In a rally that has confounded many analysts and one that the company says is not based on any impending news, Reliance Industrial Infrastructure Ltd, a listed arm of the Mukesh Ambani-led Reliance conglomerate, has been on a one-way uphill ride, consistently hitting the upper circuit in the past 25 trading sessions at the Bombay Stock Exchange.
The stock, which began its roll from Rs496 on 12 September, hit a high of Rs2,760.75 during mid-morning trade on 19 October, making the largest industrial group in India richer by at least Rs1,580 crore, based on the 46% stake it holds as promoter.
The market capitalization of Reliance Industrial rose from Rs749 crore to Rs4,168.7 crore, during the period from 12 September to 19 October, a phenomenal 456% change in about a month’s time.
Circuit filters are ceilings applied on stocks and indices to prevent excessive volatility in a single trading session. Interestingly, there were pending buy orders of 14,324 shares, with no sellers available, before the shares were locked at the upper circuit on Friday’s trade. The trading volumes rose threefold on Friday, compared with its five-day average.
“There is no fundamental support for such a strong rally in this stock,” said Nitin A. Khandkar, vice-president of research at Mumbai-based Keynote Capitals Ltd. “It is just an in-house business. The stock seems to be driven up by speculative investors.”
“We cannot comment about how our stock performs in the market,” said a spokesperson of Reliance Industries Ltd. “We have no control over it. It could be led by speculation. There is no new development that is awaited in this company.”
The shareholding pattern of Reliance Industrial is quite interesting. Among its non-promoter shareholders, Aavaran Textiles Pvt. Ltd owns more than 4% stake. However, Aavaran Textiles is also listed as a shareholder belonging to the “promoter and promoter group” of Reliance Industries, Mukesh Ambani’s flagship traded company in the latest (September) shareholding pattern on its website.
Three other relatively unknown financing companies— Soumya Finance Leasing Co. Pvt. Ltd (4%), Rajvikram Investments Pvt. Ltd (2.25%) and Kudrat Investment & Leasing India Pvt. Ltd (2.12%) together own more than 8.3% of Reliance Industrial.
However, Soumya Finance and Kudrat Investment are listed among promoter group companies in the information memorandum submitted by Reliance Communications Ltd, owned by Anil Ambani-controlled Reliance Anil Dhirubhai Ambani Group (ADAG), ahead of its public listing. Reliance Capital Ltd, another listed arm of Reliance ADAG, is also an institutional shareholder in Reliance Industrial, with more than 1% holding, belonging to the non-promoter category.
Reliance Industrial registered a minuscule 0.11% rise in net profit, Rs4.69 crore, for the quarter ended June over the year-ago period. Sales rose 6.9% to Rs14.7 crore for the quarter ended June up from Rs13.7 crore during the same period in 2006. The total income had dipped 0.77% and the earnings per share of the company stood at Rs3.11 in the quarter ended June.
Reliance Industrial’s principal focus is on construction, setting up industrial infrastructure and project related activities for the group companies.
According to Myiris.com, a research website on Indian equity market, the company was incorporated in September 1988 in the name of Chembur Patalganga Pipelines, with an objective to undertake the project for laying two cross country pipelines from Bharat Petroleum Corp.’s refinery in Mumbai’s Chembur to Reliance petrochemicals complex at Patalganga, in Maharashtra, to transport petroleum feedstock for the exclusive use of Reliance Industries.
Ashwin Ramarathinam contributed to this story.