New Delhi: Since the demerger of Reliance Industries’ financial services business into Reliance Strategic Investments (to be renamed as Jio Financial Services or JFS), its shares have lost nearly Rs 1 lakh crore in the market capitalisation (m-cap). On July 19, the stock commanded an m-cap of Rs 19,21,575, which declined to Rs 17,72,585 crore on the day (Thursday) of corporate action. The stock commanded an m-cap of Rs 16,74,658 on Monday, which suggested a roughly 98,000 crore in m-cap loss in the two sessions.
The stock dropped 2.62 per cent on Monday, reaching a low of Rs 2,469.55 on BSE. This was in addition to a prior session drop of 3.19 per cent. The fresh weakness came post-RIL’s Q1 results, as a few analysts believe the upside is limited for the stock. The next trigger for it would be any announcement on retail business unlocking or updates on new energy business in the forthcoming annual general meeting (AGM).
Analysts estimate that Jio Financial Services’ listing process will take two to three months. Nomura India anticipates that RIL will present a timeline for JFS’s listing and a detailed strategy for the new entity at its annual general meeting (AGM) in the coming weeks. Axis Securities sees JFS getting listed in the next 2-3 months. “There is no concrete listing day yet, and it may take a few weeks to get all the listing approvals. JFSL is being carved out from one of the biggest giants. We expect the listing process to be fast-tracked, and likely, JFS may be listed in a month’s time (or even earlier),” said Nuvama Institutional Equities.
On the stock, Nomura India has a target of Rs 2,925. The share price target suggests a 15.33 per cent potential upside for RIL over Friday’s closing price. Macquarie sees the stock at Rs 2,100. Citi has proposed a target of Rs 2,750 on the stock. Jefferies finds the stock worth Rs 2,935 level.
The oil-to-telecom posted a consolidated net profit for the June quarter of Rs 18,258 crore, a 6.09 per cent year-on-year (YoY) decrease from Rs 19,443 crore in the corresponding quarter previous year. Profit (attributable to the owners) declined to Rs 16,011 crore against Rs 17,955 crore, down 10.82 per cent YoY. According to analysts, profit to fall anywhere between 8 per cent and 17 per cent.
According to Systematix Institutional Equities, RIL’s June quarter revenue and Ebitda were in line with expectations, while profit after tax was slightly above estimates due to higher-than-expected other income. This brokerage has cut its target price to Rs 2,550 from Rs 2,766, largely reflecting the exclusion of Jio Financial Services (JFSL). The stock trades at an EV/Ebitda of 10.8 times and PER of 22.7 times on FY25E.
“We downgrade the stock to HOLD from earlier ‘BUY’ due to limited upside after the recent run-up,” it said.
However, a few brokerages maintained their faith in the stock and suggested targets of 15-20 per cent potential upside.
“We value the refining and petrochemical segments at 7.5 times EV/Ebitda, arriving at a valuation of Rs 904 per share for the standalone business. We ascribe an equity valuation of Rs 750 per share to RJio and Rs 1,500 per share to Reliance Retail, factoring in the recent stake sale. We have further included an equity valuation of Rs 16 per share about New Energy on book value. Our target is adjusted for Jio Financial Services’ (JFS) valuation. We reiterate our BUY rating with a target of Rs 2,935,” said Motilal Oswal Securities.
