RIL upgraded twice in two weeks on refining outlook

Global investment bank Bank of America Merrill Lynch upgraded Reliance Industries to "neutral" from "underperform" on Monday citing evidence that refining outlook is improving. Refining is the biggest of Reliance's business accounting for nearly three-fourth of the company's revenue.

However, the investment bank said stronger gross refining margins and a re-rating of Reliance's exploration and production would be needed before the stock would merit an upgrade to a "buy" rating.

Shares in RIL have rebounded over the last week after falling sharply in the run up to the Union Budget. RIL added Rs 13,427 crore to its market cap last week taking the valuation to Rs 2,75,343 crore. The stock was the second best performer on the BSE Sensex last week.

Last week, Morgan Stanley had upgraded RIL on expectations of an improvement in its core business.

Bank of America Merrill Lynch raised its target price on RIL shares by 9 per cent to Rs 893 per share. RIL's earnings growth is likely to recover in FY14E-15E, the investment bank added.

Reliance Industries is also expected to launch voice services on its 4G network soon. A move by RIL, which is still preparing to launch high-speed 4G internet services, into the voice market will intensify competition and hurt rivals such as Bharti Airtel and the Indian unit of Vodafone group.
 
Reliance has invested Rs. 12,800 crore to acquire 4G spectrum and upon can provide voice services along with high-speed internet if it pay a fee of Rs. 1,658 crore.

Shares in RIL opened at Rs 851.00 apiece on Friday and were seen trading at Rs 857.50 apiece as of 9:32 a.m. on the BSE, up 0.76 per cent from the previous close.