RIL shares up over 3 pc; m-cap rises by Rs 25,305 cr after Morgan Stanley report

Shares of Reliance Industries surged over 3 per cent on Tuesday after global brokerage firm Morgan Stanley said lower taxes and cheaper gas feed costs should de-risk outlook and boost earnings.

The scrip gained 3.22 per cent to close at Rs 1,278.55 apiece on the BSE. During the day, it jumped 4.83 per cent to Rs 1,298.55.

At the NSE, it rose by 3.09 per cent to close at Rs 1,277.50.

The company's market valuation jumped Rs 25,304.6 crore to Rs 8,10,488.60 crore on the BSE.

In terms of traded volume, 9.61 lakh shares were traded on the BSE and over 1.6 crore shares at the NSE.

Reliance Industries' earnings growth is starting to be de-risked, amid improving earnings growth clarity, better refining margins, lower tax rate, and cheaper gas feedstock costs, global brokerage Morgan Stanley said, noting that company's tax liability will reduce by 4 percentage points following cut in the corporate tax rate.

The brokerage went on to list the reasons for its assessment -- rise in refining margins with improved demand and slower capacity growth; cheaper gas costs and improved margins from a slowdown in petrochemical capacity growth in 2020, in particular for polyethylene, supporting the rise in chemical margins; and telecom subscriber addition remain steady.

On the impact of last week's announcement of a reduction in the corporate tax rate, Morgan Stanley said: "We estimate a 400 basis point reduction in the consolidated tax rate RIL's businesses paid in F2019 of 29-35 per cent, much higher than the new corporate tax rate of 25.2 per cent.

"We turn more bullish on RIL as earnings growth clarity improves with better refining margins, lower tax rate, and cheaper gas feedstock costs. This, combined with a reduction of balance sheet leverage, should de-risk earnings growth and increase investor confidence on the 17 per cent earnings CAGR seen for 2019-22, which is amongst the top quartile vs its regional energy and telecom peers," it said.