RIL’s Bobbling Stock Market

Updated: Jun 15



Hello everyone, the topic of today’s discussion is the ups and downs of the Reliance Industries Limited Stock Market in the past few days and how it is beneficial to the common man. But before diving right into it, here is an explanation of what a stock or share market is.


WHAT ARE STOCKS?

A stock or equity share is a security that represents the ownership of a fraction of a corporation. This entitles the owner to a proportion of the corporation's assets and profits equal to how much stock they own.


Stocks are bought and sold predominantly on stock exchanges and are the foundation of many individual investor portfolios.


UNDERSTANDING STOCK CORPORATIONS:

The holder of a stock or ‘shareholder’ in the piece of the corporation, depending on the type of shares held, may have a claim to part of its assets and earnings. In a nutshell, a shareholder is now an owner of the issuing company. Ownership is determined by the number of shares that a person owns relative to the number of outstanding shares of the company. For example, if a company has a thousand shares of stock outstanding and one person owns 100 shares, that person would own and have a claim to 10% of the company’s assets and earnings.


Stockholders do not own corporations, but they own shares issued by corporations. Corporations are a special type of organization because they can file taxes, borrow and own property, can be suited etc. The idea is that a corporation is a person that owns its assets. Corporate offices are full of shares belonging to the corporation and not the shareholders.

RELIANCE INDUSTRIES’ BIG LEAP:

On May 07, 22’ - Reliance Industries’ Limited, an oil - telecom retail major, reported a growth of 20.2 per cent with a whopping profit of Rs. 18,021 Crore in the quarter ending in March 2022.


The Revenue in Quarter 4 grew by 35% to Rs. 2,32,539 Crore and the Earnings Before Interest, Taxes, Depreciation, and Amortization [EBITDA] surged by 28% to 33,968 Crore, which also boosted its key segments i.e., telecom, retail and oil-to-chemical industries.

However, on April 18, 22', the share prices plunged a 2.6% hit on the market shares, making the price as low as Rs. 2542 per share on the BSE in opening deals, dragging the Sensex by 800 points. A sharp decline in stock prices has been looked over, with RIL market capitalization declining by Rs. 1.17 trillion in the past two trading days. The stock traded 2.4 per cent lower at Rs. 2,321 on the BSE. The company’s market capitalization stood at Rs. 15.69 trillion, as the BSE data showed.


Given that earnings growth prospects for RIL remain strong, the company’s new energy business is expected to provide the next leg for an abundance of opportunities besides aiding its conventional oil-to-telecom business.

IS THIS THE RIGHT TIME TO BUY RIL STOCKS?

Reliance Industries’ earning trajectory is expected to improve further over the next 12 months, driven by strength in refining, a further hike in telecom tariffs, and strong growth in the retail business.


Reliance Industries’ customers are its growth drivers. They are moving ahead with the company’s new initiatives along with its traditional business, continuing to generate steady cash flows.


As per the experts, the market has reacted positively to the news and most experts are expecting the company shares to continue performing in the market. According to them, since all promoters have the pledge to execute their rights to the right issue, it shows the confidence the promoters have in the company. The investor should only purchase the stocks/shares of the company if they are completely sure of the company’s long-term performance.

TAKEAWAYS AND KEY POINTS:

Here are some major points to look up to:

  1. There was an expectation that the oil to chemicals business would get a significant earning infusion from Saudi and Aramco and to that extent, a lot of dead issues related to the legacy assets would be addressed.

  2. Reliance has announced a significant investment in New Age Technology [renewable energy parks and projects] and all of these will require a huge amount of investment over the next 3 to 4 years.

  3. Reliance's second lead, the Jio platform, was hyped over so much, but actually, the performance is very muted since the subscribers of Reliance Jio decreased from 435 million to 410 million in the year 2022.

  4. However, Jio is also the largest broadband subscriber in all of India within 2 years of its launch. The company claimed that the broadband facility has been installed in over 6 million premises all over the country.

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