RIL loses $10 bn as shares fall nearly 10% in a week

Chennai: Shares of Reliance Industries fell nearly three per cent intraday today after brokerage firm Morgan Stanley downgraded the company to equal-weight, maintaining the target at Rs 1,349 per share.

The Mukesh Ambani-led firm was trading at a two-month low and shares of the firm fell for the fourth session. Since 3 May, the RIL shares dipped 10 per cent, losing over $10 billion in market valuation in the period, stated reports.

Earlier today, Reliance Industries was quoting at Rs 1265.90, down 2.58 per cent on the BSE. Local equity markets today fell for seventh session amid renewed trade war concerns.

Morgan Stanley expects the earnings growth of the Mukesh Ambani-led company to halve in FY20, after delivering a steady 17 per cent compound annual growth rate (CAGR) between FY17 and FY19.

The brokerage said earnings upswing of the last two fiscal is likely to reverse and the upside appears limited, as the core business of the company drags.

Morgan Stanley in its report release yesterday, said, “We expect RIL’s two-year earnings upswing to reverse, yet investors are dismissing refining headwinds amid tighter crude markets.”

“A rising glut in the gas and polyester markets could also slow growth into 2020. Upside appears limited amid core business drags, with no material capacity adds,” added the firm.

Investors were cautious after Morgan Stanley downgraded RIL stock to ‘equal weight’ with price target of Rs 1,349 a share, with them increasingly worried about RIL’s rising debt, and weak gross refining margin.

“We expect earnings growth to halve in F20, after a 17 per cent CAGR, F17-F19. Downside earnings surprises in the energy business should unfold and attract increasing investor attention – a complete reversal in narrative after the positive triggers that played out since 2017. While the potential upside from digital investments could however offer structural upside as RIL rolls out new businesses, the cyclical headwinds in energy lead us to downgrade RIL to EW(equal weight),” the report said.

RIL’s debt has been increasing continuously due to higher capex since the launch of Jio. Its debt outstanding as on 31 March rose to Rs 2.87 trillion, from Rs 2.18 trillion at the end of the previous year.

Reliance Jio net profit in the March quarter largely remained flat quarter-on-quarter at Rs 840 crore and average revenue per user declined to Rs 126 per subscriber per month. RIL’s refining margin narrowed to a 17-quarter low at $8.2 a barrel in March quarter.

NT Bureau