Reliance Industries hits over 8-year high; m-cap crosses Rs 4 lakh crore

Reliance Industries (RIL) has rallied 6% to Rs 1,255, hitting an over 8-year high on the BSE in early morning trade. The stock is trading at its highest level since May 30, 2008. A sharp rally in stock has seen the market capitalisation of RIL crossing Rs 4 lakh crore.

At 09:55 am; the stock was trading at Rs 1,250, with m-cap of Rs 405,629 crore, the BSE data shows. The company’s m-cap gained by Rs 57,336 crore in past four trading sessions.

Earlier in January 18, 2008, RIL had m-cap of Rs 406,949 crore, the Capitaline data shows. RIL currently stands at number two position in overall m-cap ranking, and is behind the IT major Tata Consultancy Services (TCS) which has m-cap of Rs 488,676 crore.

RIL hit a record high of Rs 1,626 on January 15, 2008 in intra-day trade on BSE. It had highest m-cap of Rs 467,537 on January 14, 2008 on the closing basis.

In past four trading sessions, the stock surged 17% from Rs 1,074 on February 20, after Reliance Jio Infocomm (RJio), a subsidiary of RIL, announced that its tariff plans will become applicable from April 1, 2017. The S&P BSE Sensex was up 1% during the same period.

“A substantial part of the capex programme that RIL had embarked upon in the previous few years are now getting converted into productive assets and that would reflect positively on earnings and cash flows. Due to the capex incurred the non-performance was very evident in the stock price as the free cash flow was not being thrown onto the balance sheet and the same reflected in ROE; being subdued around that 11% mark,” Angel Broking said.

With the telecom vertical revenues expected to flow in the coming year and retention expected to remain high on the subscriber base, telecom earnings are seen compounding over next few years and as large costs have already been incurred, the other elements like depreciation and interest to be paid on it can get gestated as revenues improve with core businesses like refining and petchem expected to perform meaningfully the stock is showing lot of optimism.

Also the stock has underperformed for all these reasons in the past 6 years and as revenue visibility starts becoming more lucid, the hope is that earnings should work for RIL in terms of return ratios improving hereon, according to brokerage firm.