The Street Is Going Into RIL's AGM With Very Little Expectation

The upcoming Annual General Meeting of Reliance Industries Ltd. may not bring much cheer to the street as the anticipated announcement of listing timeline for the consumer businesses—Reliance Retail Ltd. and Reliance Jio Infocomm Ltd.—may get extended.

Chairman Mukesh Ambani had indicated five years ago on the potential unlocking of shareholder value through listing of the two consumer businesses. But brokerage BofA Securities doesn’t expect any major value unlocking announcement in this AGM.

In fiscal 2020, Ambani had told investors that RIL has an extremely strong balance sheet that will support all its growth plans for three Hyper-Growth Engines; Jio, Retail and oil to chemicals. "Our target for capital raise is now complete and we now look forward to only adding strategic partners who share our vision in each of our current and future businesses," he had said.

Last year, Ambani again raised capital for its retail arm. Reliance Retail had a gross debt of over Rs 41,000 crore at the end of financial year 2024.

The street had anticipated sufficient cash flow generation from core operations to fund future capex. This has not happened, partly due to geo-political issues and partly due to domestic demand, resulting in the company raising fresh equity for its retail arm and becoming a net debt company again, on a standalone basis.

The market was disappointed in the last three AGMs, given absence of any major announcements. The street is building little expectation going into the AGM on Aug. 29.

So, what could be expected from the AGM?

Ambani said the demerger of Jio Financial Services Ltd. has unlocked significant value for shareholders. RIL could use a similar route for future unlocking of wealth for its shareholders. A year after inducting the third generation to the board of Reliance Industries, the company could prepare for potential unlocking of value through listing of the three businesses—Jio Platforms, Reliance Retail Ventures and Reliance New Energy—in the run up to its 50th year of listing on the stock exchanges.

Last year saw retail capex moderating. RIL has so far invested nearly Rs 1 lakh crore, with 77% of the capex coming up in the last three years. RIL raised equity in the retail venture last year. The company is focusing on consolidating the operations with focus on profitability, rationalisation of stores and reduction of manpower. While retail arm added 1,840 stores, it closed 1,044 during the last financial year. This rationalisation is nearly double the closure over fiscal 2023. 

The street is likely to see future launch formats and possible investment into the quick commerce segment that will combine new commerce operations and its hyperlocal strategy as it integrates with the smaller indigenous merchants and kirana store owners.

It is aggressively foraying into the beauty and apparel segment, as it recently announced a partnership with British apparel brand ASOS. It is also likely to announce partnerships with global players like Shein.

While recent hike in telecom tariff will play out over the next few quarters, Jio is targeting to push fixed wireless access across 100 million premises. It expects FWAs to pick up particularly in rural and has expanded offerings to 5,900 towns. It is also looking to leverage digital technologies to capitalise on the Disney-Viacom combined entity. RIL is targeting to capitalise on 100-crore connected screens by 2030.

Jio has raised close to $5 billion in fiscal 2024 for 5G capex. With standalone 5G infrastructure in place, it now aims to take its 5G stack overseas.

It will also announce plans for the Disney-Viacom combine entertainment company which is pending regulatory approvals.

The company has announced nearly $10 billion of investment into new energy. The progress so far has been slow, as it has invested only $2 billion in this venture so far. RIL is targeting to achieve 100 GW of renewable energy by 2030. It targets to bring the factory on-stream in a phased manner beginning end of 2025.

The AGM will provide a clear timeline of new energy businesses, including the fully integrated, end-to-end Solar PV manufacturing ecosystem. Average solar module prices have drastically fallen by half since 2022. The sector also faces challenges with respect to disruptive technologies.

While RIL is building giga factory at Jamnagar, it’s renewable energy development, production of green hydrogen and its derivatives—green ammonia and green methanol—would be at a location, based on availability of suitable land, evacuation infrastructure and requisite demand. The venture will also need connectivity to green energy generation.

The company will also confirm the timelines for setting up the battery giga factory by 2026. It is betting big on battery energy storage system. To begin, it will start off with lithium batteries and graduate into fast-track commercialisation of sodium-ion battery technology. It will be initially used for captive purposes.

In the wind energy space, Ambani is expected to indicate bigger foray into manufacturing of wind blades. RIL plans to manufacture carbon fibre at large scale to further integrate and reduce cost of wind turbines, including partnering with global technology players in wind equipment manufacturing to deliver cost-efficient solutions.

Its cash earner oil to chemical business is unlikely to see any major investment announcement. Ambani is likely to talk about supply chain routes, expanding crude supply resource and sustainability regulations that will challenge fossil fuel market.

Ambani will also update on the new KG basin wells with operational update on R Cluster and Coal Bed Methane. 

The street has already discounted fiscal 2026 earnings, including valuing the new energy business at around $20 billion enterprise value. It faces challenges on account of ban on single use plastics in the medium term, delay in monetisation of energy and telecom assets and hiccups in the execution of new energy investments. The company has again become net debt company and the endeavours could be to return to net debt zero at the earliest.