Reliance Industries Bonus Issue: The record date of the much-awaited bonus issue ahead of Diwali festival, is finally announced. It is of none other than India's largest company and oil and gas behemoth, Reliance Industries which is looking to reward investors with 1:1 bonus shares. After its Q2 results, two brokers namely JM Financial and BOB Capital Markets have recommended BUY on Reliance, with potential upside between 26% to 30%.
Reliance Industries Share Price:
After market hours of October 18, Reliance stock ended at Rs 2717.55 apiece, marginally up on BSE with a market cap of Rs 18,38,721.14 crore. However, the heavyweight stock ended the trading week from October 14-18, on a bearish note with a downside of 1.2% on BSE. RIL's monthly performance is also down by 7.6%.
However, year-to-date, the stock has rallied by 4.93% on BSE. The oil and gas behemoth's price-to-equity ratio is at 50.33x, while its return on equity is around 6.97%.
Reliance Industries Bonus Issue:
In a major development, Reliance Industries has announced the record date for its upcoming bonus issue.
The Mukesh Ambani-backed company has fixed Monday, October 28, 2024, as the record date for the purpose of determining the members of the company, eligible for bonus equity shares in the 1:1 ratio.
A 1:1 bonus issue ratio would mean that Reliance will allot 1 new fully paid-up equity share of Rs 10 face value, against every 1 existing equity share of Rs 10 face value.
Just as Reliance has promised, it plans to coincide the bonus issue with the upcoming festive season in India and as an early Diwali Gift.
Reliance earlier said, "This will be the largest-ever issuance of bonus equity shares in the Indian equity market. The issuance and listing of bonus shares will coincide with the upcoming festive season in India and will be an early Diwali Gift to all our esteemed shareholders."
Diwali festival 2024 is going to kick start from October 29, 2024.
This will be the first bonus issue by Reliance in seven years. The last bonus issue was also of 1:1 ratio in September 2017. While Reliance's first bonus issue was also of 1:1 in November 2009.
BUY Reliance Stock?
According to BOB Capital Markets latest report, while pullback in margins in O2C and retail rationalisation weighed on earnings, Q2 consolidated EBITDA was still up 3% QoQ on the resumption of growth in Digital Services with the tariff hike in July.
In Q2FY25, the company's consolidated net profit attributed to the owners of the company, at Rs 16,563 crore, declining by 4.8% from its PAT of Rs 17,394 crore in the same quarter a year ago. Reliance's Q2PAT is higher compared to net profit of Rs 15,138 crore in Q1FY25.
Further, gross revenue witnessed a gradual upside of 0.8% YoY to Rs 258,027 crore in Q2FY25, compared to Rs 255,996 crore in Q2FY24. As per Reliance, on the top-line front, oil-to-chemicals (O2C) revenue improved with higher volumes and increased domestic placement of products.
That being said, BOB CAP believes Q3 earnings will gain support from further capture of tariff hikes in Digital Services and retail growth in the festive season.
Furthermore, the brokerage's note added, "While we had slowed down FY25 EBITDA growth to a mid-single digit (6%) from 9% earlier on the slowdown in Retail and O2C, we continue to bake in 11% CAGR in EBITDA over FY24-FY27E, led by 22% CAGR in consumer business profits. Besides consumer businesses linked to growth aspirations of India, RIL is also developing New Energy as the next growth pillar."
On the valuation, the brokerage's note added, "We lower our SOTP-based TP to Rs 3,440 (from Rs 3,585) factoring in changes to estimates and lower target multiple for Retail at 32x (from 34x) reflecting slower growth assumptions of 18% (22%) CAGR over FY24-27E. We retain target multiples for other businesses - Refining (7.5x), Petrochemicals (8.5x), and Jio Infocomm (11x). Given 25% upside, we reiterate BUY."
Among key catalysts for the stock as per BOB CAP are - (a) Jio: Signs of monetising standalone 5G roll-out beyond Jio AirFiber. (b) Retail: Resumption of growth trajectory towards delivery on 3x growth target over five years. (c) New Energy: More visibility on delivery of initial milestones over FY25-26. d) O2C: Guidance on cost reduction with the deployment of new energy. (e) Public offers: Listing of the Jio and retail businesses.
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