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RIL to fire on all cylinders: Telecom, oil to drive earnings this year; O2C, retail to generate cash: Fitch

The oil-to-telecom conglomerate has so far this year outperformed benchmark Nifty 50 index and the company’s stock is up 3.90 per cent year-to-date.

RIL, Reliance Industries
RIL may spend Rs 1 lakh crore in capex, earnings may grow 14% this year: Fitch Ratings

Mukesh Ambani’s Reliance Industries Ltd is expected to fire on all cylinders and will likely see a jump in earnings in all its major businesses such as telecom and retail, according to Fitch Ratings. The company’s EBITDA will be driven by its upstream and telecom business, the rating agency said. Further, RIL’s O2C (oil-to-chemical) and retail segments are also expected to continue to expand and contribute to cash flow generation. The oil-to-telecom conglomerate has so far this year outperformed benchmark Nifty 50 index and the company’s stock is up 3.90 per cent year-to-date.

Reliance’s EBITDA expected to jump 14% led by telecom, upstream segments

Fitch Ratings said even as RIL’s capital expenditure is expected to remain high at Rs 1 lakh crore, the company’s EBITDA generation will likely remain resilient, and jump by 14 per cent year-on-year in the financial year ending March 2023. “Reliance Industries Ltd’s net leverage will remain below 1.0x in the medium term on strong cash flow generation across its business segments, even as the India-based conglomerate increases investments in new energy and new materials business,” Fitch Ratings said in a note published Tuesday.

“The EBITDA of the digital services business, largely telecom, should benefit from the full-year impact of the tariffs raised in December 2021; even as we expect its subscriber base to stabilise around 420 million in FY 2023 (FY 2022: 410 million),” the rating agency said. 

Fitch said it expects company’s upstream oil and gas segment to benefit from high gas prices while its O2C segment is also expected to improve marginally, “supported by high transportation fuel margins amid strong demand recovery in Asia and demand of Asian refined fuels in the EU due to sanction concerns on Russia’s oil and gas output”.

Brokerages bullish on Reliance stock

RIL reported quarterly earnings last week and recorded an over 30 per cent year-on-year growth in EBITDA at Rs 33, 493 crore for the quarter ended March, on the back of bumper oil refining margins, and steady growth in telecom, digital services. O2C and digital services segments contributed the highest in the company’s profits for the quarter ended March 31, 2022. RIL reported Rs 14,241 crore in EBITDA from O2C segment and Rs 11,209 crore in EBITDA from digital services segment in the fourth quarter.

Majority of brokerages such as Edelweiss, Morgan Stanley, Motilal Oswal and ICICI Securities are bullish on RIL’s stock. Edelweiss Securities sees a 22 per cent upside to the stock with a target price of Rs 3205 according to its latest brokerage report.

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