10,768.05-45.4
Stock Analysis, IPO, Mutual Funds, Bonds & More

RIL has the potential of giving 35% returns in next one year: Sushil Choksey

‘Despite Covid, the rights issue is oversubscribed’

ET Now|
Last Updated: Jun 03, 2020, 09.11 PM IST
0Comments
Post rights issue, what does the future hold for RIL?
Post rights issue, what does the future hold for RIL?
In an uncertain world, Reliance has achieved a lot and very few companies globally have done it, says the Director of Indus Equity.

Reliance evolved from being a textile company to being an oil and gas conglomerate and now a technology-backed company. Would you call it the Amazon of India? How are you looking at Reliance?
Reliance has definitely transformed in every respect; starting from their petrochemical business which is now visible to the world where at a single centre, they were processing 2% of crude and petrochemical. Similarly, they started the telecommunication business in a new avatar of Jio and they are unbundling services. Now with the Facebook partnership, they would take retail and other accessories and activities to the telecom world. We know that retail fueling to other segments is also connected to it. So it is a new avatar and a new digital world is likely to emerge due to Covid and Reliance Jio would work well on that front.

Have you applied for the rights issue?
Yes.

What would you tell the shareholders who have applied? What kind of returns are we looking for in the next three-four years?
It was a golden opportunity for right shareholders to apply because in the prevailing market, the stock is at Rs 1,540 and as a shareholder you have been putting Rs 315 with the next call in next May and balance 50% in next November; you are taking the next 18 months of upside of Reliance Industry at one third payment. If you look at the market price, it is giving you 22% of the value. Now look at the potential of Reliance. With Reliance Jio listing globally and domestically by that time the demerger of oil to chemical fructifies into a new entity as a subsidiary and Saudi Aramco investing, we need to see that those developments are in the offing.

Looking at all the infusion with the private equity led after Facebook transaction, it would emerge that Jio post today's rights issue is in the range of Rs 800. If you take one year forward and if you look at oil to chemical, it would be in the region of Rs 650 to Rs 700 depending on who wants to value it and the retail business again would be in the emerging value of somewhere between Rs 300 to Rs 400 a share.

So if I take my version of valuation: Rs 800 plus Rs 700, and Rs 350, it is roughly Rs 1850; that is the RIL gross value less the debt assuming that something is left because that is a positive for tax efficient ways if you look at it and you should not be a totally debt-free company because Reliance funding cost is far cheaper than most of the enterprises in India on global basis also. So looking at those aspects, the share value of Rs 1,700 should be fair within the next three quarters. If you take a one-year outlook, Reliance has the potential to perform with 30-35% gain based on all the new developments.

So in an uncertain world, Reliance has done a lot and very few companies globally have done it. What Reliance has achieved in terms of stock performance between 23 March to today, very few stocks have achieved it. In this current scenario, they showed how to raise resources. Despite Covid, the rights issue is fully subscribed; oversubscribed rather and shareholders have been rewarded. On listing, there may be gains roughly for existing shareholders of almost more than 50%; Rs 300 would quote somewhere in the vicinity of Rs 550 approximately. By making a partial rights payment, you are saving an interest differential of Rs 1,000.

(What's moving Sensex and Nifty Track latest market news, stock tips and expert advice on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds.)

Also Read

RIL has more monetization opportunities: Sushil Choksey

Jio’s ARPU may grow by 20% in the next few quarters: Sushil Choksey

Reliance upmove not only because of tax cut: Sushil Choksey

Reliance to give 100% return in next 24 months: Sushil Choksey

With retail and Jio, Reliance is more a consumer centric play: Sushil Choksey, Indus Equity Advisors

RIL-BP investment to create lot of synergy: Sushil Choksey, Indus Equity

Comments
Add Your Comments
Commenting feature is disabled in your country/region.

Other useful Links


Copyright © 2020 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service