Reliance Stocks Look Attractive After Recent Correction

The 7% price correction in Reliance IndustriesBSE -0.44 % over the past few weeks has rekindled local investor flavour in the counter, thanks to a favourable risk-reward ratio — RIL’s stock currently trades below its ten-year average EV/EBITDA multiple of 9.1 times.

Despite concerns over the impact of the company’s telecom venture on consolidated revenues going forward, foreign investors too, evinced interest in the stock at a recent meeting organised by an MNC broker in Singapore. Their focus rested instead on gauging parameters that could allay their concerns over Reliance Jio.

The company’s core refining and petrochemical business may drive the turnaround of its earnings trajectory which could offset the medium-term pressure on consolidated earnings due to expenses of its telecom venture — Reliance Jio.

The market fear seems to be priced in as the Street ascribes a negative value of nearly $6 billion for the telecom venture in which company will be investing nearly $22 billion — possibly the single biggest outlay made by any Indian corporate.Some analysts are factoring in a 15-25% cut in their consolidated earnings projection for FY17 and FY18 due to higher expenses after the commercial launch of Jio.

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