Reliance Industries (RIL) on Tuesday got an upside of over 25 per cent and gained 2 per cent as Goldman Sachs hiked the target price from Rs 960 to Rs 1,205. Goldman Sachs said in a statement that RIL provided the best large-cap downstream energy exposure in Asia, and that the company's operating income could double to $14 billion in March 2020.
The research firm said that besides good stock, volume-led growth with capex cycle completion, refining margins to outperform peers and telecom business would contribute positively, reported Moneycontrol. The report highlighted that over the medium petchem could drive growth, while refining earnings would remain stable. RIL's latest venture, Jio, could reach operating income of over $5 billion by March 2025 but would start contributing from the next financial year, said the report. With capex intensity declining, it expects free cash flow to turn positive after five years with a yield of 6 per cent in the next financial year.
Two days after the global credit rating agency, Moody, raised India's sovereign ratings, the company on Tuesday raised $800 million by selling 10-year bonds. The company said: "The bonds priced at 3.66 per cent were the lowest coupon ever achieved by an Indian corporate for a 10-year issuance."
It can be noted that for the September quarter, RIL, which has a market capitalisation of close to Rs 6 trillion, had a cash pile of Rs 77,014 crore and a debt of Rs 2,14,145 crore, up from Rs 1,96,601 crore in the previous quarter. The Mukesh Ambani-led RIL has been borrowing heavily for expansion and entry into telecom space with Reliance Jio into which it has invested over Rs 1.4 trillion. That apart it has also pumped in over Rs 1 trillion into its core refining and petrochemicals expansion which is now completed.
Moody's also gave Baa2 rating to the proposed unsecured bond sale by RIL. The bonds will rank pari passu with RILs other existing and future unsecured and unsubordinated obligations, it said assigning the Baar rating. "The Baa2 rating reflects RILs ability to generate operating cash flows, with annual Ebitda of over USD 10 billion from its large-scale integrated refining and petrochemical operations that generate strong margins, and its nascent but growing digital services business," said Vikas Halan, a vice-president and senior credit officer at Moody's. The rating also incorporates the increase in RILs business risk because of its growing digital services business and our expectation that high cash outflow for capital spending will keep its free cash flow negative over at least next 18 months", added Halan, who is also Moody's lead analyst for RIL.