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Reliance Industries down 4%; analysts say earnings, valuation outlook intact

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Shares of Reliance Industries Ltd (RIL) dropped over 4 percent on Monday after the conglomerate announced that it had decided to re-evaluate the deal under which Saudi Aramco was to invest roughly $15 billion investment in its oil-to-chemicals (O2C) business. Analysts maintain that any weakness in the RIL stock will be temporary and brokerages revised target price.

Reliance Industries down 4%; analysts say earnings, valuation outlook intact
Shares of Reliance Industries Ltd (RIL) dropped over 4 percent on Monday after the conglomerate announced that it had decided to re-evaluate the deal under which Saudi Aramco was to invest roughly $15 billion investment in its oil-to-chemicals (O2C) business. The 20 percent stake sale in the unit was announced in 2019 but was delayed as oil prices and demand crashed last year due to the pandemic.
Analysts maintain that any weakness in the stock will be temporary and brokerages revised target price. With a buy call, Jefferies revised the target price on RIL to Rs 2,880 from an earlier Rs 3000 per share. It said cancellation has no bearing on RIL's balancesheet, which has benign leverage.
JP Morgan maintained a neutral call on the stock at a target price of Rs 2,575 apiece while saying that the development will have limited financial impact. A significant de-leveraging is already achieved by RIL, it added.
Nomura too has a neutral call with a target of Rs 2,850 per share. The Japanese brokerage house said debt is not a concern anymore and the focus is on the new energy. The development is unlikely to affect the valuation of the company's O2C business and the outlook remains strong for each segment for H2FY22.
Speaking on CNBC-TV18 on Monday, IIFL's Harshvardhan Dole said that sentimentally, the development is negative, but it does not change earnings or valuation outlook for Reliance Industries’ O2C business.
Dole said that the state of RIL’s balance sheet was very different now following the series of fundraises over the last one year.
At 09.49 am, the stock quoted at Rs 2,398.80, still down around 3 percent.
The RIL stock price touched an intra-day low of Rs 2,370 in early deals on NSE, after opening at Rs 2,436.10. It hit the day's high of Rs 2,449.
Note To Readers

Disclosure: Network18, the parent company of CNBCTV18.com, is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.

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