ET Now: Just about two weeks ago we had a slew of brokerage houses that were actually very worried about the fact that the debt had ballooned on RIL but Mukesh Ambani has been very swift in rectifying that fear as well or addressing that concern as well by giving a very ambitious debt reduction plan.
Firstly, what do you think RIL could do from here on, what it could not do? Is that plan a bit too ambitious? Also, the stock is at Rs 1200, do you believe that there is room for further upmove?
From an analysis perspective, without giving a buy or sell recommendation on the stock, what I would say is that Reliance apart from its traditional refinery petchem business has got two huge levers now going for it — the telecom and the consumption. These two themes are global themes, plus in India the consumption theme is massive and it is a theme which will play out in the years to come making India one of the top three markets after the US and China in terms of consumption and Reliance is positioning itself fairly well. Already Reliance is the biggest retailer in the country and now it is going for an e-commerce play. It has de-risked on the petchem side by signing with Aramco and with BP on the gas exploration part.
This was a very well thought out presentation and where they are coming from, they are much better allocators of capital than most of the Street; why not that company should be leveraged is what I would look at. They have been very efficient allocators and they have created value for investors in the past. The brokerage reports that pointed out that the net debt is getting too high was addressed. So overall, what I would say is it is a well-positioned company. If you are investing in India, you have to have a position in Reliance. Also, within five years there would be a listing for the retail play and the telecom play and thus a lot of drivers for the stock overall. Again, by compliance I am not allowed to give a buy or sell, I am just stating the facts as I interpret them.
ET Now: We are finished with the first-quarter earnings season. Did it meet your expectations and any disappointments that you would like to flag off?
Both sales and earnings were below par. If you take out the financials, then the numbers are pretty poor.
Overall, it has been a subdued quarter, we expect the next quarter to be bad too. The smart money has started taking positions already. The question is — do you wait for October second-third week when the poor results of this quarter get discounted and the management guidance comes for the rest of the year or do you start buying now?. The smart money — the institutional money — has started pecking in, so I would say it is up to an individual allocator what they want to do but my vote will be for caution.
What will append this argument is if the government of India comes out with a stimulus plan. The market has ended today with a lot of hope that with the prime minister meeting the FM yesterday there is a lot of hope that even on this weekend or in the near future you will get a stimulus that then changes this analysis and then probably this week was a good time to buy. You can wait out if that stimulus does not come through and even if it comes through you will get enough opportunities. I would still wait, I am not an institutional investor and I would say this still is a cautious time given the global scenario, given how the domestic economy is faring and given the lack of corporate earnings growth that we have seen in quarter one.
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