Mukesh Ambani fails to lift Reliance shares: 5 reasons why

Reliance Industries chairman Mukesh Ambani's speech at the company's 38th Annual General Meeting has failed to lift the sentiment around its shares. No positive surprises came from its annual shareholders meeting on Thursday, analysts said.Shares in Reliance rose 0.75 per cent on Thursday, lagging a 1.2 per cent gain in the broader market.Brokerage firm CLSA cut its target price on the stock from Rs 825 to Rs 790 per share today. Vivek Mavani, independent market analyst & portfolio manager told NDTV that news flow has to improve and investors need to be convinced that growth is back in the company for meaningful upsides."I don't expect much growth for the next 2-3 years. Current businesses are going slow and it's obvious they don't have big growth opportunities in front of them," said Dharmesh Gosalia, a 42-year-old shareholder, who has 1,100 Reliance shares, many passed down from his father.Here are five things that disappointed markets:1) Buyback has not helped: In January, Reliance announced a $2.1 billion share buyback. So far less than a quarter of that sum has been spent. 2) Mukesh Ambani said that Reliance will invest Rs 1 lakh crore in its Indian operations over the next four to five years that will double its operating profits in this period. "At least 50 per cent of that doubling of profit can be done by effective use of their cash pile," said Deven Choksey, chief executive officer at KR Choksey Shares & Securities.The company generates up to $1 billion in free cash every quarter and held $13.8 billion at March-end.3) Gas output at D6 block, off India's east coast, is projected to decline to 20 million standard cubic metres a day (mscmd) in 2014-15 from 28 mscmd in the current fiscal year. That's less than half the 60 mscmd it was producing in 2010 and well below planned peak capacity of 80 mscmd. Ambani said Reliance aimed to add around 30 mscmd of oil and gas output through new developments, and achieve sustained total production of 60 mscmd in 3-4 years. Analysts said this looked ambitious.4) The group's push beyond energy and chemicals into capital-intensive consumer businesses may take longer to yield returns. Reliance has invested at least $3.5 billion to enter the fiercely competitive and regulatory unpredictable telecoms sector, but has yet to launch its fourth-generation (4G) service. Ambani said the company was finalising plans to offer broadband services, but did not set a timeframe for launch.5) RIL's retail business, India's second largest with 1,300 stores, is loss-making after six years. Ambani said the company aimed to generate Rs 4-5 lakh crore in sales from its retail business in 3-4 years from less than Rs 7,600 crore in the year to end-March. There is no concrete roadmap for this, analysts said..(With inputs from Reuters)

Mukesh Ambani fails to lift Reliance shares: 5 reasons why

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