RIL stock jumps 170% in less than 6 months; should you buy? Check Credit Suisse, JP Morgan, CLSA ratings

CLSA said that RIL and Silver Lake deal valuation limits any large near-term upsides for the stock

RIL shares gained 2 per cent from day’s low to Rs 2,332.90 apiece on BSE, a day after the Mukesh Ambani-led firm said it cannot confirm or deny any transaction which may or may not be in the works. These comments were in regards to recent media reports claiming ‘Reliance Industries offers Amazon $20 billion stake in retail arm’. In the previous session, oil-to-telecom conglomerate became the first Indian company to hit a market capitalisation of $200 billion, after it scaled a fresh high of Rs 2,343.90 apiece, surpassing the previous 52-week high of Rs 2198.80 per share. Earlier this week, RIL announced that Silver Lake would invest Rs 7,500 crore in its retail arm Reliance Retail Ventures Ltd (RRVL). Foreign brokerages Credit Suisse and JP Morgan hold ‘neutral’ rating to the stock.

RIL stock price has rallied 170 per cent from its 52-week low of Rs 868 apiece touched in March this year. JP Morgan in its latest research report, struggled to square off a few things among which one is how would the New Commerce Strategy balance Reliance Retail, WhatsApp and a new strategic investor who is already a large e-commerce player in India. The firm has given a target price of Rs 2,060 apiece, a downside of 11 per cent from the previous close.

Reliance Industries shares were continuously moving between gains and losses. At 11 AM, RIL shares were trading 0.14 per cent up at Rs 2,318 apiece, as compared to a 0.13 per cent rise in S&P BSE Sensex. JP Morgan also raised concerns on if as much as 40 per cent stake is sold to a strategic partner, assuming RIL would like to retain a similar or higher stake, what would be the implication for any future IPO plans.

In a separate development, Reliance Industries informed that Alok Industries has alloted 115 crore equity shares of the face value of Re 1 each, fully paid up, to RIL, pursuant to the conversion of debt. It has also allotted 160 crore equity shares of the face value of Re 1 each, fully paid up, to JMFARC, pursuant to the conversion of debt. Foreign brokerage Credit Suisse believes that induction of financial investors into the retail segment is earlier than expected as e-commerce operations in food and grocery started 4-5 months back and extension to consumer electronics, apparels and footwear is scheduled to commence in the current month. The brokerage firm has pegged a target price of Rs 1,930, a downside of over 16 per cent.

On the other hand, CLSA has given an ‘outperform’ rating to the stock. It said that RIL and Silver Lake deal valuation limits any large near-term upsides for the stock. “Unlike, Jio Platform deals, this doesn’t bring in a new marquee strategic player and the fact that debt is no more concern may also limit positive surprises,” it said. RIL has also largely exhausted its large near-term inorganic triggers even as organic earnings may struggle to deliver any big surprises in the current environment.