Reliance Industries Ltd.'s stock rose 5% to a record, marking the company's third straight session of gains and increasing its market capitalization to Rs 19.2 lakh billion. The stock peaked on January 29 at 12:50 p.m., at Rs 2,850.
Following Bloomberg's news that Walt Disney's India branch could see its valuation significantly decline - possibly by half -as it prepares to merge with Mukesh Ambani's media company, the shares of RIL increased. Disney's holdings in India are currently valued at about $4.5 billion after discussions, down from its initial demand of $10 billion, according to the article. A $11 billion valuation is the goal for the united company, in which Disney has a 40% share.
The purchase is expected to close in February, with Reliance Industries holding a 51 percent stake, according to Bloomberg. The report also stated that the potential significant opponent is eliminated with the failure of the $10 billion merger between Sony and Zed Entertainment. In January, the RIL stock increased by 8.6 percent as a result of encouraging remarks about rising capex and robust retail performance. Analysts have kept their ratings the same while increasing their target prices.
The corporation spent Rs 30,100 crore on capital expenditures (capex) in the third quarter, a 22% drop from the prior quarter. This decline was caused by lower investment in retail due to constrained space development and lower spending by Jio following the completion of the 5G rollout throughout India.
"We anticipate that retail capital expenditure will decrease by Rs 15,000 crore in FY24 and much more in FY25. According to Jefferies India, Jio's headline capital expenditure could decrease by Rs 30,000 crore in FY25, which will enhance free cash flow and allay worries about the company's rising net debt.
Analysts claim that as the 5G rollout's conclusion drew near, expenditures decreased in the December quarter. Over the last three years, RIL's free cash flow has been negative, mostly as a result of its communications expenses. It is projected that RIL will produce positive free cash flow for the next two years, with these expenses subsiding and an EBITDA run rate of $20 billion per year. Despite a minor quarter-over-quarter increase in net debt during the three months ended December 31, which analysts attribute to the payback of other capex commitments, analysts anticipate a downward trend in net debt going forward, bolstered by lower capex and a better EBITDA run rate.
With Jio (greater tariff hikes), retail (recent strong performance), and O2C (Q3 beat), we increased our FY24–26 EBITDA by 2–5%. However, we believe that the stock's recent outperformance has brought risk and reward into better balance, thus we downgrade to Neutral with a TP of Rs2,910 (+12%; roll-forward). Important indicators include deleveraging ahead of projections, Jio/retail monetisation updates, and a surprise in the size of tariff hikes, according to CITI's most recent note.
