Reliance Industries’ investors are expecting announcements on a stake sale in its oil-to-chemical business and an acquisition of the retail business of the Future group at the company’s forty-third AGM to be held through video conferencing on Wednesday.
The investors are also expecting chairman-cum-managing director Mukesh Ambani to offer directions on the course of Reliance’s digital services business under Jio Platforms, which has raked in an astonishing Rs 1.18 lakh crore through stake sales to 12 marquee investors, with the latest deal announced on Sunday evening when Qualcomm picked up a 0.15 per cent stake.
Besides, RIL has secured $1 billion from BP for its fuel retail business. The company also undertook a rights issue where 25 per cent of the over Rs 53,000 crore on offer is already in its bag.
Its shareholders have also been rewarded with the RIL stock sprinting 110 per cent from it 52-week lows in March.
At its last AGM in August, 2019, Ambani had set a goal of the oil-to-telecom giant becoming net debt free by March 2021. The company had recently said that it has achieved this target.
RIL observers will keenly watch any proposed deal with Saudi Aramco in its oil-to-chemical business. The latter was set to take 20 per cent in the O2C business for an enterprise value of $75 billion. Though doubts grew about the transaction after the Covid-19 pandemic hit the world and crude oil prices collapsed, market circles remain optimistic though it is felt that RIL may not get the same valuations . Brokerages like HSBC had valued the business at $65 billion.
“While Ambani is certain to give an update, one also cannot rule out an announcement with regard to the conclusion of the deal. In such a case, the valuation will hold the key. If this announcement is made, it will lead to a re-rating of the stock,” an analyst with a foreign brokerage said.
“As RIL has achieved a decent foothold in both digital services and organised retail, we believe it would now turn its focus to O2C, for which it has signed an MoU with Saudi Aramco,” a report from Motilal Oswal said.
Reliance may also conclude a transaction with the Future group for the latter’s retail business. Future Retail has more than 1,500 stores in various formats and a deal will further bolster Reliance Retail’s presence in the sector.
Ambani may also announce further expansion in its online grocery shopping venture JioMart.
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Its analysts added that a new trend is emerging among refiners in favour of increasing the percentage of chemicals in the overall production. This is due to the vast difference in profitability combined with an increased threat from electric vehicles to petrol and diesel.
“At present, chemical conversion stands at 24 per cent for RIL... The advancement of Saudi Aramco in this technology could be the main reason RIL is looking at a partnership with the former,” the brokerage said.
While the O2C and the retail businesses may hog the limelight this time around, its digital service may also see action. Here, Ambani is expected to throw more light on what Facebook will bring to Jio’s table, particularly through its messaging app WhatsApp. The RIL chief may also indicate plans to monetise (by offloading stake to financial or strategic investors) in Jio Platform arms like Reliance Jio Infocomm and an update on its plans to rope in global investors in its fibre InvIT.
“For this upcoming AGM, we expect investor focus to be on asset monetisation details, especially on telecom InvITs and Saudi Aramco stake sale, capital allocation and growth strategy post Covid-19, plans to leverage the partnerships with global technology peers and integrate its retail, digital and financials business,” a note from Morgan Stanley said.
