New Delhi: Amid its never-ending surprises, with back-to-back deals with marquee investors and expansion spree, shares of Reliance Industries Limited (RIL) fell nearly 9% on Monday. This was followed by a 15% decline in its net profit for the September quarter.
At 10:15 am Monday, the stock traded at Rs 1952.50 on the Bombay Stock Exchange, down 5% from its previous close, as benchmark Sensex fell 0.55% to 39,397. Then at 12:21 pm, RIL shares were down at 6.84% to Rs 1,913.75, slipping the most since May 12.
What triggered the fall?
The Mumbai-based company’s quarterly earnings led to a sell-off in the market on Monday, dragging the shares to close at Rs 1,877.30 apiece on the BSE, a level last seen on 16 July, down 8.62%. This was the biggest fall in the share price of RIL since March 23, according to Bloomberg. During the day, the stock fell as much as 9.46% to hit a low of Rs 1,860.
The shares closed at Rs 1,876 apiece on the NSE, down 8.69%, on Monday.
RIL on Friday reported a 15% year-on-year decline in net profit at Rs 9,567 crore for the second quarter ended September for fiscal year 2020-21, mainly on account of lower revenue from its oil and gas business. The company posted a consolidated net profit of Rs 11,262 crore in the same quarter a year ago.
The revenue from the refining and petrochemicals business of the company took a hit. The company’s gross refining margin in the second quarter fell to $5.7 per barrel, the lowest level since 2009, reported Mint.
However, a better quarterly performance by the telecom and retail subsidiaries prevented RIL shares from declining further in the stock price rout.
Reliance Jio Infocomm Limited posted a strong revenue growth as its standalone net profit rose nearly three-fold for the July-September quarter at Rs 2,844 crore, the report said. The average revenue per user (Arpu) rose to Rs 145 in September quarter from Rs 140 in the June quarter, and Rs 120 a year ago, as work-from-home led to higher data consumption.
Jio also became the first mobile operator to have crossed 400 million subscribers in India, according to data by the Telecom Regulatory Authority of India.
Reliance’s retail arm also reported a substantial improvement in its revenue for the September quarter at Rs 41,100 crore from the Rs 31,620 crore in the June quarter, the Mint report said.
Why is this significant?
RIL’s stock gained 170% on the BSE, after hitting a 52-week low of Rs 867 on March 23.
Over the last few months, the company had raised about Rs 1.52 lakh crore from several renowned global investors like Google, Facebook, Qualcomm, Intel, Saudi Arabia Public Investment Fund, KKR and General Atlantic among others, for its retail and telecom arm.
During the fund raising spree, the stock hit an all-time high of Rs 2,343.90 apiece, and RIL became the first Indian company to hit a market capitalisation of $200 billion. (There are less than 50 firms globally which are valued at more than $200 billion.)
Therefore, the sharp fall in RIL’s share price on Monday reportedly led to a loss of nearly Rs 1 lakh crore from investors’ wealth.
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Wealth erosion
Being the day’s worst performer on the Sensex, the sell-off in shares also eroded chairman Mukesh Ambani’s wealth by almost $6.8 billion, Bloomberg reported, pushing him down to the tenth spot from sixth on the world’s rich list. Ambani’s personal wealth now stands at $71.5 billion.
The stock price slump also wiped off Rs 1.23 lakh crore from RIL’s market capitalisation which declined to Rs 13.14 lakh crore on Monday from Rs 14.37 lakh crore on Friday, the Economic Times reported. While promoters’ wealth reduced by about Rs 50,000 crore, retail investors lost about Rs 8,000 crore during the day, the report said.
Brokerage calls
According to BloombergQuint, out of the 35 analysts tracking RIL, 24 recommend to ‘buy’, seven recommend to ‘hold, while the rest have a ‘sell’ recommendation. With a cautious tone, Macquarie issued an ‘underperform’ rating for the stock with a price target of Rs 1,195. The brokerage also indicated a 42% downside from its Friday’s close of Rs 2,054, the Economic Times reported.
Edelweiss Securities and Emkay Global Financial Services retained ‘hold’ ratings on the stock with targets of Rs 2,105 and Rs 1,970, respectively. Goldman Sachs has a ‘buy’ call with a target price of Rs 2,330. JPMorgan maintained a ‘neutral’ rating, with a target price of Rs 2,060 apiece.
RIL’s stock Tuesday closed at Rs 1,849.45 apiece, down 1.48% on the BSE.