Reliance Share Price Down 4% As Ambit Maintains 'Sell' Rating

Ambit Capital Pvt. has retained its "sell" rating for Reliance Industries Ltd.'s stock, stating that there are "no inflection points in sight" for the oil-to-chemical conglomerate. The Reliance share price closed almost 4% in the red on Thursday.

The brokerage, while maintaining the sell call, raised the target price for RIL to Rs 2,650 per share from Rs 2,600 in its previous estimate. The target price is 9.5% lower than the stock's closing price on Oct. 1.

RIL’s share price trailed Sensex by 3% last year but underperformance is starker since September 2020 after the consumer businesses' fundraise, the brokerage said in a note.

End-game like monetisation of deleveraging via InvITs remains unclear, it said, while adding that entities other than fossil fuel and consumer businesses are "earning no returns".

The true return on capital employed of consumer businesses "would be lower if standalone-funded ‘others’ entity stops providing subsidised services to the former", it added.

"Aspiration of continuously scaling up its consumer businesses and building new ‘growth engines’ like new energy put it on a collision course with global/domestic specialists and put it at risk of persistently low returns. In its consumer businesses, RIL is trailing peers in growth," the brokerage said.

The company's new energy investment plans are facing delays and it’s unable to attract new strategic investors to fund its lofty dreams in media and new energy, it added.

"We are gung-ho about O2C, upstream and Jio as RIL is pursuing a strategy of profit maximisation in these businesses from a position of strength. But we remain circumspect of RIL’s growth aspirations in new energy and retail," Ambit Capital further noted.

The brokerage estimates RIL to clock a revenue of Rs 9,99,100 crore in fiscal 2025, Rs 10,60,900 crore in fiscal 2026, and Rs 11,55,100 crore in fiscal 2027.

The conglomerate's net profit is estimated as Rs 77,200 crore in fiscal 2025, Rs 87,400 crore in fiscal 2026 and Rs 1,03,500 crore in fiscal 2027.

Shares of RIL closed 3.95% lower at Rs 2,813.95 apiece on the NSE, compared to a 2.05% decline in the Nifty 50 at 3:30 p.m.

RIL's stock is up by 8.8% on year-to-date basis, and by 21.4% over the past 12 months.

Out of 36 analysts tracking the company, 25 have a 'buy' rating on the stock, eight suggest a 'hold' and three have a 'sell', according to Bloomberg data. The average of 12-month analyst price targets implies a potential upside of 17%.