The street clearly seems to be upset with Reliance Industries Ltd's (RIL) stock performance over the last 12-18 months.
Many brokerages are of the opinion that the energy bellwether needs to be radically different in its approach to business so that it remains the numero uno market mover.
Experts said that the market cannot be leaderless and RIL would continue to be the leader unless another leader comes.
“The leader has to be one which is dynamic and is able to outperform the market even in bad times,” said Mr Arun Kejriwal, Founder, KRIS research.
Challenges
“Unfortunately RIL hasn't been able to do so, at least in the last 12-18 months. The market is looking out for a new leader and even though there are some names cropping up, none of them have been performing consistently to be called numero uno .”
A Kotak Institutional Equities report said that RIL has two challenges to overcome — size and success.
It also said that de-rating may continue if the company failed to utilise cash for its next leg of growth.
The brokerage also pointed out that improved corporate governance practices such as better and consistent disclosures on sales volumes, realisations, margins and capex could be one way of reversing RIL's ongoing de-rating and help investors take a more informed view of the company.
Credit Suisse also maintained the same stance saying that the company needed to spend its free cash flow for sharper long term stock growth though the brokerage maintained an outperformer rating on the stock.
Downgraded
HSBC Global Research, meanwhile, downgraded the stock to neutral on concerns of CBI investigating possible dealing between Indian energy companies and the Oil Ministry. This could result in a freezing of bureaucratic decision making and hamper RIL's ability to carry out E&P activities effectively in its blocks said the report.
Market experts are surprised at RIL's unwillingness to take risk going forward.
“It is serious if India's biggest company wants to repay debt and not utilise cash to grow as it speaks of the environment we are in,” said the Head of Institutional research at an Indian Brokerage. “This could just be RIL's response to the environment.”
On Friday, RIL lost 2.21 per cent over its previous close, to close at Rs 868.4 on the BSE.