RIL shares dive 3% ahead of Q1 results; here’s why

Snapping four sessions losing streak, shares of Reliance Industries (RIL) tumbled over 3% in intraday trade on Friday as investors resorted to profit booking ahead of first quarter earnings report slated to be released post market-hours today. On Thursday, Reliance shares ended 1.6% higher at ₹2,620 on NSE after the new share price of RIL ex-JFSL was fixed at ₹2,580 in the special pre-opening session. However, as compared to Wednesday's closing price of ₹2,841.85, the country’s most valued stock settled 7.8% lower.

Early today, RIL shares opened marginally lower at ₹2,609 against the previous closing price of ₹2,619.85 on the NSE. On the BSE, the index heavyweight opened a tad lower at ₹2,603 compared to previous closing price of ₹2,619.80. The share price of the oil-to-telecom conglomerate declined as much as 3.24% to hit an intraday low of ₹2,535, while the market capitalisation (m-cap) dropped to ₹17.14 lakh crore.

Earlier this week, the RIL share price touched a fresh all-time high of ₹2,635.17 on July 19 and its m-cap crossed ₹19 lakh crore, driven by the demerger of its financial services arm, Jio Financial Services (JFSL). The stock hit its 52-week low of ₹2,012.14 on March 20, 2023. At the current price level, the stock trades 26% higher than its 52-week low and 4% lower than its record high level.

RIL shares were hammered today as investors turned jittery ahead of June quarter earnings, which will come a day after the split-off of JFSL as a separate entity. Billionaire Mukesh Ambani-led conglomerate is expected to report muted earnings in the first quarter of FY24 due to decline in its oil-to-chemical (O2C) business, as per analysts.

Foreign brokerage Morgan Stanley expects RIL’s EBITDA and net profit to fall by 0.5% and 19% QoQ, respectively. Oil to Chemicals EBITDA is expecetd to drop by 4% QoQ, despite the sharp correction in refining margins. The telecom arm, Jio is projected to report flattish EBITDA margins and average revenue per user (ARPU) QoQ at ₹180, with net addition of 8 million subscribers. 

Reliance’s consolidated net sales are likely to be at ₹2.14 lakh crore and net profit is estimated at ₹16,995.50 crore, according to Bloomberg survey of brokerages.

On Thursday, the demerger of Jio Financial Services from RIL took place and JFSL shares were temporarily listed on the bourses at a discovery price of ₹261.85 per share after the special pre-opening session on the NSE. The discovery price of JFSL was much higher than analysts’ estimate of ₹160-190 per share. Axis Securities has pegged JFSL price at ₹160 apiece, while Motilal Oswal at ₹190 per share. Nuvama Institutional Equities has estimated the listing at ₹168, while Jefferies and JPMorgan at ₹179 and ₹189, respectively.  

JFSL has been temporarily added to all the NSE and BSE Indices at a constant price till the listing date is announced. It has been added as a 51st constituent in Nifty50 and 31st constituent in Sensex. The stock will be considered in weight calculations of indices on a daily basis. It will be removed from all the indices three days after JFSL listing on the stock exchanges. 

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