RIL scrip peaks before demerger

Share touches lifetime high of Rs 937.50 on eve of special trade session.

Spurred by expectations of "unlocking" value ahead of the Reliance de-merger tomorrow, the Reliance Industries stock witnessed a lifetime high of Rs 937.50 in late trading today, up 6.36 per cent from its previous close of Rs 872.95 on the National Stock Exchange. Short-covering by several investors also caused the stock price to rise.

Tomorrow, the stock will be listed for a special trading session between 8 am and 9 am.

The volume weighted average price of RIL during this session will be used for adjustments to the base market capitalisation of respective indices. The company's present market capitalisation is around Rs 1,21,667 crore.

"Even the most conservative estimate of the different components of the stock today is Rs 1,000, owing to the increased focus it is likely to bring on each individual company," pointed out a broker.

The consensus sum-of-parts valuation of the company stands at around Rs 1,100. Most analysts said the stripped-down version of the stock was expected to lose around Rs 200 tomorrow and was likely to settle in the Rs 700-750 band as an oil and petrochemicals scrip.

Analysts are bullish about the prospects of the new stand-alone company.

"There was significant valuation discount in the merged entity due to unrelated diversification," pointed out one, "and this will be gone once they are separated."

Most, therefore, expect the scrip to move down only by around 20 to 25 per cent on the bourses. The increased valuation for the component companies today saw the stock going through the roof, both in value and volumes.

While it ended at Rs 928.15 on the Bombay Stock Exchange, it scaled a new peak on the NSE at Rs 937.50. Nearly 45 million stocks of Reliance changed hands on the NSE while the BSE saw another 15.7 million transactions.

Motilal Oswal's Vice-President, Equity Strategy, Manish Sonthalia said, going forward, the positive triggers for Reliance Industries included upsides like gas discoveries in the Krishna-Godavari basin and in the Mahanadi basin.

Moreover, the petrochemical cycle, which will continue for another 18-24 months, is another positive. Motilal Oswal had valued the combined entity, including the businesses of Reliance Energy Ventures, Global Fuel Management Services, Reliance Capital Ventures and Reliance Communication Ventures, at Rs 991.

It values the new stand-alone business of Reliance Industries at Rs 740, while the four new entities are valued at about Rs 250. Sonthalia expects Reliance Industries to open in the range of Rs 700-710.

Sushil Finance Consultants Vice-President-Institutional Sales Devan Shah expects Reliance Industries to list in the range of Rs 650-750 tomorrow.

The Reliance de-merger has been the most significant corporate event in the past year. The Reliance stock went through a major turmoil after the Ambani brothers fought over ownership issues.

But the stock has been an outperformer after the group came out with an amicable solution for the warring brothers by de-merging its various businesses.