Reliance Industries Limited(RIL) will partner with Google to create its own 5G network. On Wednesday, RIL shares rose to ?1978.5 but slumped to ?1845.6 when Mukesh Ambani, Chairman of RIL announced that there would be some delays in the agreement to sell stakes in the oil and chemical business to Saudi Aramco, and Arabian multinational petroleum company.
Investors responded with distaste when the Google deal took place at a much lower valuation than Facebook. Google’s investment of ?33,737 crores for a 7.7% stake in Jio platforms at an equity evaluation of ?4.36 lac crores is way below the recent transaction which valued Jio at ?4.91 lac crores, a 12.5% premium to Google’s proposed investment.
Moreover, Jio and Google are planning for making affordable 4G and 5G enabled smartphones to make India 2G mukt which implies ‘free from 2G’. Google will provide necessary optimizations to the Android operating systems and Playstore for smartphones that Jio is going to launch.
On Wednesday, ?13,000 crores value of shares was traded when compared with the daily average of ?3,600 crores. Shares of RIL are on the upsurge due to various deals by Jio platforms. Various analysts have said that the gains would have been capped due to profit bookings.
Ambani stated that last year, he shared the basis of equity investments by Saudi Aramco but due to unforeseen circumstances in the energy market and the COVID-19 situation the deal was not able to progress within the timeline. The equity requirements of the company have already been met. He further added that the RIL target for capital-raise is concluded and it is only approaching strategic partners, with similar interests, to add up.
RIL has plans for the initial public offering for Jio but it has not cleared the timeline yet. Also, there is planning for the expansion of retail businesses, O2C(order-to-cash) business. The company holds an extremely strong balance sheet and achieved a state of net-debt free. It achieved the mark due to fundraising from Jio platforms and RIL shares rights issues.
The company had a nearly two decades relationship with Saudi Aramco and is having plans to approach NCLT(National Company Law Tribunal) for the expansion of its O2C businesses into a separate subsidiary.
Most of the investors and analysts are optimistic for the future of RIL with its features of net-debt free, strong management, a fortified balance sheet. The shares of the company have surmounted the Nifty with an upsurge of 22% this year.
