RIL shares closed by 8.6% at Rs 1877.3 on Monday, valuing the company at Rs 12,69,437 crore, still making it as India’s most valued in terms of market capitalization.
RIL shares started taking as Macquarie came out with an 'underperform' rating on the company with a price target of Rs 1,195, indicating a 42% downside from its Friday's close of Rs 2,054. The overseas firm remains cautious, as it still sees no economic moat for the company. However, it did note that RIL has reported a largely expected sequential rebound in Q2.
“On a 1-2 year view, we agree with India’s long term digital opportunity, but we continue to see meaningful execution challenges and no moat particularly in retail for Reliance, our earnings, and cash flow estimates are meaningful below consensus and the stock is trading at our blue sky valuation,” said Macquarie in its research note to its clients on Monday.
The company’s partly paid-up (PP) rights shares, which were listed on exchanges after the Rs 53,000 crore rights issue earlier this year also fell sharply.
The PP shares hit the lower circuit limit on Monday as it fell 10% or by Rs 118.45 to Rs 1066.3 in a firm Mumbai market on Monday. RIL’s PP had made a robust debut on June 15 with more than 120% gains. The partly paid shares, which were issued at Rs 314.25, had reached a new high of Rs 1,469.95 on September 16.
RIL’s digital arm Jio Platforms Limited (JPL), raised Rs 1,52,056 crore from leading global investors such as Facebook, Google, Silver Lake, Vista Equity Partners, General Atlantic, KKR, Mubadala, ADIA, TPG, L Catterton, PIF, Intel Capital and Qualcomm Ventures.
RIL’s retail arm Reliance Retail Ventures Limited (RRVL) also raised Rs 37,710 crore of investments from leading global investors including Silver Lake, KKR, General Atlantic, Mubadala, GIC, TPG, and ADIA.
However, despite the massive funds raised, the company’s outstanding debt stands at Rs 279,251 crore ($ 37.9 billion) as of September 30, 2020, against cash and cash equivalents of Rs 185,711 crore ($ 25.2 billion).
According to RIL, funds received post-quarter-end and balance capital commitment receivables are more than quarter-end net debt levels.
The company has received an amount of Rs 30,210 crore during the third quarter and has balance commitments of Rs 73,586 crore.
The oil-to-retail-to-telecom conglomerate saw consumer-facing units doing well amid the lockdown easing but the core business continued to face pressure.
In the transport fuel market, the company saw an 11 percent quarter on a quarter turnaround in demand with the lifting of lockdown amid a seasonal slowdown due to heavy monsoon.
A significant increase in vehicular traffic movement and some traction in domestic air travel led to a massive 41% increase in petrol demand, a 5% increase in diesel demand, and an exponential 107% increase in aviation turbine fuel (ATF).
During the quarter, RIL became one of the first Indian company to cross the $200 billion market cap milestone and is currently among the Top 50 globally and Top 10 in Asia by market cap.
“While we expect earnings to gradually recover to pre-pandemic levels, RIL's credit metrics will remain strongly positioned for its Baa2 rating because of the company's zero net debt status on a reported basis,” said Moody’s Investors Service citing EBITDA improvement and asset monetization as credit positive for the company.