All the things that drove Reliance Industries’ shares to a 11-month high and over the coveted ₹15 lakh crore mark

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All the things that drove Reliance Industries’ shares to a 11-month high and over the coveted ₹15 lakh crore mark
Mukesh Ambani, chairman and managing director, Reliance IndustriesBCCL
  • Mukesh Ambani-led Reliance Industries (RIL) has crossed the ₹15 lakh crore market capitalisation milestone.
  • Over the last 10 trading sessions, RIL’s share price has surged by over 11%.
  • After being stuck in a range for much of the last one year, the stock started to see traction at the end of July and is picking up pace now.
  • Check out the other latest news and updates on Business Insider.
Mukesh Ambani’s Reliance Industries has crossed the ₹15 lakh crore market capitalisation, surging by over 17% since the end of July.

Shares of RIL touched an all-time high of ₹2,389, up by over 4% over the previous closing price.

In the last month alone, RIL’s share price has leaped by over 17% compared to Nifty 50’s 6.55%.

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All the things that drove Reliance Industries’ shares to a 11-month high and over the coveted ₹15 lakh crore mark
RIL share price in the financial year 2021-22 so farBSE / Business Insider India / Flourish

The gulf between the market capitalisation of RIL and other companies continues to widen. RIL and Tata Consultancy Services (TCS) were in a neck-to-neck race in January this year.

Now, the gap between the market cap of both the companies is a little over ₹1 lakh crore.

So, how exactly has RIL pulled so far ahead of the rest of the market? The company’s annual report has some clues.
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Triple hypergrowth engines driving RIL’s future



In the annual report, the company’s chairman Mukesh Ambani identified the digital business a.k.a Jio, retail, and oil-to-chemicals units as the three pillars of growth.

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Together, these three businesses contribute to most of the company’s topline (revenue). However, they weren’t doing too well until this last quarter, which also looks way better than reality because the comparable period from a year ago was even worse.

BusinessRevenue (April-June 2021)Growth compared to same time last yearRevenue (FY21) (in crore)Revenue (FY20) (in crore)Performance
Retail₹38,56322%₹1,53,818₹1,62,936-5.6%
Digital Services₹23,4039.9%₹90,287₹68,46231.9%
Oil to Chemicals (incl. petrochem)₹1,03,21275%₹3,20,008₹5,32,786-39.9%

Source: RIL annual report

The O2C business, which makes for more than half the company’s revenue, has seen a drastic decline. This was, in part, due to the fall in demand due to lockdowns across the country during the first wave of COVID-19 last year.
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The recovery in the conventional energy business is important for Mukesh Ambani to seal the stake sale in the unit to Saudi Arabia’s Aramco. “In our view, sustained strong petrochemical performance improves the likelihood of O2C stake sale in FY22,” said a Jefferies Equity Research report dated May 27, 2021.

The stock will gain strength as the deal closure gets more visible.

A big step in green energy has further fuelled the market’s excitement around RIL


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All the things that drove Reliance Industries’ shares to a 11-month high and over the coveted ₹15 lakh crore mark
BCCL

Mukesh Ambani yesterday announced that the company has started developing the Dhirubhai Ambani Green Energy Giga Complex over 5,000 acres in Jamnagar, which he claimed will be one of the largest integrated renewable energy manufacturing facilities in the world.

The complex will house four giga factories, covering different sources of renewable energy. The company will invest ₹75,000 crore over the next three years for its green initiatives.

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“At the current stock price (₹1,969, May 26), valuing the Energy business at long-term average multiples, we are left with ₹1,150 per share as imputed value of RIL’s stake in Jio and Retail,” the report further added.

The Jefferies report gives a target price of ₹2,580 (+8%), but if RIL manages to seal the Aramco deal, this is increased up to ₹3,150 (+32%).

Jio is becoming stronger



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Reliance Jio added over 5.4 million subscribers in the month of June as per a Telecom Regulatory Authority of India (TRAI) report. The latest additions take Jio’s mobile subscriber base to over 430 million. In addition to wireless, Jio has also been increasing its fiber users, taking its total subscribers to over 3.22 million in June.

Jio Platforms is prepping fast for the 5G era



Perhaps one of the biggest announcements coming out of RIL recently, is the fact that Jio is working with chipmaker Qualcomm to bring affordable 5G to India.

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The company announced that Jio and Qualcomm have tested their 5G network, touching the 1Gbps milestone on the newly developed 5G stack. In total, the company has 371 patents, 40 of which were granted in FY21.

Reliance Retail remains a top player despite losing the battle for Future against Amazon



In a setback for Reliance Retail, the country’s apex court ruled in favour of Amazon, preventing the company from acquiring Future Retail in a over ₹24,000 crore deal. The company had reached an agreement to acquire Future Group’s retail and wholesale business, in addition to the logistics and warehousing business.

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However, Ambani is making all the right noises with this cash generating segment, for a company that was for nearly three decades known as an energy giant.

Reliance Industries’ subsidiary, Reliance Retail Ventures, now has a 40.95% stake in Just Dial, the popular hyperlocal search engine that connects merchants with customers. The acquisition is valued at ₹3,947 crore and will help the Mukesh Ambani-led company bolster its merchant database as it seeks to expand its presence in the retail segment with JioMart.

At the moment, JioMart is available in 200 cities and towns across India. The company claims that it has served over 1 million customers via online and offline channels. It has partnered with local kirana (grocery) merchants in 33 cities, as of March, 2021. The JioMart app has been downloaded by over 10 million users on Android alone.

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Reliance is betting big on retail, leveraging its digital presence by launching its hyperlocal platform JioMart across 200 cities in the country.

But beyond that, the company also teamed up with merchants – it now claims to have over 10,000 vendors on its platform. This had a direct impact on its revenue numbers, as the vendors contributed to 10% of retail revenues, from almost a year ago.

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