Reliance Industries through JIO is the first to bring in the 5G shift in telecom, the company gains momentum in the new energy value chain, growth is witnessed in the retail and new FMCG consumption, consolidation of leadership in legacy products. These factors are unaccounted in the valuations.

Reliance Industries made multiple announcements for investment plans across business segments. This improves the capex cycle, the push is selective into high growth areas such as 5G services, green energy, O2C (Oil to Chemical), new age commerce.

Strong upscaling for the O2C segment

RIL has made an announcement for Rs 75000 crore worth of investments in the next 5 years to expand its existing capabilities and building of new capacities across the chain value. It includes the expansion in the Petrochemical business.

The company’s present natural gas production accounts for 20 percent of India’s total gas production. This is planned to increase to 30 percent by the end of the current year when the MJ field is fully functional.

JIO 5G launch plans

RIL has planned an investment of Rs 2 lakh crore for 5G services after acquiring the largest chunk of spectrum amongst the competitors in the 5G space.

RIL plans to roll out the services in the key metro cities by Diwali this year. It plans to deliver 5G services to every town of India by December 2023.

RIL has made a partnership with Qualcomm (A global giant in communications technology). They will be working on cloud-native, scalable, flexible 5G infrastructure to develop a network which extends beyond India.

Major planning into solar ecosystem

Reliance has made partnerships with multiple global companies which are Ambri (US), Faradion (UK), Lithium Werks (Netherlands), for promoting the business into EV and battery storage market.

Reliance New Energy Solar (RNES) is the green energy business of Reliance Industries. RIL has invested in companies like Nexwafe, REC Solar and Sterling & Wilson for the expansion of its competency and market reach in the renewables ecosystem.

RNES is setting up a giga factory for power electronics in Jamnagar and aims to begin production of battery packs by 2023 and scale up to 5GWh annual cell to pack manufacturing facility by 2024. The solar PV cell and module factory (10 GW capacity) is expected to commence operations in 2024.

RNES plans to commercialize hydrogen technology through the bio energy technology centre in Jamnagar. RNES also plans to invest in glass and POE film manufacturing.

Retail expansion

The business would expand in both physical stores and enhance its digital footprint to provide seamless experience to consumers. The company has announcement a partnership of Jio Mart with WhatsApp to enable easy ordering from WhatsApp which is expected to drive smaller transactions.

New commerce business scaling

This business where Reliance Retail provides a platform for small stores which are usually small businesses run by family or small groups, to enhance their product offerings and reach a wider target audience. They have already enrolled about 20 lakh business partners.

Jio Mart Digital enables small electronic merchants to sell the entire range of Reliance Retail products.

Ajio is the new commerce segment for fashion which has scaled up to reach about 3500 towns which comprise of 8000 brands (both regional and national).

Netmeds Wholesale business is launched for the pharmacy segment recently.

Reliance Retail aims to have 1 crore partnerships under the new commerce business over the next 5 years serving 7500 towns and 3 lakh villages.

Announcement of foray into FMCG

Reliance Retail has announced a foray into the FMCG business in this financial year. The business plans to develop and deliver high quality, affordable products which will satisfy the consumer needs.

Stock Analysis

If we look at the retracement levels from the correction of 2020, Reliance has already achieved its 281.4% retracement level of Rs 2768, not once but thrice. This will be a strong stagnation level unless this stock breaks above the price level of Rs 2800. Such stagnation is visible and prevalent in Reliance if we look back on the chart for the last 20 years.

The stock price is carrying along the trend line, however the trend seems to be weakening every month. Reliance is already overpriced and overvalued, this means the stock is highly expensive.

Reliance has been showing tremendous growth in their quarterly results for the past 2 years. Hence the likelihood of growth in Reliance is consistent but slow. Collection of this stock for long term growth with low risk is a good idea as Reliance is the premier company of India.