Reliance Infrastructure

#1
I was not able to find a thread for this stock and so I started a new thread.

It is going down sharply. Does anyone know the reason? I have shares of this company and feeling worried.

Even if we consider only the holding in Reliance power, it comes to a substantial amount. There is no problem in Reliance Power but this stock is simply falling down.

I have holding in this company and therefore, I am worried.
 

San Yad

Active member
#2
I was not able to find a thread for this stock and so I started a new thread.

It is going down sharply. Does anyone know the reason? I have shares of this company and feeling worried.

Even if we consider only the holding in Reliance power, it comes to a substantial amount. There is no problem in Reliance Power but this stock is simply falling down.

I have holding in this company and therefore, I am worried.
Most analysts are not very comfortable with infrastructure long term story in India.

Now let's see the chart how does it look l

Rs. 950 level which seems broken out currently but it may try to hold this level.

You need to watch its closing price because it is high beta stock.

If it closes below Rs 900 for few days continuously then definitely it has more impact on down side.

It might take a bounce from the level of Rs 900.

(You need to watch out this.)

If that happens then I don't rule out the price to touch Rs 650 in near future.

That is what I look on chart.

Happy Investing !
 
#4
Reliance Infrastructure business

Reliance Infrastructure valuations.

I read their complete annual report which was mailed to me and here is my analysis of their valuations.

Their current book value on a consolidated level is Rs 87x. At current price, stock price is less than consolidated book values. Even their standalone book value is more than Rs 600.

Their different businesses and their valuations:-

1) Distribution:- Currently facing problems and their Mumbai distribution business license is set to expire on August 2011.

But, they have developed state of the art distribution system in the city and they will definitely get renewal of their license. Even if they don't get renewal, they can lease out their infrastructure.

Their Delhi business is running well and it is in a JV with Delhi government. This business is performing excellent and will continue to perform well without any hindrances according to the report.

Total valuation given to distribution by me even after considering that their license can expire should be at least Rs 4000 crores. It should be much more but I am considering the fact that they are having trouble in Mumbai. Delhi business is smooth.

They can increase their business by getting distribution licenses in more cities.

Currently they are doing business in Orissa but it is not financially viable but they are in talks with the government to make it viable.

So valuation = 4000 crores considering that the future is bleak.

2) Transmission business - They have invested about Rs 2300 crore cash and rest will be through debt.

So valuing this business at book value of 2300 crore.

Valuation = Rs 2300 crore

3) Reliance Power- Current market value- Rs 17000 crores. After giving the discount of holding company, it turns out to be Rs 13000 crores.

Valuation = Rs 13000 crores.

4) Roads- Developing roads worth Rs 11200 crores.

Their 8 projects will start earning revenue by the end of this financial year.

Considering earnings of Rs 250 crore annually, valuing at PE of 15, it becomes Rs 3750 crores

5) Sea Link- Considering only their cash investment and neglecting debt. Valuation = Rs 1300 crores.

6) Metro- Delhi metro is to be functional soon. Mumbai metro will start earning revenue by the end of this financial year.

Valuing this business at Rs 2000 crore after giving substantial discount.

7) Airports- Not a good business according to me. Future scope is there but valuing this business at nil.

Valuation = Nil.

8) EPC:- 2010 PAT at Rs 280 crores. Valuing at a PE of 15 because huge growth expected as it has a large order book. No slowdown expected on this front.

Valuation = Rs 4200 crores (Should be valued much more)

9) Power Generation- Only 1 plant will be left after giving the rest to Reliance Power.

Dahanu power plant-- Can't determine exact valuation but as far as I can make out it should be valued at least Rs 2000 crores.

Valuation = Rs 2000 crores.

10) IT business- Not valued much.

Valuation = nil.

11) Cement- Company wants to become a 25 MT company by 2015.

Two plants of 5 MT each are expected to be complete by FY 2013.

Their sales will be good as EPC and infra business of reliance infra would require cement.

But, as the plants are not operational valuing this segment at NIL

Valuation= NIL

Plus they have huge amounts of cash. But, valuing it at NIL.

Total valuation = Rs 32250 crores

Current market price = Rs 20000 crores

Thus, even after giving substantial discounts, this company is valued at a substantial discount.

I have not considered their cement business which can be quite big.

The company also planned to demerge EPC business and their were talks that it will be demerged and it will be listed and this can add to value unlocking.

