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Thursday, August 9, 2018

Is Reliance Industries Limited Stock Beneficial for the Long-Run?

Reliance Industries Limited is one of the largest conglomerates in the country. The company was founded in the year 1977 and in a span of 41 years, it has grown to become a household name in India. It is engaged in various business verticals like energy, petrochemicals, telecommunications, textiles, and retail. With such a diverse portfolio of operations, the Reliance Industries Limited stock has attracted plenty of investors over the years.

However, if there is one thing that we have learned about the markets, it is the fact that a big name does not necessarily mean big numbers. That’s why, before investing in the stock of a particular company, it is always recommended to analyse and study the company thoroughly. In this article, we will be examining whether Reliance Industries Limited is a good stock to purchase as a long-term investment. For the sake of simplicity, we will be exploring this idea in three distinct parts as follows:

Reliance Industries Limited Business Operations

Reliance Industries Limited is one of the largest private players in the country when it comes to hydrocarbons and energy segments. From exploration and production to refining and marketing, Reliance is actively involved in all the stages of the petroleum and petrochemicals supply chain. In fact, these well-established segments contribute heavily to the income of the company. 

In addition to these verticals, Reliance has diversified its operations into retail, media, and digital services. Some of the very popular names in this space are Reliance One, Reliance Digital, Reliance Jewels, Reliance Jio, and the Network 18 Group. These segments have picked up a great deal of momentum over the course of last year and the same has been seen in its exceptional financial performance.

It is worth mentioning that Jio has been witnessing a strong subscriber growth. In the Q1 FY19, Reliance Jio added 28.7 million subscribers, as against 26.5 million added in the previous quarter. It has also been ranked as the fastest network by TRAI’s MySpeed Analytics App. In order to keep up with the demand, Reliance Jio is continuously expanding its 4G network coverage.

A similar growth has also been seen in its retail business. Over the course of the last year, Reliance Retail has massively improved its network. It now comprises more than 8,500 stores across more than 5,000 cities.

Fundamentally speaking, the company is built on strong foundations and has an excellent management team leading it. It has survived hard financial times and is well-placed to withstand the same in the future.

The Financials of the Company

For the fiscal year 2017-18, Reliance Industries Limited reported its consolidated turnover to be Rs.4,30,731 crore - an increase of 30.5% with respect to the previous financial year. Subsequently, its net profit for the year also increased by 7% y-o-y to stand at Rs.36,075 crore. Interestingly, this remarkable increase in the two metrics came on the account of hyper-growth in the retail and Jio segments and high volume growth in the oil and petrochemicals segment.

Interestingly enough, FY 2017-18 was one of the best years that Reliance Industries has had in a long time. While the company did manage to deliver a healthy profit in the recent years, its overall performance had been rather stagnant and the same was reflected in its stock price. It wasn’t until the launch of Jio that Reliance Industries Limited picked up momentum once again.

In fact, for the quarter ended June 30, 2018, Reliance reported its consolidated revenue to be at Rs.1,41,699 crore as against a revenue of Rs.90,537 crore reported for the corresponding quarter of the previous fiscal. In other words, the revenue jumped up by more than 50% in this period. Similarly, net profit for the period also increased by 17.9% with respect to the June quarter of FY18 to stand at Rs.9,459 crore.

If we look at the segment-wise performance, its refining & marketing and petrochemicals business together account for more than 60% of the overall revenues. Its organised retail business also expanded massively in the quarter with the revenue witnessing a jump of more than 120% with respect to the Q1 FY18. 

The company’s long-term debt-equity ratio stands at 0.26 as of March 31, 2018. Considering the liabilities of the company, it stands at Rs.8,65,237 crore as against Rs.7,30,980 reported for the corresponding period of the last year.

Performance of the Stock

From 2010 to 2016, the stock price of Reliance Industries Limited had been rather stagnant. It mainly varied at levels varying from Rs.350 - Rs.550 without any significant gains. The company issued regular dividends every year to keep investors sentiments positive.

When Jio was commercially launched in September 2016, the markets were sent into a frenzy. The anticipation of Jio’s performance kept investors on their toes. When reports began to emerge that Jio has proven itself to be quite worthy of the Indian market, the share price skyrocketed. Through the course of 2017, the stock price rose from levels around Rs.533 in January to Rs.920 by the end of the year.

Furthermore, the announcement of bonus shares in 1:1 ratio gave the stocks a more steady heading. As of August 2018, the shares are trading at levels around Rs.1,100. Also you can visit BankBazaar to get more information on Reliance stock

Final Thoughts

Reliance Industries Limited is a fundamentally strong company with many business verticals. It has performed well over the years and off late, it has picked up a great deal of momentum owing to the growth in Jio business and retail. Needless to mention, Reliance Industries Limited stock makes for an attractive buy from a long-term perspective. However, it is strongly recommended that you do your own research before investing.

1 comment:

  1. For long term investor this RIL stock is always better but let the price come down when it can be purchased.

    ReplyDelete

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