In the last 5 years, shares of have more than doubled in value, but the foreign ownership in India’s largest company by market capitalization is the lowest in at least 5 years.
As of December 2022, the total FII ownership in the index heavyweight stood at 23.48%, and for six quarters in a row, this investor community has reduced its holdings.
The total holdings of FIIs are down to 23.48% at the end of December from 25.41% in September 2021, data from Ace Equity showed.
If one looks at the stock performance in 2022,
gave nearly 8% returns to shareholders compared with Nifty 50 that gave a little over 4%.
But in 2023 so far, the stock has been one of the major laggards in Nifty50, shedding close to 10%, and underperforming the index by a wide margin.
RIL’s share performance was marred since the second half of 2022 when the government imposed additional tax on the windfall gains made by oil producers and exporters from the high crude oil prices.
Russia’s invasion of Ukraine in March 2022 pushed crude oil prices to multi-year highs and boosted earnings of RIL and other producers such as Oil and Natural Gas Corp, and Oil India.
The government has been reviewing the taxes every fortnight based on the trend in global crude oil prices.
This has been a major overhang on the oil-to-chemicals (O2C) business, which makes for more than 65% of RIL’s consolidated topline.
More than on domestic crude, the taxes on exports of fuel products hurts the conglomerate, as they make more than 50% of the total O2C revenue.
This has triggered earnings downgrades for the company in the last few quarters.
Over the past 6 months,volatility in energy markets, investments in 5G telecom services, absence of tariff hikes and higher global rates have driven a 6% cut in consensus estimates for RIL, reversing the trend of upgrades seen in the first half of 2022.
Morgan Stanley believes that improvement in the energy business is key to raising investor confidence in RIL’s earnings and stock.
The key catalysts to earnings upgrade for RIL will be recovery in demand in China, upcycle in the refining business, unwinding of windfall gains tax, and higher domestic gas production, Morgan Stanley said.
Another American investment bank, JPMorgan Chase, last month cut down earnings estimates for RIL for FY24, and is of the view that value creation in the recently forayed financial services will be the primary driver of returns in the stock in 2023.
While the majority of analysts have a “buy” rating on RIL stock, they see no firecrackers for the stakeholders of Mukesh Ambani’s crown jewel in the foreseeable future.
(Data inputs from Ritesh Presswala)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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