Reliance Industries – Confusion or Disappointment?

Reliance Industries Limited (RIL) is an Indian multinational conglomerate company which is headquartered in Mumbai. The company has diverse businesses including energy, petrochemicals, natural gas, retail, telecommunications, mass media, and textiles. Reliance is one of the most profitable companies in India, the largest publicly traded companies in India by market capitalisation, and the largest company in India as measured by revenue. Reliance is also the one of the largest employers in India with over 300,000 employees in the world.

Reliance is ranked 100th on the Fortune Global 500 list of the world’s biggest corporations as of 2022. Reliance continues to be India’s largest exporter, accounting for 7% of India’s total merchandise exports and it has access to markets in over 100 countries. Reliance generates about 5% of the Government of India’s total revenue from customs and excise duty. It is also the highest income taxpayer in the private sector in India. Reliance has evolved from being a textiles and polyester company to an integrated player across energy, materials, retail, entertainment and digital services. Reliance’s products and services portfolio touches almost all Indians on a daily basis, across economic and social spectrums.

Quarterly Earnings Walkthrough

Reliance Industries has reported a 13% year-on-year decline in net profit to Rs 17,806 crore during the third quarter which was affected mainly by higher finance cost, depreciation, volatility in global crude prices and special additional excise duty. Reliance had acquired additional capital from its divestment of shale gas assets that for Rs 2,836 crore in the corresponding quarter in the previous year.

Sequentially, the company reported a 14.8 per cent rise in net profit. The yearly and sequential growth in net profit was supported by the retail, telecom, and oil-and-gas production.

The net sales have spiked by an astounding 17.4 percent yearly to Rs 2,17,164 crore for the third quarter. However, net sales were down 5.6 percent sequentially.

The interest and depreciation expenses have made an enormous impact on profitability as Reliance has undertaken expansion in its retail and telecom businesses.

Reliance has stated that its board has made the approval for the fundraising of Rs 20,000 crore through non-convertible debentures (NCDs) on the basis of a private placement.

Segment wise performance

The revenue of the O2C (Oil to Chemicals) segment, which is the company’s largest segment (54 percent of the consolidated gross revenue) has grown by 10 per cent yearly to Rs 1.44 lakh crore. However, the output has declined about 5 per cent compared to last year at 18.8 million tonnes.

Reliance Retail Ventures has reported 6.2 per cent yearly growth in its consolidated net profit to Rs 2,400 crore. Revenue has increased by 17 per cent YoY to Rs 67,623 crore.

Jio Platforms has reported a 21 per cent yearly growth in revenue to Rs 29,195 crore. The past quarter has reported the highest sales historically. Growth was supported by a steady increase in both subscriber base and average revenue per user (ARPU). Vitality in revenue and a margin enhancement has driven Reliance Jio’s operational performance. As on 31st December 2022, the total customer base of Reliance Jio was 432.9 million as compared to 427.6 million.

Reliance has declared that the Jio 5G services are ready and accessible in 134 cities and towns. The company also stated that Jio would connect over 100 million premises with JioFiber and JioAirFiber.

The upstream oil & gas business has provided a sustainable production from its KG D6 block with higher realisation. The company is in pursuit to reach 30 million metric standard cubic metre per day (MMSCMD) of gas production in FY24, after the commissioning of the MJ field at the KG D6 block.

Regarding the new energy segments, the company has reported that it was making rapid progress towards the implementation of new energy Giga factories in Jamnagar.

Technical Analysis

Reliance Weekly Candlestick Chart on Sharekhan’s TradeTiger

Reliance stock price is into a short-term correctional phase and is heading towards the 23.6% retracement level at 2388. The current market price is very close to the 23.6% retracement level and MFI is at 34 points which makes the stock relatively cheap for a short-term upside. We can expect the stock price to bounce back up to its distribution zone around Rs 2800.

A mid-term correction is possible to the 38.2% retracement level at Rs 2100 and the price had taken heavy support at this level which can be observed by the candles formed that are marked by the yellow box.

A deep correction would take the stock plummeting down to the 50% retracement level at Rs 1865 as the stock price has stagnated in the past which is marked by the orange coloured box. The long-term buying opportunity at the 50% retracement level would be a fantastic one as it would place the price underneath the 200-day moving average. However, such an occurrence would be rare and investors should place trigger alerts for this level. A correction in Reliance would drag Nifty down and might trigger a massive sell-off.

Please practice patience for investments as majority of the stock market as well as the gold market is at an all-time high which is a contradiction. This can be explained by the weakness in the IT and Pharma sectors where the liquidity has shifted to the remaining sectors and into gold.

Disclaimer: We do not endorse or encourage you to take trades or investment decisions based upon our posts/research, all of your trading and investment activities are your own and should be taken through consultation with reputed financial advisors. The analysis posted on this website has been created by involving multiple mediums which are present over the Internet.

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