The market didn’t seem impressed with the big-bang announcements at RIL’s AGM — including roping in Google as yet another marquee investor in Jio Platforms, the company’s plans to launch 5G tech, and its re-iteration of having become net debt-free ahead of timeline. The RIL stock, at one point, was down almost 6 per cent and ended the day about 4 per cent lower than the previous close.

There seem to be a few reasons for the market’s disappointment. One, the RIL stock has had a stupendous run over the past few months and seems priced-to-perfection, with no room for disappointments — real or perceived. From its peak of ₹1,610 in mid-December 2019, the RIL stock had crashed to ₹884 on March 23 this year. But since then, the stock more than doubled to over ₹1,900, thanks to its rapid, mega stake sale deals in Jio Platforms and the big-ticket rights issue.

This massive rally, coupled with the dip in reported earnings in the March 2020 quarter, saw the stock’s valuation (trailing 12-month price-to-earnings) shoot up to about 30 times, compared with its three-year average of about 19 times. Even adjusted for exceptional items in the March 2020 quarter, such as inventory write-down due to the oil and petro-products price crash, the stock’s valuation had risen to about 27 times, far higher than what it has traded in the past. The market already seems to be assigning to RIL the lofty valuations of global tech majors, in the hope that Jio Platforms, after its fund-raising blitz, will launch its initial public offer (IPO) at top-dollar valuation and list on global exchanges such as the Nasdaq.

No word on...

That there was no announcement or hint in the AGM about such value unlocking in Jio Platforms seems to have been a dampener for the RIL stock. Also, there was no announcement about RIL’s possible acquisition of Future Retail, speculation about which have been flowing thick and fast over the past few weeks. Besides, there was no word about the roadmap to list Reliance Retail.

Also, Mukesh Ambani acknowledged the delay in the proposed $15 billion (about ₹1-lakh crore) stake sale deal of 20 per cent in RIL’s oil-to-chemicals business to Saudi Aramco, that was announced last year. Whether the deal finally goes through or not needs to be seen, given the crash in oil prices and the Covid-19 pandemic that has harmed Saudi Aramco’s finances badly. Whether RIL will be able to rope in other investors in this business needs to be seen, given the difficult conditions in the oil sector.

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The gameplan for ‘financial services’ that RIL identified as a separate business segment from the March 2020 quarter, was not laid out in the AGM.

Finally, investors expecting a bonus ‘reward’, given the sharp run-up in the stock price did not get one. That may have added to the disappointment.

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