Mukesh Ambani, chairman of Reliance Industries (Photographer: Adam Berry/Bloomberg)

Reliance Industries Crosses Rs 8 Lakh Crore In Market Value

Mukesh Ambani-owned Reliance Industries Ltd. has become the first Indian company to cross Rs 8 lakh crore ($114 billion) in market capitalisation.

Shares of the oil-to-telecom conglomerate rose as much as 1.47 percent to Rs 1,265 apiece – an all-time high for the stock. It has risen 37.3 percent so far this year, compared to nearly 10 percent advance in the NSE Nifty 50 Index.

The company had reclaimed the $100 billion market cap mark on Jul. 21. The latest surge started with the launch of Reliance Jio Infocomm Ltd. in September 2016 that disrupted India’s telecom industry with cheap data. RIL’s market capitalisation has since doubled.

The rally increased Ambani’s wealth to more than $48 billion, according to Bloomberg Billionaires Index. India’s richest man owns close to 47 percent in RIL—the owner of the world’s largest oil refining complex. The oil explorer and refiner scaled the $100 billion valuation peak despite the rupee depreciating 10 percent against the U.S. dollar this year.

Reliance Industries Crosses Rs 8 Lakh Crore In Market Value

What Aided The Rally

The Launch of Reliance Jio

Reliance Jio, with investments close to Rs 2.5 lakh crore, turned profitable within 15 months of launch. The upstart also benefited from the Telecom Regulatory Authority of India’s decision to reduce interconnect fee. Driven by free services initially and then cheaper data plans, India’s newest telecom operator garnered 21 crore subscribers in just a year and a half, according to the company.

Investments Paying Off

RIL uses ethane and gas as raw material for its refining and petrochemicals businesses. These are cheaper, and the prices are less volatile than its alternative liquefied natural gas. LNG prices, which are linked to oil, have risen more than 50 percent so far this financial year.

Use of cheaper substitutes is expected to boost the company’s operating profits and gross refining margins. RIL ramped up the refinery off-gas cracker plant, which will be used to supply gas to the company’s downstream plants.

Analysts expect the company’s earnings before interest, tax and depreciation and amortisation for the ongoing financial year to rise 34 percent—the highest in at least nine years.

Cash Flows Improving

RIL is expected to report a free cash flow of close to Rs 6,000 crore in the financial year ending March 2019, the first time in last six years, according to Bloomberg estimates. In the previous five financial years, the company reported a negative cash flow due to capital expenditure.

Analysts’ View

  • Only five of the 41 analysts tracked by Bloomberg have a ‘Sell’ rating on the RIL stock; 31 suggest ‘Buy’ and five recommend ‘Hold’.