RIL shares up over 3% after Morgan Stanley report; market-cap rises by Rs 25,305 cr

  • During the day, RIL shares jumped 4.83 percent to Rs 1,298.55

  • The company's market valuation jumped Rs 25,304.6 crore to Rs 8,10,488.60 crore on the BSE

  • RIL's earnings growth is starting to be de-risked, amid improving earnings growth clarity, better refining margins, lower tax rate, and cheaper gas feedstock costs, global brokerage Morgan Stanley said

New Delhi: Shares of Reliance Industries surged over 3 percent on Tuesday after global brokerage firm Morgan Stanley said lower taxes and cheaper gas feed costs should de-risk outlook and boost earnings.

The scrip gained 3.22 percent to close at Rs 1,278.55 apiece on the BSE. During the day, it jumped 4.83 percent to Rs 1,298.55.

At the NSE, it rose by 3.09 percent to close at Rs 1,277.50.

The company's market valuation jumped Rs 25,304.6 crore to Rs 8,10,488.60 crore on the BSE.

 RIL shares up over 3% after Morgan Stanley report; market-cap rises by Rs 25,305 cr

Representational image. Reuters.

In terms of traded volume, 9.61 lakh shares were traded on the BSE and over 1.6 crore shares at the NSE.

Reliance Industries' earnings growth is starting to be de-risked, amid improving earnings growth clarity, better refining margins, lower tax rate, and cheaper gas feedstock costs, global brokerage Morgan Stanley said, noting that company's tax liability will reduce by 4 percentage points following cut in the corporate tax rate.

The brokerage went on to list the reasons for its assessment -- rise in refining margins with improved demand and slower capacity growth; cheaper gas costs and improved margins from a slowdown in petrochemical capacity growth in 2020, in particular for polyethylene, supporting the rise in chemical margins; and telecom subscriber addition remain steady.

On the impact of last week's announcement of a reduction in the corporate tax rate, Morgan Stanley said: "We estimate a 400 basis point reduction in the consolidated tax rate RIL's businesses paid in F2019 of 29-35 percent, much higher than the new corporate tax rate of 25.2 percent.

"We turn more bullish on RIL as earnings growth clarity improves with better refining margins, lower tax rate, and cheaper gas feedstock costs. This, combined with a reduction of balance sheet leverage, should de-risk earnings growth and increase investor confidence on the 17 percent earnings CAGR seen for 2019-22, which is amongst the top quartile vs its regional energy and telecom peers," it said.

(Disclosure - Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd)

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Updated Date: Sep 24, 2019 17:10:46 IST