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Reliance Industries Limited (RIL), a major player in India's business landscape, has announced a significant 1:1 bonus share issue, offering shareholders an additional fully paid-up equity share for each ₹10 share they hold. This move, described as an 'early Diwali gift,' signifies the company's confidence in its future prospects and its commitment to shareholder value. The bonus share issue, set to be the largest in India's stock market, is expected to increase liquidity and enhance the stock's attractiveness to investors. The exact record date for the issue is yet to be finalized but is scheduled to be confirmed during a Board meeting on October 14th. This meeting will also delve into RIL's unaudited financial results for the quarter and half-year ending September 30th.
While the bonus issue excites shareholders, attention also turns to RIL's financial performance in the second quarter of FY2025. The company is expected to present a mixed outlook, with varying performance across its various business segments. The oil-to-chemicals segment, a key driver of RIL's revenues, is likely to see a decline due to weaker refining margins. This weakness is attributed to the sharp 62% year-on-year drop in Singapore refining margins, leading to an anticipated 26-27% fall in EBITDA from this segment, reaching around ₹14,100 crore. However, the company's oil and gas business is projected to witness a 4% rise in EBITDA, driven by a 3% increase in production. This suggests that while the O2C segment may face challenges, other sectors within RIL are poised for growth.
On the other hand, RIL's consumer-facing businesses are expected to perform well, bolstering the overall financial performance. The retail segment, a major growth engine for RIL, is forecast to continue its steady growth trajectory with an estimated 7% year-on-year increase in EBITDA. This growth is attributed to RIL's robust retail expansion strategy and its strong brand recognition. Reliance Jio, RIL's telecom arm, is also expected to deliver solid growth driven by recent tariff hikes. The company's EBITDA is projected to rise by 12% annually, with ARPU growth of 5% helping to offset a slight drop in subscriber numbers. Both brokerage firms, Nuvama and Motilal Oswal, anticipate a 7% sequential increase in ARPU, reflecting the steady performance of the telecom sector. Despite these positive projections, investors will be closely monitoring key developments such as RIL's progress on its ₹75,000 crore investment in the new energy business, its ongoing retail expansion, and potential shifts in telecom pricing. These developments will be crucial in shaping RIL's future growth trajectory.
Brokerage firms offer varying perspectives on RIL's overall financial performance. Nuvama projects a 5.5% year-on-year drop in EBITDA primarily due to the weakness in the O2C segment. However, strong performances in consumer-facing businesses are expected to partially offset this decline. In contrast, Motilal Oswal forecasts a 2% annual growth in consolidated EBITDA, reaching ₹39,700 crore. While analysts acknowledge the challenges in the O2C segment, they also highlight the potential for positive surprises in the upcoming financial results. They view any dip in the stock price as a buying opportunity for long-term investors, particularly considering the significant correction Reliance shares have experienced recently. Anshul Jain, Head of Research at Lakshmishree Investment, notes that while RIL reported a 2% EBITDA growth in the previous quarter, net profit declined by 5%. This highlights the need to closely examine the upcoming financial results for potential gains.
On the technical front, Reliance's stock, currently trading around ₹2,744, has dropped below key moving averages. Sumeet Bagadia, Executive Director at Choice Broking, points to support levels at ₹2,700 and resistance between ₹2,900 and ₹2,950. A break below ₹2,700 could lead to a further fall to ₹2,650, while breaking above resistance could trigger a bullish trend. Traders are advised to closely monitor these levels to anticipate Reliance's next move. The bonus share issue and upcoming financial results will be key drivers of investor sentiment and will shape the future trajectory of Reliance Industries in the coming months.
In conclusion, Reliance Industries is poised for continued growth despite some headwinds in the oil-to-chemicals sector. The bonus share issue demonstrates the company's commitment to shareholder value and is expected to boost investor interest. With strong performances anticipated in the retail and Jio segments, the upcoming financial results will be closely scrutinized for insights into the company's future direction. Analysts view any dip in the stock price as a buying opportunity for long-term investors, highlighting the potential for growth despite the current market volatility. It remains to be seen whether RIL can navigate these challenges and maintain its status as a leading player in India's dynamic business landscape.
Source: Reliance's 1:1 bonus issue, Q2 preview, and stock strategy: What you need to know