RIL dips 3% post Q4 nos; Silver Lake to invest Rs 5,656 cr in Jio Platforms

Shares of Reliance Industries (RIL) dipped 3 per cent to Rs 1,420 on the BSE in the early morning trade on Monday after the company reported a 33.5 per cent decline in its consolidated profit before tax (PBT) at Rs 9,223 crore for the quarter ended March 2020 (Q4FY20) due to pressure in its petrochemicals business, higher expenses and exceptional items.

Meanwhile, RIL on Monday announced that Silver Lake will invest Rs 5,656 crore in Jio Platforms, a wholly-owned subsidiary of the company. This investment values Jio Platforms at an equity value of Rs 4.90 trillion and an enterprise value of Rs 5.15 trillion and represents a 12.5 per cent premium to the equity valuation of the Facebook investment announced on April 22, 2020. READ ABOUT IT HERE

At 09:19 am, RIL traded 2 per cent lower at Rs 1,440 on the BSE, against 4.3 per cent decline in the S&P BSE Sensex.

In the past one month, RIL has rallied 42 per cent, as compared to a 18.6 per cent rise in the benchmark index till Thursday.

In Q4FY20, RIL’s net profit attributable to the owners of the company, after exceptional items was 38.7 per cent lower at Rs 6,348 crore from Rs 10,362 crore in the quarter ending March 2019. The company incurred a one-time loss of Rs 4,245 due to the Covid-19 pandemic induced lockdown and inventory losses because of fluctuations in the global oil prices.

The fall in net profit is its biggest-ever since June 2014 quarter, when RIL started declaring consolidated numbers. The last time its profit fell sharply (by 23.2 per cent) was in September 2016 quarter.

Consolidated net sales for the quarter under review was at Rs 1.36 trillion, 2.4 per cent lower from Rs 1.39 trillion reported in the corresponding quarter a year back.

“RJio’s Q4FY20 operating performance was weak led by modest 1.7 per cent quarter-on-quarter average revenue per user (ARPU) growth. This is despite 30-40 per cent headline tariff increase in Q3FY20. While operating performance was weak, strategic partnership with Facebook and its investments of Rs 43,500 crore for 10 per cent equity stake in Jio Platforms (JPL, RJIL’s Parent) is positive,” analyst at Dolat Capital said in a result update.

Analysts at IDBI Capital have cut earnings pers share (EPS) estimates by 13 per cent and 5 per cent, respectively for FY21E/FY22E owing to lower tariff hike and lower Retail profits impacted by Covid-19 pandemic; as lockdown will not be in FY22.  The brokerage firm has lowered its target price to Rs 1,528 (Rs 1,586 earlier) and downgraded the stock to HOLD from BUY due to limited upside potential from the current level. READ MORE HERE

Further, RIL also announced a rights Issue priced at Rs 1,257 per share at a ratio of 1:15 shares held that would raise Rs 53,125 crore and keep net debt/EBITDA ratio at comfortable level of less than 3 times. Promoter commitment to take entitlement and all unsubscribed portion would provide confidence to investors about value creation.

“RIL is moving quickly to realize its plan of becoming net debt free by end-FY21. The company is now poised to receive Rs 1.04 trillion through rights issue, the Facebook-Jio deal and the Fuel retailing JV with BP in the coming quarters,” Motilal Oswal Securities said in a results update.

“The contribution from standalone business to consolidated EBITDA has declined to 60 per cent in FY20 from 85 per cent in FY15. Higher debt in the standalone business as well as better valuations for Tech/Consumer businesses (together account for 78 per cent of valuations) leads us to believe these two segments are the new core”, it added.