RIL share price: Reliance Industries (RIL) shares have experienced significant decline, dropping 25% from their peak of Rs 1,608.95 on BSE on July 8. Foreign institutional investors‘ selling amid retail slowdown and weak refining margins has led to a Rs 5.4 lakh crore erosion in value. The stock’s performance has lagged behind Nifty by 10% since January 2024, creating widespread negative sentiment, according to an ET report.
Recent trading sessions show a 4% recovery in RIL shares, indicating possible value buying at lower levels. The sustainability of this recovery remains uncertain.
Jefferies analysts consider current valuations excessively negative, pointing out that the market capitalisation suggests an enterprise value of $48 billion for RIL’s retail division, substantially below the $106 billion valuation from its previous funding round. They anticipate 15% retail growth in FY26, supported by same-store sales growth and expansion. Additional positive factors include potential tariff increases, Jio’s listing prospects, and O2C business improvement. Jefferies maintains their ‘Buy’ recommendation with Rs 1,660 target.
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Jio’s outlook remains positive, with projected revenue CAGR of 18% and EBITDA CAGR of 22% for FY25-27, supported by increasing mobile tariffs and broadband expansion. The company’s ARPU growth potential remains strong, considering previous tariff adjustments haven’t fully materialised in revenues.
Kotak Institutional Equities has elevated their rating to ‘Buy’ with a Rs 1,400 target price. Despite slight downward revisions in FY26/27 EBITDA forecasts, they project 11% earnings CAGR through FY24-27. They anticipate gradual retail sector improvement, with potential telecom IPO and tariff increases as growth drivers.
The retail division is currently streamlining operations, closing non-performing outlets whilst maintaining expansion. This consolidation phase should conclude by FY25, followed by planned retail space addition of 6-7 million sq. ft in FY26-27.
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ICICIdirect.com’s Head of Research, Pankaj Pandey, expresses reservations about recovery prospects. “Valuations are definitely comforting, but the only segment doing well is Jio. We expect another price hike, but retail remains sluggish outside of end-of-season sales. Oil and gas margins have yet to improve, and FIIs have been dumping oil and gas stocks, which dampens any near-term upside,” he said.
FII ownership in RIL has seen a significant decline since September 2022, dropping from 23.6% in Q2 of FY23 to 19.6% in Q3 of FY25. The energy sector has witnessed additional FII withdrawals of Rs 5,000 crore in the past two months.
The refining sector faces challenges due to heightened Russian sanctions and US tariff implications. RIL’s O2C division continues to experience pressure from weak global refining margins and low petrochemical spreads.
RIL’s current valuation might present an opportunity, considering the extensive negative sentiment already reflected in prices. The company’s underperformance compared to the Nifty indicates thorough pricing of adverse factors. Potential improvement in Jio’s performance, retail sector stabilisation, and O2C division recovery could trigger positive revaluation.
The recent 4% increase in share price indicates renewed investor interest, though uncertainty remains about whether this represents a sustained recovery or temporary uptick.
Disclaimer: The opinions, analyses and recommendations expressed herein are those of brokerages and do not reflect the views of The Times of India. Always consult with a qualified investment advisor or financial planner before making any investment decisions.
