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FPI stake in Reliance Industries at Record High | Yadnya Investment Academy

FPI stake in Reliance Industries at Record High | Yadnya Investment Academy

Published on 06 May 2021|
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Performance of Reliance Industries Stock has turned down the mood of many long-term investors in the market. Meanwhile, there are some facts and news which are looking positive for Reliance Industries. So, to know this reason behind how did Reliance upset the long-term investors in the market and what things are going well for the company, go through this blog.

Introduction:

Indian Conglomerate Reliance Industries and the company with the highest market value in terms of market capitalization has witnessed a very fruitful period in 2020 whether in terms of Acquisitions, Investment from Strategic Investors, or many more. These strategies and operations of the company won the hearts of the long-term investors, but the poor performance of the stock against the benchmark had now disheartened the sentiments of the long-term investors in the market.

In the past 5 months, Reliance Industries Stock has underperformed the Nifty 50 Index by a huge 36%. This huge underperformance by this giant organization was not liked by the investors in the market.

On the other hand, Foreign Portfolio Investors (FPIs) have increased their stake in Reliance Industries at its all-time high levels. So, let’s discuss in detail the reasons behind developing interest in FPIs in this stock.

Performance over Last 6-Months- Nifty 50 vs. RIL

1) FPI Shareholding in Reliance Industries at Record High:

  • Despite the poor performance of the stock in terms of Returns, FPIs shareholding in Reliance Industries has increased to 25.6%, which is at record all-time high levels.
  • Reliance Industries underperformed Nifty 50 by 36% in Absolute Terms in the past 6 months.

FPI Shareholding in Reliance Industries at Record High

2) Declining Weightage of Reliance in Nifty-50 Index- MoM Trend:

Also, the weightage of Reliance Industries in Nifty 50 has reduced from 14.9% in September 2020 to 10.2% in April 2021.

3) Why FPIs Interest in Reliance Industries is Rising?

i) Rising contribution of consumer-focused businesses (Retail & Jio) to the Consolidated Performance:

  • Revenue from the Retail business has increased by 5.2% in last year from 29.5% in Q4FY20 to 34.7% in Q4FY21.
  • While the Revenue from Jio has increased from 11.1% in Q4FY20 to 14.1% in Q4FY21.
  • Summing up the revenues of the Jio and Retail, then these business segments contribute to nearly 49% in Q4FY21 as compare to around 41% in Q4FY20.

Rising Contribution of consumer-focused businesses.

ii) RIL’s Net Debt-free Status :

  • Reliance Industries is a virtually debt-free company.
  • Having a Strong Balance sheet Built with Net Cash.
  • They are having an ample amount of cash reserves to clear off the debt but currently, the management is focusing on improving their return ratios.

iii) ESG Parameters

  • Reliance Industries’ Goal to turn net carbon zero by 2035, prospective investments in alternative energy.
  • RIL’s Prospective investments in alternative energy.

4) FPIs Total Portfolio:

  • As of April 15, 2021, the Total Investment of FPI is around Rs. 40.6 Lakh Cr.
  • Among this total investment of FPI, a total of 8% i.e., Rs. 3.25 Lakh Cr. is invested in Reliance Industries alone.
  • There are other strategic investments done by various foreign companies in Reliance Industries like Facebook, KKR, etc.

Conclusion:

Currently, Reliance Industries is having 2 growth engines mainly Reliance Jio and Reliance Retail. FPI may further continue to increase the stake in the company post listing of Jio and Retail as well. Hence, this company with the presence of 2 growth engines should be on the investor’s horizon from a long-term perspective. But should invest only with proper research and after consulting a financial advisor.

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