RIL gains after brokerage maintains 'buy' rating

Reliance Industries (RIL) gained 2.58% to Rs 1,472.50 after a foreign brokerage reportedly maintained 'buy' rating on the stock with a target of Rs 1,770 per share.

According to the brokerage, the investment by Facebook and Silver Lake should help to position Jio as a tech major. The company should achieve its target to bring down net debt by Rs 1.5 lakh crore, it said.

RIL and Jio Platforms announced on 4 May that Silver Lake will invest Rs 5,655.75 crore into Jio Platforms. This investment values Jio Platforms at an equity value of Rs 4.90 lakh crore and an enterprise value of Rs 5.15 lakh crore and represents a 12.5% premium to the equity valuation of the Facebook investment announced on 22 April 2020.

RIL, Jio Platforms and Facebook Inc. on 22 April 2020 announced the signing of binding agreements for an investment of Rs 43,574 crore by Facebook into Jio Platforms. This investment by Facebook values Jio Platforms at Rs 4.62 lakh crore pre-money enterprise value. Facebook's investment will translate into a 9.99% equity stake in Jio Platforms on a fully diluted basis.

On a consolidated basis, RIL's net profit fell 38.74% to Rs 6,348 crore on 2.5% decline in revenue to Rs 151,209 crore in Q4 March 2020 over Q4 March 2019. EBITDA increased 7.6% to Rs 25,886 crore in Q4 March 2020 over Q4 March 2019.

RIL's telecom arm Reliance Jio Infocomm reported a 177.50% YoY and 72.70% QoQ growth in net profit at Rs 2,331 crore in Q4 quarter. Its subscriber base grew 26.30% YoY to 387.50 million, with each user spending an average of Rs 130.60 a month during the quarter, the company said in a statement.

Organized retail business segment revenue rose 4.2% to Rs 38,211 crore in Q4 March 2020 over Q4 March 2019. EBITDA for Q4 March 2020 grew by 32.9% Y-o-Y to Rs 2,556 crore.

Outstanding debt as on 31 March 2020 was Rs 336,294 crore ($44.4 billion). Cash and cash equivalents as on 31 March 2020 were at Rs 175,259 crore ($23.2 billion).

Meanwhile, RIL's board approved issuance of equity shares of Rs 10 each of the company of an issue size of Rs 53,125 crore by way of 'rights issue' to eligible equity shareholders of the company as on the record date. The price for the rights issue has been determined at Rs 1,257 per share and the share ratio at 1:15. The promoters have confirmed that in addition to subscribing to their aggregate entitlement in full, they will also subscribe to all the unsubscribed portion.

Further, RIL said it will hive off its oil-to-chemicals (O2C) business into a separate division. The RIL's board has approved the proposal, while it needs to get approved by the National Company Law Tribunal. O2C undertaking of the company comprises entire oil-to-chemicals business of the company consisting of refining, petrochemicals, fuel retail & aviation fuel (majority interest only) and bulk wholesale marketing businesses together with its assets and liabilities, as more particularly set out in the scheme.

RIL is India's largest private sector company. RIL's activities span hydrocarbon exploration and production, petroleum refining and marketing, petrochemicals, retail and digital services.

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