The bear case for Reliance

protrade

Well-Known Member
#1
While I have been bullish on Reliance for a very long time, considering that Reliance is making continuous daily highs, it is worth looking at the things that could pull down the stock. And when you start looking at the other side, there’s a few things to be concerned about.

The exposure from Retail - As the largest player in Organized retail, with over 11,000 stores, and most of them in malls, Reliance has massive exposure to mall closures during Corona. And their online business isn’t big enough to offset these protracted lockdowns. This could be source of huge pain. Other retail players like Future and Shopper’s Stop have come crashing to the ground.

Oil and Gas weakness - The primary business, that accounted for almost two-thirds of profit till last quarter, is still in doldrums. And in current circumstances unlikely Aramco will pay $15B for 20% of Oil and Gas, based on last years good times valuations. Corona related demand reductions likely to continue for a while longer.

Fund Raising negative beyond a point - Yes, Reliance has raised a ton of money on Jio, that’s impressive. But Mukesh Ambani is not a fool. The more of Jio he sells today, the less he benefits from a blockbuster IPO. And now, Reliance has been selling more of Jio than is needed to repay debt, and more of Jio than is needed for Spectrum auctions.

Are we reading this wrong? Is Reliance selling the Crown Jewels from strength, or is it desperation? How big is the impact on Reliance Retail and the Oil and Gas business from Corona? Could these be big enough to push Reliance into a dramatic loss? The first ever in the company’s history ever since it went public?

Postponement of the results - This is also a worrying sign. Large companies don’t do these things, unless there is bad news. Reliance execution has been flawless during Corona - so it’s difficult to believe that they were unable to complete formalities in time.

The Valuation Conundrum - Reliance is happy to sell stakes in Jio, so we know exactly what the value of Jio is - $66B. And now, we know that they are debt free. And while we don’t know how much of Jio is owned by ESOPs given to employees, or other shareholders, let’s assume Reliance owns the entire 67% of Jio Platforms that hasn’t been sold so far. That means Jio Platforms holdings of Reliance are worth 67% of $66B - or $44B.

Even if we go by street talk, of a potential $100B valuation in a Jio IPO, the stake owned by Reliance is valued at 67% of $100B - or $67B.

That means, the Oil and Gas business, and the Retail Business, both of which are in the worst imaginable environment, are valued at $120B!! These businesses didn’t have such valuations even at the best of times!! Would you pay ₹1300 per share, for Reliance, without Jio? Well, that’s exactly what is happening today!!

I think the market is seeing only one side of the story in Reliance - and it is going to face a shock shortly. Even the best business has a price beyond which it doesn’t make sense. And Reliance no longer makes sense at this price.
 
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TracerBullet

Well-Known Member
#2
Not very useful, but my experience with jiomart has been negative. Lots of technical issues and terrible customer service. Technical issues were understandable somewhat and i was willing to put up with it. But the way in which cs handled a bad delivery means i wont use them at all.
 
#3
Not very useful, but my experience with jiomart has been negative. Lots of technical issues and terrible customer service. Technical issues were understandable somewhat and i was willing to put up with it. But the way in which cs handled a bad delivery means i wont use them at all.
Even Jio internet connection was a poorly one 2 years ago. It has improved a lot.

Seems like Jio is using the customers for its beta testing, with enough incentives thrown in to retain the customer.
 

TracerBullet

Well-Known Member
#4
Even Jio internet connection was a poorly one 2 years ago. It has improved a lot.

Seems like Jio is using the customers for its beta testing, with enough incentives thrown in to retain the customer.
Happy with jio mobile connection ever since i got it. Stable ( use it for trading ) and they brought down prices to reasonable levels. But could be dependent on which city you live in i guess.
 
#5
Happy with jio mobile connection ever since i got it. Stable ( use it for trading ) and they brought down prices to reasonable levels. But could be dependent on which city you live in i guess.
Yeah. It is a very good connection in Surat, but very iffy in my area in Delhi. Then again, many areas in Delhi report it as the best connection. Anyway, ever since I started using Airtel, I see that it works steady in Surat and Delhi and on the way too.
 

protrade

Well-Known Member
#6
I have no problem with their business. Their execution is fantastic, their mindset is also fantastic - thinking scale.

My concern is only that valuations are not justified and the delay in results is also raising red flags.

I can’t imagine the stodgy commodity business in Oil and Gas, and predominantly brick and mortar retail business to be worth this high, in this environment. To me those businesses make no sense being worth 2X of Jio!!
 

Pvot

New Member
#7
Not very useful, but my experience with jiomart has been negative. Lots of technical issues and terrible customer service. Technical issues were understandable somewhat and i was willing to put up with it. But the way in which cs handled a bad delivery means i wont use them at all.
This has been a concern. Unfortunately in India, cost trumps customer experience. There are very few (or none) alternatives that will give both CS and competitive cost. Until the cost aspects are addressed, people would continue to engage with the likes of Jio!
 

sanju005ind

Investor, Option Writer
#8
Yeah. It is a very good connection in Surat, but very iffy in my area in Delhi. Then again, many areas in Delhi report it as the best connection. Anyway, ever since I started using Airtel, I see that it works steady in Surat and Delhi and on the way too.
The connection is very good. I was traveling by Shatabdi from Pune to Hyd the train was moving almost at 110 Kmh and I was able to connect to my US Office VPN and still able to do intraday trades.
 
#9
This is what I meant by inconsistent ping using Jio in my area in Delhi (using JioFi)

1595864477961.png


............. and here's using Airtel hotspot.

1595864614123.png


It's not so much about the speed (average speed is ok), it's the consistency.
 

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