Despite the initial enthusiasm from retail investors following Reliance Industries Limited's (RIL) announcement of a bonus issue at its 2024 annual general meeting (AGM), the company's shares saw a decline by the end of the week. The bonus issue, scheduled for consideration on September 5, initially caused a 1.5% uptick in RIL shares on Thursday. However, this momentum diminished, resulting in a 0.69% drop in shares on the Bombay Stock Exchange (BSE) the following Friday.
A significant reason behind the market's tepid reaction was the lack of updates on the potential listing of RIL’s two major segments—Reliance Jio and Reliance Retail. Investors were anticipating details regarding these key spin-offs, but their absence left a void in the strategic outlook of the company, leading to uncertainty and caution among market participants.
Brokerages have largely retained their buy recommendations for RIL but have refrained from adjusting their target prices. Macquarie, for instance, opted to maintain a neutral view of the stock. Analysts Aditya Suresh and Baiju Joshi at Macquarie upheld a target price of Rs 2,750, noting, “The AGM’s commentary does not change our view regarding the downside risks to the consensus forecast of FY26 consolidated EPS of Rs 135-140.”
Reliance Industries’ projections suggest that both Jio and Retail are expected to see their revenue and EBITDA double within the next 3-4 years. Additionally, the company anticipates that its new energy segment will grow at a pace similar to its oil-to-chemicals (O2C) segment over the next 5-7 years. Despite these ambitious targets, the projections were in line with existing expectations, providing no new insights that might significantly alter investor sentiment.
Kotak Institutional Equities also maintained an “Add” rating on RIL, setting a fair value of Rs 3,200. The firm acknowledged that while new energy initiatives could support growth over the next 3-5 years, they continue to pose potential risks. ICICI Securities, aligning with a cautious approach, kept a hold rating on RIL, citing concerns over high valuation multiples, subdued free cash flow yields, and return ratios. Despite anticipating a strong EPS growth of 14.2% CAGR over FY25–27 and the bonus issue, the firm remains wary of the stock’s current valuation.
Conversely, Nomura, which regards RIL as a top pick in the energy sector, maintained a target price of Rs 3,600. The brokerage is optimistic about robust growth across RIL’s various segments, forecasting a 13% EBITDA CAGR over the next three years. This positive outlook is supported by expectations of increased free cash flow generation and a significant reduction in net debt by FY27.
JM Financial kept its 12-month target price at Rs 3,500 and set a longer-term target of Rs 4,600. The firm dismissed concerns regarding RIL's debt and projected a 16-17% EPS CAGR over the next 3-5 years. This anticipated growth is expected to be driven by a projected ~11% CAGR in Jio’s Average Revenue Per User (ARPU) over FY24-28, supported by industry consolidation and a recovery in 5G capital expenditures.
