A look at RIL's recent acquisitions and stock trading strategy ahead of AGM

Sensex heavyweight Reliance Industries Ltd (RIL) will be convening its 46th Annual General Meeting (AGM) of shareholders on Monday, August 28, 2023, and investors will likely focus on the timeline for potential listing of telco and retail businesses, updates on digital and oil-to-chemical (O2C) businesses and any update on investment in clean energy.

- In May 2023, RIL subsidiary Reliance Retail Ventures Ltd (RRVL) had acquired a 100 percent equity stake in Metro Cash and Carry India Pvt Ltd, which operates under the ‘Metro India' brand, for a cash consideration of Rs 2,850 crore.

- Reliance had in September 2022 invested $32 million to acquire a 79.4 percent stake in the US-based SenseHawk Inc in order to expand its green energy portfolio. Reliance has made the investment through primary infusion and secondary purchase.

- In July 2023, RIL joined hands with Brookfield Infrastructure Partners Lp and Digital Realty Trust Inc. in a three-way venture for setting up special purpose vehicles (SPVs) aimed at developing data centres in India. RIL will hold a 33.33 percent stake in the SPVs.

- Reliance Strategic Business Ventures Ltd (RSBVL), a wholly owned subsidiary of Reliance, acquired a 23.3 percent stake in Exyn Technologies Inc (Exyn) for a total consideration of $25 million in December 2022.

- RIL subsidiary Reliance New Energy has acquired a 20 percent stake in California-based solar tech firm Caelux for $12 million as it strengthens its new energy manufacturing capabilities.

- Reliance Consumer Products (RCPL), the FMCG arm of Reliance Retail Ventures (RRVL), acquired a controlling stake of 51 percent in Lotus Chocolate Company Ltd in May this year. RCPL completed the acquisition for an aggregate consideration of Rs 74 crore and subscribed to non-cumulative redeemable preference shares of Lotus for an aggregate consideration of Rs 25 crore.

RRVL is a subsidiary of Mukesh Ambani-led Reliance Industries and is the holding company of all the retail businesses under the RIL group.

- Reliance Retail has acquired 25.8 percent stakes in Dunzo on January 6, 2022, in a deal where Dunzo raised $240 mn worth of funds from the mammoth conglomerate.

- RIL's subsidiary Reliance New Energy (RNEL) has acquired a 40 percent equity stake in Sterling and Wilson Renewable Energy (SWREL).

- Reliance Consumer Products Ltd (RCPL), the FMCG arm and a wholly-owned subsidiary of Reliance Retail Ventures Ltd (RRVL), has made two new acquisitions in the fast moving consumer goods business adding beverage brand Raskik and candy brand Toffeeman to its portfolio, a move that underlines the company’s intent to build a strong consumer goods business in the country.

RIL's AGM comes after the listing of Jio Financial Services Ltd (JFSL) on stock exchanges earlier in the month. After hitting lower circuits for five consecutive sessions, including today, JFSL shares rebounded and climbed 3 percent to the day’s high of Rs 224.80 on BSE. However, the stock again slipped back into the red zone due to a volatile trading session.

Meanwhile, shares of Reliance Industries settled 0.35 percent lower at Rs 2,469.95 apiece on the BSE in trade on Friday. In the last five trading sessions, the stock fell three percent. RIL shares rose four percent on a year-to-date basis, while it's up 2.19 percent in the last one year.

Brokerage firm CLSA has maintained a 'buy' rating on the shares of Reliance Industries with a target price of Rs 3,060 apiece. The brokerage firm notes that in the past year,  the company has seen three more acquisitions worth $50 m to add to new energy capabilities.

RIL's planned capex of Rs 75,000 crore in this segment should pick up from 2024, the brokerage said. According to CLSA, the scale-up targets of the company are maintained, and the investment can double if viable.

The long-term trend for the stock of RIL is positive, but the short-term trend suggests a possible downside retracement.

Reliance, on a weekly basis, is trading within a higher range, forming a rectangle pattern. Based on price action, there's a potential for negative movement in the coming weeks. The minor-term trend also points to a continuation of the downward move, said Kunal N Kamble, Senior Technical Research Analyst at Bonanza Portfolio.

"Considering the current setup, implementing a 'Buy on Dip' strategy in Reliance seems viable. It's anticipated that Reliance might correct to around 2200 levels, presenting an opportunity for accumulation. At the 2200 levels, accumulation could lead to an upward movement towards 2700 levels. However, if the security closes below 1970, the long view will be negated," Kamble said.

According to Pravesh Gour, Senior Technical Analyst at Swastika Investmart, the counter has shown profit booking from the higher levels after the breakout of the long trend line and triangle pattern formation on the longer timeframe. "Now it has retested its previous breakout levels at around Rs 2420. The structure of the counter is still lucrative for long-term investors as it is trading above its important moving averages (100 and 200 DMA). MACD (moving average convergence divergence) supports the current strength, whereas the momentum indicator RSI (relative strength index) is also positively poised."

"On the upside, Rs 2550 is an immediate hurdle; above this, we can expect a move towards Rs 2630. On the downside, Rs 2420 is a strong demand zone during any correction," Gour said.

"Reliance trading below 2500, is a very negative trend for the scrip now, as option chain for current and next series reflects on 2500 straddle playing very aggressive. A trend change on the positive side will only be witnessed above 2520, otherwise a trading range below 2500 levels now signals a weak sentiment which can lead to a downslide towards 2420/2380 zones on immediate basis," said Shilpa Rout – Derivatives Lead Analyst at Prabhudas Lilladher.