InvestorQ : Why did the stock of Reliance Industries correct so sharply on 02 November and do you see the stock bouncing back?
Mitali Bhutta made post

Why did the stock of Reliance Industries correct so sharply on 02 November and do you see the stock bouncing back?

Answer
image
3 weeks ago
Follow

On 02 November, the stock of Reliance Industries cracked by 9% the day after it started trading post results. The quarter had seen RIL profits lower by 15% on a yoy basis due to lower gross refining margins and lower crude prices.

On Monday, Reliance lost close to Rs.120,000 crore in market cap in a single day and that is about $16 billion of value wiped out in a single day. That would have also depleted the Ambani family wealth by $8 billion, but that is a different matter altogether.

While the digital and retail business continued to be robust, the core oil and chemicals business slumped on low oil prices. Since refining traditionally contributed the most to the cash pile of the company, it really had a huge impact on the numbers.

However, most analysts appear to have missed out on a very important aspect of the results. Actually, the results are very significant in the sense that the underlying shift in Reliance is now becoming clearer. There has been all the talk about the digital future.

The second largest contributor to top line comes from retail after refining. In the Sep-20 quarter, the biggest contributor to EBITDA was the digital division, accounting for 40% of the total EBITDA of Reliance Industries following by petchem. That shift is something to celebrate.

0 Views