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Reliance Inds. – In the spotlight…

The last 2 months has just brought bad news, and more bad news. What with the rapid CoVID infection spread and deaths throughout the world and its collateral damage on world economy and citizens. With most nations resorting to lockdowns, businesses come to a grinding halt, unemployment numbers soar and business owners start looking up to the government to bail them out of the crisis.

In such a environment, theres probably only one company in the world (to my knowledge), Reliance Industries (RIL), which seems to be working..rather, working harder than pre-CoVID times!!!

Look at the spate of announcements from RIL, over the last 30 calendar days to be specific:

Screen Shot 2020-05-22 at 1.45.10 PMSource: company disclosures on the exchange

RIL announces fund raises totalling a staggering Rs. 1.50 lac crs!!! (Rs. 78k crs already announced in Jio Platforms + Rs. 25k crs in RIL via NCD + Rs.53k crs in RIL via rights issuance). Its rightly headed towards the debt-free status that was guided by the management some time back.

And investors seem to be giving a standing ovation to this stellar performance, going by the 65% jump in the stock price in the last 50 calendar days! The analyst community also seem to be united in their views (and rightly so), with more than 84% of the analyst community having a BUY rating on the stock, with a average PO of Rs,1,527.

While I tend to agree with the consensus view from a long term point of view, i sense a correction in the stock price in the near term.

Why do i sense so? Take a look at the image below:

Screen Shot 2020-05-22 at 2.01.02 PM

Source: moneycontrol website.
The above chart is a 6 month price chart of RIL, along with my monthly observations in the table below the price chart.

I’m not sure how should one read this?

  • A +50% move in the stock price in a month before any announcements are made (informed circles buying??)
  • And a mere 6% stock move in a month in which such stellar announcements are made? at a time when the investor fraternity is dumb founded by the frequency and size of the fund raise? (Are these informed circles taking some money off the table, now that the announcements are in public domain??)

Such major fund raising outcomes are never a result of overnight efforts. I’m sure the management has been working in this direction for the past couple of months.

Frankly, i am not aware and am sure no one has the precise explanations to these price movements. We can only hazard a guess from the the data points we take a look at. And looking at the above data points, i expect some cooling off in the price in the near term.

P.S.: Please don’t construe this as a recommendation. I am not a SEBI registered analyst nor do i have any positions in the stock. Do your own due diligence before taking any action. These are just my observations which i’m documenting for my records and inviting views/comments. 

I would love to hear your views on this name.

Cheers!!!

Sudhir

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