RIL hits 13-month high on retail buyback, demerger of finance unit

Stock rallies 3.8 per cent to finish at Rs 2,735; m-cap tops 18.5 trillion again

Reliance Industries, India's most valued company, ended Monday's session at a 13-month high after the company unveiled its plan to list its financial services unit and announced that its retail division will repurchase shares.

Shares of RIL rose 3.8 per cent–most since March 31, 2023—to finish at Rs 2,735. The company’s market capitalisation once again topped Rs 18.5 trillion. The all-time high on a closing basis for RIL is Rs 2,856.2 logged on April 29, 2022.

On Saturday, RIL set July 20 as the record date determining the shareholders who will be eligible to receive shares of Reliance Strategic Investments (RSIL), which will subsequently be renamed as Jio Financial Services (JFS).

The move to demerge and list separate its financial services unit is likely to unlock value for the Mukesh Ambani-led firm. Every RIL shareholder as on the ex-date will get one share of RSIL, under the scheme of demerger.

Analysts said JFS would enjoy an 'AAA' rating similar to RIL, meaning that its borrowing costs could be among the lowest in the cohort of non-banking finance companies (NBFCs). And JFS could leverage the 18,040 Reliance Retail stores, which have 780 million footfall annually and a subscriber base of 440 million.

JFS owns 6.1 per cent of RIL, valued at Rs 1.13 trillion and representing a substantial portion (90 per cent) of JFS's net worth.

In addition to the lending business, JFS will also include the insurance, AMC and wealth management business, and payments bank.

"We will see more demergers of various RIL units. Based on the growth and unlocking potential of its various units, I expect RIL to command a share price of Rs 5,000 in the next four years if the economy has no exogenous crisis," said Chokkalingam G, Founder of Equinomics.

Ambareesh Baliga, an independent equity analyst, said that a demerger is a wealth creator whenever it happens.

"A subsidiary or vertical always gets discounted within the organisation. Now it will get listed separately and will create wealth for investors. Furthermore, Reliance Retail's buyback from retail investors indicates that the roadmap for listing is clear."

Regarding the outlook for RIL, Baliga said apart from the demergers, how the green energy projects take shape will determine RIL's trajectory.

"We need something happening on the ground level vis-a-vis the green energy project at least by FY25."

On Friday, RIL said it will buy back shares of Reliance Retail held by public shareholders, which were traded in the unlisted market. Most of these shares were given to employees as stock options.

The company said it would buy shares at Rs 866 apiece as determined by independent valuers.

Sensex, Nifty50 up on RIL boost, FII inflows

BSE benchmark Sensex and the National Stock Exchange (NSE)  Nifty advanced in a volatile trade on Monday, driven by heavy buying in index major Reliance Industries and unabated foreign fund inflows.
 

Bouncing back from Friday's decline, the 30-share BSE Sensex gained 63.72 points or 0.10 per cent to settle at 65,344.17. During the day, it climbed 353.04 points or 0.54 per cent to 65,633.49. The NSE Nifty advanced 24.10 points or 0.12 per cent to end at 19,355.90.
 

From the Sensex pack, Reliance Industries jumped the most by 3.78 per cent, helping the index close in green. Tata Steel, Bharti Airtel, IndusInd Bank, Kotak Mahindra Bank, UltraTech Cement, ICICI Bank and Tata Motors were the other big gainers. Titan, HCL Technologies, Power Grid, Tata Consultancy Services, Wipro, Hindustan Unilever, Axis Bank and Nestle were among the major laggards.
 

Correction in IT counters ahead of their quarterly earnings announcements restricted the gains.