Reliance should not keep the stock market waiting too long

livemint.com:

Reliance’s annual general meeting on Monday, the 66-year-old announced that his three children would be joining the board, even as he continues as chairman and managing director for five more years. Reliance’s sway has grown following a $150 billion investment spree over the past decade. It now controls 15% of the total fixed capital deployed at India’s top 300 non-financial firms, employs 7% of the workforce and garners 10% of their combined ebitda.

Reliance is no longer just a corporate, but “a precious Indian institution," Ambani said. The market, however, wants to see some of that translate into a higher share price. After spinning off its consumer-finance venture worth $16 billion, the enterprise is valued at $232 billion, including net debt.

Macquarie analysts downgraded the stock to ‘underperform’ last month. A premium for retail and telecom may already be embedded in the share price, and investors may be assessing new energy—its next big bet—at around $20 billion, they wrote. Reliance wants to put up gigafactories to make solar modules from sand, low-cost wind turbines using carbon fibre from its own plants, batteries powered by lithium and sodium ions, and electrolyzers to split water into hydrogen and oxygen.

In his address, Ambani promised “a new and virtuous multi-decade value creation cycle defined by faster growth, higher revenues, better margins and increased ebitda," significantly upping the earnings multiples of each businesses. This is where the market seems to be less sanguine than him. The price-to-earnings ratio dipped below 25 after his speech.