The year 2024 has proven to be quite challenging for Reliance Industries Limited (RIL), with its shares on track to end the year with negative returns for the first time since 2014. This stark decline marks a significant departure from the company’s previous years of strong growth, as RIL’s stock price plummeted approximately 22.5% from its peak at ₹2,856.15, resulting in the loss of over ₹4.4 lakh crore from its market capitalization.
Despite reaching record highs earlier this year, Reliance’s stock has faced continuous erosion since its Annual General Meeting (AGM) held in August. Investors were left disappointed as management offered little clarity on the monetization timelines for its retail and Jio Platforms businesses, triggering concerns about future profitability.
Over the past three months alone, the shares have declined by ₹39.60 or 3.07%, with no signs of immediate recovery. It has been reported RIL’s stock has witnessed negative returns for four consecutive months—an alarming trend not seen since before 2014. From September’s -2.2% to October’s -9.8%, and -3% and -3.9% declines recorded throughout November and December, the figures paint a worrying picture.
The market capitalization of Reliance now stands at ₹16.89 lakh crore, down considerably from its peak. Adding to the company's woes, Mukesh Ambani’s net worth has also taken a hit, dropping from $120.8 billion back in July to approximately $96.7 billion by mid-December, according to Bloomberg.
What could be causing this slowdown? Analysts indicate multiple factors are at play. The pressure on margins in Reliance’s petrochemical and oil & gas businesses is partly due to weak global demand affecting profitability. The telecom arm, Reliance Jio, has been experiencing slower revenue growth than anticipated, stalling at lower average revenue per user (ARPU) levels. To make matters worse, Reliance Retail has struggled against fierce competition from quick commerce companies, facing operational restructuring delays alongside consumer demand issues.
Notably, the AGM disappointment represented a turning point for RIL this year. Investors had been anticipating announcements concerning the future of Reliance Retail and Jio Platforms but were left wanting after the event. A surprise announcement of the 1:1 bonus share issue could not compensate for the broader concerns voiced by investors.
The retail sector, long viewed as one of RIL’s crown jewels, has had to contend with significant operational challenges. Amid declining demand—particularly within the fashion segment—a staggering 1,185 underperforming stores were closed down, prompting questions about the robustness of its operation. While analysts remain cautiously optimistic about potential recovery, they believe it may take at least two more quarters for meaningful growth to return.
On the telecom front, Reliance Jio continues to be India’s leading operator. Yet, increasing competition including potential challenges from Elon Musk's Starlink satellite broadband threatens this position. RIL is attempting to bolster Jio’s offerings with strategic partnerships, such as the recent collaboration with Nvidia to develop AI infrastructure across the nation.
Regarding future strategies, both Reliance Jio and Reliance Retail are eyeing IPOs, with projections estimating Jio’s valuation could exceed $100 billion. Yet, timelines for these listings remain uncertain, as insiders note Reliance Retail may not see its IPO until post-2025 due to internal restructuring issues. Such listings could be pivotal for unlocking value, especially considering analysts evince confidence in Reliance’s diversified portfolio, which encompasses digital, retail, and energy segments.
Brokerages have offered mixed predictions about RIL’s challenges and recovery potential. Pointing toward relative valuations, analysts such as those from Jefferies recommended “Buy” status for Reliance with target pricing set at ₹1,700—an ambitious gain from recent prices. Similarly, JPMorgan indicated RIL’s relative valuation remains attractive, yet stressed the need for improvements in profitability across refining and petrochemicals sectors to stimulate growth.
Despite the challenges, historical trends suggest Reliance Industries has shown resilience, previously recovering from downturns. With analysts viewing positive free cash flow generation and management of net debt as key indicators for recovery, stakeholders remain cautiously optimistic about what the future holds for RIL amid present headwinds.
