Buy Reliance Industries Ltd for the Target Rs. 1,555 By Prabhudas Liladhar Capital Ltd
AGM Highlights- Transitioning into tech-driven company
Quick Pointers:
* Aims to list Jio in H1CY26, subject to necessary approvals
* A new wholly owned subsidiary, Reliance Intelligence to focus on AI initiatives
Reliance Industries’ (RIL) 48th AGM gave further fillip to its journey towards a tech-driven entity focusing on New Energy and AI. For the first time, a clear timeline has been provided for listing of Jio- in H1CY26. It has also announced formation of a new subsidiary- Reliance Intelligence which would house its initiatives on AI front. The focus on hydrocarbon segment also continues with earlier announced investments of Rs750bn in 1.2mmtpa PVC plant at Nagothane, expanded cPVC and 3mmtpa PTA plant at Dahej and 1mmtpa specialty polyester at Palghar.
Digital services: The company highlighted how it has crossed 500mn customers and has emerged as the world’s largest wireless data carrier. The next leg of growth is expected from building simple, scalable and secure platforms for MSMEs and enterprises. In addition to the earlier announced Jio AI Cloud, the company announced two new features this AGM- Jio PC and Jio Frames. The first enables converting any TV or screen into AI-ready computer by plugging a keyboard into Jio Set-Top Box. The latter is an AI powered wearable platform and ecosystem and enables clicking photos and recording videos. It aims to list Jio in H1CY26 subject to necessary approvals.
Reliance Intelligence: This is a new wholly owned subsidiary launched to house the company’s AI initiatives. The aim is to build gigawatt-scale AI ready data centres at Jamnagar, powered by green energy. It will also develop AI solutions for consumers, small businesses and enterprises and solutions for sectors like agriculture, healthcare and education. It aims to focus on robotics to develop adaptive production systems, autonomous supply chains and precision care. It has partnered with Google to transform its businesses through AI. It has entered into a JV with Meta to deliver AI solutions using Meta’s Llama platform.
Retail: It aims to open 2,000-3,000 retail outlets every year. RCPL is expected to become a direct subsidiary of RIL and will house all consumer brands under one roof. The company aims to ramp-up sales from Rs115bn in FY25 to Rs1tr within five years. Retail segment is expected to grow at a CAGR of 20% for next three years.
Hydrocarbons: Over past three years, the company has saved 10mn gigajoules in energy savings through its efficiency programmes. The company is investing Rs750bn on its 1.2mmtpa PVC plant at Nagothane, expanded cPVC and 3mmtpa PTA plant at Dahej and 1mmtpa specialty polyester plant at Palghar. Hazira carbon fibre capacity will cater to demand from aerospace, defence and advanced materials segments.
New Energy: The company has successfully produced first 200MW of HJT modules with 10% higher yield, 20% better temperature performance and 25% lower degradation. It would be expanded to 10GWp of fully integrated annual solar PV manufacturing capacity and subsequently to 20GWp. Battery gigafactory is expected to commence operations in 2026 with 40GWh capacity and will be ramped up to 100GWh subsequently. Electrolyzer facility is also expected to be operational by 2026-end scalable to 3GW/yr. At Kutch, it is developing 5,50,000acres where at peak, 55MW of solar modules and 150MWh of battery containers would be deployed every year. Green H2 capacity would be ramped up to 3mmtpa by 2032. It is also building 55 CBG plants this year with total capacity of 0.5mmtpa. This will be expanded to 500+ plants by 2030.
Valuation and recommendation: The company has successfully demonstrated its ability to execute large scale unrelated diversifications through its foray into retail as well as digital services in the past. Since 2021, it has been working on its New Energy segment where it has also partnered with several technology companies. In absence of further details, we have valued its New Energy segment at 2x its stated capex of Rs750bn, valuing it at Rs111/share. However, New Energy segment faces 1) overcapacity and ability of the Chinese to crash prices, 2) rapid changes in technologies, 3) tight control of Chinese over the supply-chain, and 4) lack of ecosystem in the country. We have also highlighted in our thematic note the difficulties faced by non-Chinese companies in this segment, which has seen ten large size bankruptcies in 2024 alone. We use SOTP to value the company at Rs1,555 (unchanged). The stock has corrected by 7% since our last note. Due to the same, we upgrade the stock to BUY from Accumulate.
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