There is nothing to worry about Reliance Industries despite an 8 per cent intraday drop in its share price on Friday, according to market analysts. Shares of the company came under pressure on July 1 after the government imposed taxes on the export of petrol, diesel and jet fuel (ATF) shipped overseas by Indian firms.
The government levied a tax of Rs 6 per litre on exports of petrol and aviation turbine fuel and Rs 13 per litre on exports of diesel. The step is aimed at meeting the demand of the domestic market.
AK Prabhakar, head of research, IDBI Capital Market said, “Investors should wait for a while before investing in Reliance Industries shares right now. There may be another 5 per cent fall pending in the scrip.” At the same time, he added that the level of Rs 2,200 is a good value for buying RIL shares.
“RIL will benefit even after paying taxes. It will take a hit on margins. However, gross refining margins are very high at present as they are importing from Russia at a discounted price and exporting at a premium. The company may see windfall profit in the upcoming quarterly results,” he added.
The energy-to-telecom behemoth traded Rs 213 down at Rs 2,381 in the afternoon trade at around 2.45 pm (IST). Reliance Industries reported a consolidated EBITDA of Rs 14,241 crore in Q4 from oil to chemical business against a total EBITDA of Rs 33,493 crore, indicating a contribution of over 42 per cent from the segment.
The oil to chemicals business includes refining, petrochemicals, fuel retailing through Reliance BP Mobility Limited, aviation fuel and bulk wholesale marketing.
Sanjeev Hota, head of research, Sharekhan said, “Friday’s fall creates a good entry point for investors. I think the total impact on EBITDA will be around Rs 24,000 crore annually. I don’t see any cut in earnings estimates for Reliance Industries due to robust GRMs. The scrip will bounce back soon.”
Santosh Meena, head of research, Swastika Investmart said, “Reliance was firing on all cylinders but now there is a break in its refinery business as the commodity cycle is also reversing however other verticals have strong growth potential. Some investors will look for buying opportunities in this correction ahead of AGM expected in July end because there is a buzz of some major announcements especially a path for separate listing of Jio and Retail businesses.”
“Technically, investors should watch out Rs 2,400-2,350 demand zone because if it manages to hold this area then we can expect a recovery while if it slips below the Rs 2,350 level then it may head towards the Rs 2,200 level. On the upside, Rs 2,600 is a critical hurdle. Above this, we can expect a fresh expansion phase,” he added.
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