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Weekly Insights #9- Reliance: The House of Optionalities

This post is a revisit & extension on one of our old posts on Optionalities. Would highly recommend you to read that before going ahead-

In above post we had talked about how Optionalities can drive non-linear returns. And one of the examples I had shared was that of Reliance & how the JIO’s optionality played out.

It still feels surreal that such a large optionality played out so perfectly in one of the largest & well tracked company in India. Reliance’s stock price has gone up ~5x since 2017, that’s a ~30% CAGR returns (~12% for Nifty) in one of the largest companies in India.

Below snippet from CLSA is a great reflection of how the Optionalities of JIO & Retail has driven Reliance’s profits over last six years. Reliance’s profits have tripled over this period led almost entirely by JIO & Retail-

Above snippet is also a good reflection of the fact that market is not yet discounting the new optionalities that can play out for Reliance-

1. New Energy & New Materials Business

In its 2021 AGM, Reliance had announced its plans to setup a new complex at Jamnagar for its New Energy Business.

It has already invested ~Rs5500 crores in making some key strategic acquisitions for this business and is looking to invest $80 billion in this business over next 10-15 years.

2. Financial Services

In Oct’22, Reliance announced that it will demerge its financial services undertaking and list it as Jio Financial Services, with an intention of incubating financial services business of lending, insurance, payment, digital broking and asset management.

This new entity will be the beneficial owner of ~6.1% of Reliance Limited, which is valued at ~Rs90,000 to fund capital requirements of these businesses.

Both these new optionalities are not something that are Reliance’s business plans in far distant future, ground work for these businesses have already started. Recent news reports have also been buzzing that Reliance is soon expected to approach IRDA for an insurance license.

Further, in our earlier blog post I had highlighted how the possibility of an Optionality materializing is higher if the new business is related to the company’s existing business. In both the above optionalities, Reliance as a group (before split) has past experiences and also linkages with its existing business. Even with JIO, Mukesh Ambani had prior experience of incubating RCOM and that reflected in top-notch execution.

You can read our 2nd blog on Optionalities to understand more on how to evaluate such optionalities here-

Finally, there is a secondary optionality of separate listing of JIO and Reliance Retail and/or stake sale in O2C business, all of which can unlock further value.

In summary, we have seen how the optionalities have played out for Reliance in the past and currently similar kind of optionalities looks to be in the works, which when materializes can create substantial value.

That’s it for this week, new insight coming up next week. So stayed tuned!


Surge Capital is a trade/brand name used by Ankush Agrawal (Individual SEBI Registered Research Analyst INH000008941) to provide equity research services in the Indian Equity Markets.

“Registration granted by SEBI, and certification from NISM in no way guarantee performance of the Research Analyst or provide any assurance of returns to investors”

“Investments in securities market are subject to market risks. Read all the related documents carefully before investing.”

“The securities quoted are for illustration only and are not recommendatory”

Stock specific investment disclosure:

Reliance- No Investment. Not Traded in last 30 days. Not an active recommendation in Research Service.


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