Their outstanding GDR's are only 0.69% of their present paid up equity so it will not affect much.

Plus, the company has outstanding warrants which it can convert till January 8, 2011.

196,00,000 warrants have already been converted which shows Anil Ambani's confidence in his company. I think as soon as he will convert his warrants, he will demerge the EPC business.

The debt of the company is under manageable levels.

So, I guess this stock must be valued much more and once it starts to increase, it can get continuous re-rating.

Technically, the stock is weak. It is at support levels and can bounce back 50-100 Rs, but overall technicals are weak.

But, the technicals can reverse as Reliance Industries was also showing a similar trend around 2 months back. After that it bounced back and current technicals are bullish.
 

Alchemist

Administrator
Staff member
#5
Dahanu power plant - can't determine exact valuation but as far as I can make out it should be valued at least Rs 2000 crores.

Valuation = Rs 2000 crores.
Roughly, new power plants need an investment of Rs 4000 - Rs 5000 crore for every 1000 MW, with debt to equity ratio of 3:1.

That's an equity requirement of Rs 1000 crore - Rs 1250 crore for every 1000 MW.

Dahanu has a capacity of 500 MW.

Dahanu Thermal Power Station (DTPS) consists of two units of 250 MW and is located around 120 K.M. north of Mumbai on Mumbai-Ahmadabad rail line.
Reliance Infrastructure

I am not sure what debt:equity is Dahanu operating with, but if I assume a ratio of 3:1, the Dahanu's book value should be around Rs 500 crore.

Even if I value the business at 2 times book value, it shouldn't be valued at more than Rs 1000 crore.

(NTPC is currently trading at 2.47 times its book value).
 

Alchemist

Administrator
Staff member
#6

Alchemist

Administrator
Staff member
#8
The company will buyback all the shares?
No.

The company will buyback a limited number of shares.

The details of the buyback have not been decided.

Note: Just because a company declares a buyback, it doesn't mean the company will actually buyback shares. Some companies just announce buybacks and then buy no or only a very small number of shares.
 

Alchemist

Administrator
Staff member
#10
Anyone has any idea why Reliance Infrastructure is falling so sharply?

The volumes are mind boggling.

Yesterday NSE+BSE volume was 8.77 crore + 0.85 crore.

The free float is 13.03 crore shares.

Today will be a extremely high volume day too. If the volumes of the 2 days are added, it will be higher than the free float of the company.
 

Alchemist

Administrator
Staff member
#11
It seems to be a pledged shares issue.

STCI FINANCE LIMITED sold 19 lac shares of Reliance Infra on NSE yesterday.

I think more pledged shares have been sold today.

A big part of promoter holding is also pledged in ADAG companies. If ADAG is not able to provide additional margin, these shares may also get sold in the open market.

Do not take big positions in ADAG stock as these can be very volatile in next few days.
 

Alchemist

Administrator
Staff member
#12
Reliance Infra is now trading at PE of 2.5 and PB of 0.14
Reliance Capital is now trading at PE of 3.83 and PB of 0.2.
Reliance Home Finance is trading at a PE of 4.86 and PB of 0.58.
Reliance Power is now trading at PE of 2.72 and PB is 0.12.

The combined market cap of the above 4 companies is less than Rs 10000 crore.

Dhirubhai's son has turned out to be exact opposite of Dhirubhai - no one has destroyed wealth as Anil Ambani.
 

Alchemist

Administrator
Staff member
#13
A large quantity of pledged shares were sold by L&T Finance today.

Reliance Infrastructure
Total Delivery Quantity: 1,39,06,409
Number of shares sold by L&T Finance: 49,00,000
% of Total Delivery sold by L&T Finance: 35.24%

Reliance Capital
Total Delivery Quantity: 95,75,891
Number of shares sold by L&T Finance: 77,86,642
% of Total Delivery sold by L&T Finance: 81.32%

Reliance Power
Total Delivery Quantity: 8,08,40,029
Number of shares sold by L&T Finance: 6,25,00,000
% of Total Delivery sold by L&T Finance: 77.31%

Reliance Communications
Total Delivery Quantity: 3,09,30,183
Number of shares sold by L&T Finance: 2,00,00,000
% of Total Delivery sold by L&T Finance: 64.66%


Except in the case of Reliance Infrastructure, most of the delivery selling in major ADAG stocks came from L&T Finance.

It is possible the selling came from the promoter group's pledged shares.
 
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