Equities, told Moneycontrol.
“Some comments are expected towards value unlocking in its oil-to-chemical (O2C) business, where the outlook on the margins is improving, given the pickup in global consumption. Media articles also suggest that RIL may induct Aramco’s CEO on its board, which would be a step towards a much larger partnership between the two conglomerates,” he said.
According to Dole, investors are also expecting some comments on 1) progress and possible launch dates for the smartphone being developed by Jio and Google jointly; 2) roadmap for the listing of Reliance Retail and 3) progress to induct a strategic investor in the O2C business.
The RIL Chairman in the last and the company’s 43rd AGM outlined ambitions to become a net carbon zero company by 2035.
“Investors would keenly await the strategy adopted by RIL to achieve this target, as it would significantly improve its positioning on the Environmental Social and Governance (ESG) framework,” Dole said.
Vinod Nair, Head of Research at Geojit Financial Services, also said shareholders would be delighted to know about details of a plausible demerger of the main company into three different business of Jio, Retail and Petrochemicals, which is expected to generate a high amount of value unlocking for shareholders in the future.
He added that announcements regarding the RIL-Aramco deal, the launch of 5G and new technology products and services are expected at the AGM.
Reliance Industries has been in the process of spinning off its oil-to-chemical business into a separate subsidiary. The scheme for transfer of O2C undertakings to a wholly owned subsidiary has been filed with the National Company Law Tribunal (NCLT) and is pending approval.
“The said scheme has been approved by the creditors and shareholders of the company,” said Reliance Industries in its FY21 earnings press release.
In the last AGM, Chairman Mukesh Ambani had also said that in the next three years, he can see a strong path for Jio to connect – over half-a-billion mobile customers, over a billion smart sensors, and above 50 million homes and business establishments.
He further said that Jio’s global scale 4G and FIBER network was powered by several core software technologies and components.
Now the focus would be on 5G, as Jio has designed and developed a complete 5G solution from scratch.
“Made-in-India 5G solution will be ready for trials as soon as the 5G spectrum is available… and can be ready for field deployment next year. And because of Jio’s converged, all-IPnetwork architecture… we can easily upgrade our 4G network to 5G,” Ambani had said at the last AGM.
Said Gaurav Garg, Head of Research at CapitalVia Global Research: “In the upcoming AGM, Reliance is likely to announce kickstarting 5G services, which might begin in late 2021. Moreover, 5G phones are likely to be revealed in the AGM, which might be another interesting development to watch out for.”
According to him, JioBook, the low-cost laptop, is a further attraction that might lure investors.
Garg said announcement over dividend declaration and bonus can also be expected in this AGM. “Reliance likes to keep the market price of shares around Rs 1,000 so we might get to see 1:1 bonus announcement,” he stated.
Reliance’s market capitalisation has risen significantly, now nearly Rs 14 lakh crore, which is highest among listed entities in India.
“When Reliance scales still higher summits of success, our employees and shareholders will surely reap its rewards,” Ambani had promised in his last AGM speech.
Reliance Industries had fixed June 14, 2021, as the record date for the purpose of determining members eligible to receive the dividend for financial year 2020-21.
The dividend, if declared at the AGM, will be paid within a week from the conclusion of the meeting, the company said earlier this month.
In FY21, Reliance Industries posted a record annual consolidated profit of Rs 53,739 crore with growth of 34.8 percent compared to the previous year.
The revenue from operations during the year stood at Rs 4,86,326 crore, compared to Rs 6,12,437 crore in the previous year.
The company recorded annual EBITDA (earnings before interest, taxes, depreciation, and amortization) for Jio Platforms at Rs 32,359 crore and Reliance Retail Ventures at Rs 9,789 crore.
Harshvardhan Dole believes RIL’s consolidated earnings are set to register a 17 percent per annum growth through FY 21-23 on the back of certain key factors.
These, according to Dole, include:
- recovery in the O2C business: cyclical recovery in gross refining margin (GRMs) aided by pick up in consumption across the globe clubbed with strength in petchem (petrochemicals) deltas.
- 34 percent growth in Jio’s EBITDA (10 percent per annum growth in ARPU assumed),
- 26 percent per annum growth in EBITDA of Reliance Retail.
In the base case, he valued RIL at Rs 2,200 per share, near the current market price.
“But the stock can offer significant upsides with these two events – 1) value unlocking in the O2C segment (induction of strategic investor) and, 2) successful consummation of Future Retail’s business, which as of now is under litigation,” Dole pointed out.
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