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For those who think that they are able to value Reliance web of Companies, they must get a Nobel Prize award in Finance. As per their latest annual report, Reliance has 335 disclosed subsidiaries and over 150 JVs & Associate Companies.
I wonder how many genius masterminds would be working to keep a tab of all of them. And I really have great respect for its auditors for the risk they take while signing their audit reports. Being a stat auditor once, it is difficult to scratch even the surface of a normal Co.
And this is a master web of intricate Companies, minutely linked with horrendous amount of related party transactions along with business synergies. Any outsider coming to invest in such a Company at a parent level will have foggiest idea of what's in the details
Perhaps that why to attract foreign capital, Jio Platforms was born. But we invest in the parent and not in an unlisted Company.
Hence, many fund managers stay far away from RIL, though they face the perils of under performance if RIL shoots up (as it did recently)
Hence, many fund managers stay far away from RIL, though they face the perils of under performance if RIL shoots up (as it did recently)
But reverse can also be true.
For an investor on the street, he would neither know Reliance's details or of a simple structure Company. Hence it doesn't matter as it is a speculation at max. You are safer to speculate on the largest name than the others.
For an investor on the street, he would neither know Reliance's details or of a simple structure Company. Hence it doesn't matter as it is a speculation at max. You are safer to speculate on the largest name than the others.
But if one really wants to know the underlying business and then invest, Reliance is a tough nut to crack (if not impossible).
Undoubtly it is one of the innovative Companies in India. But most of what which can be seen live is a Commodity business. Jio Platforms is about mobile technology & connectivities. To build it to this scale is a huge barrier of entry for other Companies.
All of the businesses are extremely Capital heavy and hence till date the Return ratios of the Company are sulking. ROCE was 11.5% back in 2012 and is 10.3% now. ROE is even worse at 9.4%.
Unless the profitability increases to double or Capital gets reduced, per unit of money, it doesn't generate sufficient profitability. But here is where the analysts thrive on > future. Every thing is possible on Spreadsheets.
One of the tweets said > trust Mota bhai. Well, you should ask the Company / person who deals with Reliance. The terms of the business are seldom beneficial for both sides. It operates on negative working capital. While it is good for the Company, think it from the supplier side
Jio was launched as a free Mobile offering. You have seen how it has and will transpire. Obviously no offering should be for free. But killing healthy business competition by offering free and then raising prices post killing has happened.
While Reliance as a stock goes up with such practises, would you think it ends up being a healthy proposition for the economy as a whole. Yes it forces ppl to innovate. But also it forces business to go bust and widespread unemployment. Guess, you can't have both.
Same is happening in Financial Products where all the freebies out there like ET Money, Groww, Coin, Paytm are offering investors free options to invest. But for how long. You can gain customers initially to milk them at a later date. I m not a fan of such practices.
