Saudi Aramco and Reliance Industries Limited (RIL) on Monday announced that they have agreed to a non-binding Letter of Intent (LOI) for a proposed investment in the Oil to Chemicals (O2C) division comprising the Refining, Petrochemicals, and fuels marketing businesses of RIL. Saudi Aramco’s potential 20% stake is based upon an enterprise value of $75 billion for the O2C division. In comparison, RIL’s latest market value (as on Aug 9) is $103 billion.
The deal with Saudi Aramco, touted as one of the largest foreign direct investments (FDI) ever into India, will benefit RIL on many counts. One is it will help in deleveraging in businesses such as oil and chemicals, fiber and tower, and as RIL chairman Mukesh Ambani said at the annual general meeting today, the company aims to become a “zero debt company in the next 18 months”. The deal is likely to lead to re-rating of the stock. This means the equity mutual funds – and by extension MF investors – with the highest exposure to RIL will be biggest beneficiaries. RupeeIQ looks at which funds have the highest exposure to RIL stock.
Equity oriented funds
Our quick analysis of mutual funds holding Reliance Industries shares shows us that about 370 funds, as on July 31, held the stock in their individual portfolios. Out of the 370 funds holding, about 240 funds are equity-oriented schemes and the rest are in hybrid schemes. In total, RIL stock is a Rs 37,000-crore bet by Indian MF industry.
Over the last 3-years, RIL stock has given 31% CAGR, beating the Sensex’s 10% CAGR by a handsome margin. Although the stock recently lost close to 20% as there were concerns of increasing leverage in the business (as per Credit Suisse report, about $65 billion debt). But today’s news of Aramco investment and other asset monetisation exercises are bringing comfort at the Reliance counter.
So which of some of the biggest and actively managed equity funds stand to gain from their exposure to RIL stock? The answer is below. We have compiled the list of top 10 equity and hybrids funds that have the highest exposure to RIL stock. But before you read it, here is what analysts are saying about the RIL-Aramco deal.
Gagan Dixit, Oil & Gas analyst, Elara Capital says: “Combined value of refining plus petchem (petrochemical) by Aramco at $75 billion is positive. It would provide much-needed capital for oil to chemicals expansion plans in a phased manner over next decade as mentioned by RIL FY19 annual report, for which we estimate 12 mn MT rise in petchem capacity should require another $11 billion in long term. But in near term, it’s a positive development that Rs 1.05 trillion available from Aramco and Rs 0.8-0.9 trillion/annum operating cash flow would help de-leverage RIL within two years.”
Ajay Bodke, CEO, PMS, Prabhudas Lilladher, feels the stock market is going to heartily welcome the seminal announcement by India’s largest & most respected company RIL of 20% stake sale in its oil-to-chemical (OTC) business to the world’s largest oil company Saudi Aramco. “This program to aggressively pursue deleveraging in businesses such as OTC, fiber & tower and emerge as a zero debt company in the next 18 months will strengthen the consolidated balance-sheet leading to strong valuation re-rating of the stock. RIL continues to remain as the pre-eminent play on the Indian economic juggernaut that is likely to touch USD 10 trillion by 2030.”
The biggest funds in MF mart like HDFC Balanced Advantage Fund, SBI Equity Hybrid Fund, ICICI Prudential Balanced Advantage Fund, Kotak Standard Multicap Fund, HDFC Equity Fund, SBI Bluechip Fund, Aditya Birla Sun Life Frontline Equity Fund and Mirae Asset Large Cap Fund all have exposure to RIL stock.
Now, here is the list of some of the biggest and actively managed funds that hold maximum exposure to RIL stock. For your convenience, we have removed the close-ended schemes and arbitrage schemes.
Top 10 actively managed funds most exposed to RIL
|Equity fund name||% net asset||Fund AUM Rs Cr|
|HDFC Balanced Advantage Fund||3.52||41472|
|SBI Equity Hybrid Fund||1.65||29408|
|ICICI Prudential Balanced Advantage Fund||2.09||27798|
|Kotak Standard Multicap Fund||6.07||24959|
|HDFC Equity Fund||5.1||22215|
|SBI Bluechip Fund||2.56||21585|
|Aditya Birla Sun Life Frontline Equity Fund||4.34||20584|
|HDFC Top 100 Fund||7.66||17905|
|Mirae Asset Large Cap Fund||5.5||13492|
|Aditya Birla Sun Life Tax Relief 96 Fund||7.64||8416|
|Data as on Jul 31, 2019|
In terms of highest % net asset alone, JM Large Cap Fund, DSP Equity Savings Fund and HSBC Large Cap Equity Fund have the largest exposures, each with 8% of net asset in RIL stock.
Index funds and ETFs
The biggest exposure i.e. % of net asset, is undoubtedly in exchange-traded funds and index funds. Reliance ETF NV20 and ICICI Prudential NV20 ETF each have 14% of their fund’s money in RIL stock.
Here is a list of the top 10 index funds and ETFs that hold maximum exposure to RIL stock. For your convenience, we have removed the close-ended schemes.
Index funds and ETFs top 10 most exposed to RIL
|Equity fund name||% net asset|
|Reliance ETF NV20||14.45|
|ICICI Prudential NV20 ETF||14.24|
|LIC MF Index-Sensex Plan||9.87|
|UTI Sensex Exchange Traded Fund||9.85|
|HDFC Index Fund – Sensex Plan||9.83|
|HDFC Sensex ETF||9.83|
|LIC MF Exchange Traded Fund – Sensex||9.82|
|ICICI Prudential Sensex ETF||9.8|
|Reliance ETF Sensex||9.79|
|Aditya Birla Sun Life Sensex ETF||9.78|
Read the RIl-Saudi Aramco official deal announcement details here.
Disclaimer: Views expressed here in this article are for general information and reading purpose only. They do not constitute any guidelines or recommendations on any course of action to be followed by the reader. The views are not meant to serve as a professional guide/investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument.