Reliance Industries share price rockets 6%, but guess what? Mukesh Ambani got poorer by $5.2 bn

Today, interestingly, Mukesh Ambani's Reliance Industries share price emerged among top performers on Sensex, despite hiking petrochemical prices. The increase in petrochemical prices is something that can be blamed on soaring international crude oil prices. However, investors seemed less bothered with the hike in that commodity, in fact they maintained a 'buy' sentiment in Reliance Industries. At around 11:54 hours, RIL share price has surged by 5.02% or Rs 52.75 trading at Rs 1,102.60 per piece. So far, in a few hours of trading, the company has gained by nearly 6% with an intraday high of Rs 1,108.85 per piece. 

According LiveMint report, RIL raised prices of at least seven key petrochemicals in the last quarter to offset higher crude oil prices and counter the effect of a weakening rupee. Bulk chemicals traders, suppliers for RIL’s petrochemical products and analysts tracking the company said it raised prices by 10-21% in the second quarter of this fiscal while year-on-year increase is 17-61%.

Reportedly, these products are - purified terephthalic acid (PTA), monoethylene glycol (MEG), polyester staple fibre (PSF), partially oriented yarn (POY), polypropylene or high density polyethylene (HDPE) and linear alkyl benzene (LAB).

Brent crude has touched above $85 per barrel, while our Indian currency has even earmarked over 74-mark against US benchmark dollar index at interbank forex market. The rupee's new low is attributed to some shocks given by RBI, which last week, decided to maintain a status quo, keeping the policy repo rate unchanged at 6.50% at the fourth bi-monthly monetary policy of FY19. 

That said, RIL is still soaring today despite the headwinds surrounding it. Shockingly, the impact of the above mentioned issues can actually be seen in chairman Ambani's net worth. 

On Bloomberg Billionaire Index, Ambani who was at 16th  rank, witnessed drop in his position and now is at the 18th spot with a net worth of $39.5 billion. The Bloomberg Billionaires Index is a daily ranking of the world’s richest people. Details about the calculations are provided in the net worth analysis on each billionaire’s profile page. The figures are updated at the close of every trading day in New York.

But what is interesting to see is that, Ambani lost about $2.5 billion dollar in last change of RIL share price. However, on October 04, Ambani's net worth was at $44.7 billion, as per the Bloomberg Billionaire list. If we take that into consideration, this would mean that Ambani has lost about $5.2 billion from October 04 to till date. 

Analysts at Jefferies said, “Well over a decade since it was launched, the salience of Retail has finally risen within Reliance's inv. thesis. Rev. growth may soon slow and margin expn. ease but the runway for organized retail is vast boding well for India's largest retailer. We now build uninterrupted growth for decades and infer a US$19bn EV to lift our PT to Rs 920. Peer comps suggest even more upside than what our prosaic DCF allows but we stay U/P noting pot'l EPS misses & rising liab.”

Reliance's success in mobile wireless has been the key tailwind for its shares but retail has also grown in salience with quarterly EBITDA trebling over the past year. 

Hence, Jefferies has stayed on ‘Underperform’,  noting that 'likely EPS misses, rising net liab. as capex stays high and rich valuations (~22x FY18 P/E for 13% FY18-23E CAGR)'.