Taking note of the fact that weakness in Reliance Industries's (RIL) refining business has been counter-balanced by "solid growth" in retail and telecom (Jio) business, HSBC expects RIL's earnings momentum to accelerate in FY20 and maintains "buy" rating.

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RIL's earnings outlook is robust, HSBC said and added it has kept "buy" rating with an updated target price of Rs 1,512 against Rs 1,500 earlier. The stock is currently trading at Rs 1,363.25 per share.

"Weakness in refining margins was offset by solid growth in retail and telecom (Jio). Both Retail and Jio are ramping up well and now contribute 25 per cent of RIL's consolidated Ebitda (earnings before interest, taxes, depreciation and amortisation)," the HSBC said.

"We expect RIL's earnings momentum to accelerate in FY20e, driven by margin expansion in downstream refining and chemicals on the back of lower energy and feedstock costs, the ramp-up of petcoke gasifiers and an upcoming upcycle in refining on the back of IMO-2020. Telecom and retail businesses remain in high growth phase near-term," it said.

HSBC report also noted that RIL's consolidated adjusted net debt has declined to $33.2 billion from $42.7 billion in Q3FY19, as it has restructured the telecom operations (Jio) by transferring control of its key assets -- fibre and towers -- to two separate infrastructure trusts along with Rs 700 billion of external liabilities and part of RIL's investments of Rs 366 billion.

RIL will monetise these investments once external investors bring capital into the InvITs (infrastructure investment trusts) in the coming months. Jio as an anchor tenant will pay rentals for using these assets. 

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In addition, RIL expects a business case beyond Jio's usage as other telecom operators and customers can also lease these assets and participate in any such upside after the trusts service liabilities of Rs 1,070 billion, it added.

However, investors will likely regard this restructuring as mainly a financing transaction to offload debt from RIL's balance sheet, considering there is limited clarity on payments by Jio as well as any revenue upside from other customers, it said.