Shareholders of the Reliance ADAG have already benefitted from the “peace dividend” over the past fortnight. Stock prices of group companies such as Reliance Infrastructure, Reliance Power and Reliance Natural Resources Ltd (RNRL) have gone up from 12-26 per cent. Could the truce between the two groups also see a change in fortune for Reliance Industries?
Over the past one year, RIL has seen its stock price fall about 6.7 per cent whereas the BSE Sensex is up 13.3 per cent over the same period. Apart from low margins in its key business — petroleum refining — RIL’s stock price has also suffered because of an absence of growth opportunities. Could that change?
With the company’s annual general meeting round the corner, there is anticipation that chairman, Mr Mukesh Ambani, could make some big ticket announcements of new investments. Five years back, he had announced RIL’s decision to go for a new refinery of 27 million tons at Jamnagar at the company’s annual general body meeting.
“They could probably announce large investments but that’s unlikely to impact the stock price immediately. Such projects typically yield value over a longer period,” says an analyst who tracks the firm.
“Compared to that, the stocks of ADAG firms are more sensitive to news or one off events,” he adds.
A one off event such as an acquisition that will impact the stock price in a big way is also unlikely — the acquisition will have to be huge to have any impact on a $70 billion company. Also, RIL has mostly grown organically in the past.
Market watchers feel that the company could come out with announcements in power or infra sectors — which require large investments and strong execution skills.
So far, RIL was barred from these businesses — because of the no-compete agreement. This could perhaps change now.