Infocom plans drive RIL stock

NetScribes/Salil Panchal

Reliance Industries Ltd's proposed infocom initiatives are driving its valuations skywards. The RIL stock has reacted strongly over the past two trading days, touching an all-time high of Rs 387 during intra-day trading on Monday.

The RIL scrip closed at Rs 384.5 at the Bombay Stock Exchange, up 2.83 per cent over its previous close of Rs 373.95. A total of 88.9 lakh shares were traded at the counter. The scrip touched its all-time high of Rs 387 during intra-day trading on Monday. The previous level of over Rs 400 witnessed last year was the cum-bonus price.

Against the backdrop of the group's infocom initiatives, the RIL scrip has seen a shift in the nature of trading. In recent years, RIL was seen as a trading stock rather than an investment stock. Over the past few weeks, a large section of market players, including mutual funds, domestic financial institutions, foreign funds and local brokerages, have started viewing the scrip as an investment stock.

According to marketmen, large foreign funds Salomon Smith Barney and Goldman Sachs have been major buyers into the stock over the past two trading days. Larger mutual funds such as Templeton Asset Management, Prudential-ICICI and DSP Merrill Lynch were seen as major buyers into the stock during intra-day trading on Monday. Brokers say that retail interest is also back into the stock.

In a recent report, Dresdner Kleinwort Benson, the UK-based investment bank, has placed a `buy' recommendation on RIL. While looking at RIL's foray into telecom and infocom positively, the investment bank expects the consolidation of Reliance Petroleum to add 26 per cent earnings growth over the next two years, with an adjusted FY2001 EBITDA of 5.5 multiples.

Company sources told NetScribes that last week, RIL had made presentations to financial institutions and banks on its IT initiatives. RIL had announced its infocom initiatives at its recent AGM. While the finer details are being worked out, the move would be to create a next-generation communications network with terabit bandwidth to boost global communication and IT space.

Reliance aims to deliver advanced applications - including e-commerce, media casting, Web hosting and software services - to businesses, consumers and service providers. RIL's investments in the infocom initiatives are expected to be completed over the next 24 months.

"Reliance appears to be a strong stock based on the infocom venture. They have also spoken of conversion of cash into New Economy assets, which would make strong business sense," says Chetan Sehgal, director (research) at Templeton Asset Management. RIL shares make up 10 per cent of the portfolio of TIGF, Templeton's local equity fund.

Marketmen are already talking of Rs 700 levels for the Reliance scrip over the next six-nine months. While this level may seem optimistic, the stock would undergo a fresh re-rating with an upward revision with some of the public-sector mutual funds.

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