Blue chip stock jumps 4% after plans of demerger; Analyst expect huge upside in it

Reliance Industries Ltd (RIL) shares jumped around 4 percent today and currently trades at a price of Rs 2,323. After some bearish sessions and hitting its 52-week low figures, finally, the stock witnessed an up movement of around 6.5 percent from those levels. 

One of the probable reasons for such a movement in the company’s stock is the initiation of demerger process of its financial services business. A meeting of the creditors and shareholders will be held at the start of May to consider and approve the proposed scheme of arrangement between RIL and Reliance Strategic Investments (RSIL). After the demerger, the name of Reliance Strategic Investments will be changed to ‘Jio Financial Services Limited’. 

JM Financial has given a ‘Buy’ rating to the company with a target price of Rs 2,900 which is an upside of around 24 percent as compared to the current levels.

Reliance Industries Ltd, headquartered in Mumbai, Maharashtra, is engaged in the business of hydrocarbon exploration and production, refining and marketing, petrochemicals, financial services, retail, etc. The Group has five principal operating and reporting segments: Oil To Chemicals (O2C), Oil and Gas, Retail, Digital Services, and Financial Services. 

It also commercializes petrochemical products including aromatics, elastomers, and polyesters. In addition to the same, the company also provides telecommunication, broadband internet, security, and other digital services. 

The financials represent a contrasting picture as far as the revenues and net profit figures are concerned. Revenues have moved down from around Rs 2.33 lakh crores in Q2 to Rs 2.21 lakh crores in Q3. Net profits, on the other side, increased from around Rs 15,600 crores in Q2 to Rs 17,700 crores in Q3. 

The profitability ratio such as the ROE has seen a reduction from 9.6 percent during FY20-21 to 9.39 percent in FY21-22. Another parameter being the ROCE has moved up from 8.76 percent in FY20-21 to 9.86 percent in FY21-22. 

The debt to equity ratio of the company has observed a favorable movement from 0.38 in FY20-21 to 0.34 in FY21-22. 

Written by Amit Madnani

Disclaimer

The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.