Reliance shareholders face first negative returns in 10 years
Mukesh Ambani-led Reliance Industries Limited (RIL) is on course to end 2024 with negative returns for the first time in a decade. The company's market capitalization has eroded by over ₹4.4 lakh crore since its July peak as RIL shares have plummeted nearly 21% from their peak of ₹1,608.95. The decline comes after a strong growth phase, including a 70.55% return in 2017 and steady growth till 2020.
Factors contributing to RIL's market decline
The return on RIL shares dropped to 19.32% in 2021, 7.60% in 2022, and 1.44% in 2023. This year, the bellwether stock is on track for its first annual decline since 2014. The decline in RIL's market performance can be attributed to slowing growth, rising costs, and increased competition. Analysts have identified slower growth, newer competitors in retail space, and escalating real estate costs as major challenges for the company.
Reliance Retail faces weak demand and competition
Reliance Retail (RR) has struggled with weak demand, particularly in fashion, and headwinds from operating in a high-base environment from last year. The company shut 1,185 stores amid sluggish revenue growth despite higher footfalls. However, Jefferies remains positive on RR given its scale and industry leadership.
JPMorgan suggests potential drivers for RIL's stock gains
JPMorgan also highlights RIL's fair relative valuations and suggests that stronger refining margins or higher retail valuations could drive stock gains. Despite negative free cash flow due to telecom spending, RIL is expected to generate positive free cash flow moving forward. Ambani targets a 2025 listing for Jio, which analysts value at over $100 billion. The retail unit's IPO will follow after overcoming internal business challenges post-2025.
Ambani's net worth drops amid RIL's market challenges
Ambani's net worth fell from $120.8 billion in July to $96.7 billion on December 13. Ambani is eyeing digital platforms, retail brands, and renewable energy for future growth. Elon Musk's Starlink's potential entry into India's satellite broadband market threatens Jio Platforms's growth. Reliance has also forged a joint venture with Walt Disney for an $8.5 billion media giant targeting India's streaming market.
