Reliance Industries share price hits fresh 52-week high on plan to form digital services platform company

Reliance Industries share price hit a fresh 52-week high in trade today amid the conglomerate's plan to create a holding company for its digital platform initiatives. Reliance Industries share price rose 2.91% to Rs 1,475.85 in trade today compared to the previous close of Rs 1,434.10 on BSE. The large cap share opened higher at Rs 1,442.25 on BSE.  

RIL share price has gained 35% during the last year and risen 31.43% since the beginning of this year. Reliance Industries last week said it would set up a new unit to bring all its digital initiatives and apps under a single entity, and infuse Rs 1.08 lakh crore equity into this new unit.

Also read: Reliance Jio net profit rises 45% to Rs 990 crore in Q2 FY20; subscriber base crosses 350 million

The new structure will also create the largest digital services platform company in India. The new entity will continue to work on technologies in areas such as healthcare and education, while also looking at next-gen competencies such as artificial intelligence, Blockchain, virtual and augmented reality, among others.

It will also bring into its fold Reliance's consumer-focused digital offerings such as MyJio, JioTV, JioCinema, JioNews and JioSaavn, while enabling Reliance Jio to become "virtually net debt free" by March 31, 2020 (excluding spectrum liabilities).

"Consolidated debt remains unchanged, but platform apps move onto investor radar, clarity on corporate structure improves and interest capitalization concerns lessen," Morgan Stanley said in a report on Monday.

IIFL Institutional Equities in a recent report said the move, which involves transferring telecom venture Reliance Jio's debt to parent balance sheet, should make digital platform "increasingly attractive to potential strategic investor".

RIL share price has risen 4.3% or 61 points since the conglomerate announced a strong set of earnings in Q2. On October 18, the conglomerate reported a 18.3 per cent year-on-year (YoY) rise in consolidated net profit at Rs 11,262 crore for the second quarter ended September 30, 2019 compared to consolidated net profit of Rs 9,516 crore in the same quarter last year helped by strong performance across all business segments.

As per Bloomberg consensus estimates, RIL was expected to post a 17 per cent jump in its consolidated net profit to Rs 11,158 crore for Q2FY20.

RIL's consolidated net revenue grew by 4.8 per cent to Rs 163,854 crore in July-September quarter of FY20, compared to Rs 1,56,291 crore in the corresponding quarter, driven by robust growth in retail and digital services businesses. During the quarter under review, RIL's profit before tax (PBT) increased by 15.5 per cent to Rs 15,055 crore as against Rs 13,198 crore in quarter ended September 2018.

The company's operating profit (EBITDA) rose by 7.1 per cent YoY to Rs 23,169 crore from Rs 21,641 crore in the corresponding period of the previous year, helped by strong operating performance in retail and digital services business.

After Q2 earnings were announced, brokerage Emkay raised its target price for the stock by 9% to Rs 1,540 and maintained hold position on the stock. Motilal Oswal also reiterated its Buy rating on the company with a revised target price of Rs 1,630.