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Friday, June 17, 2011

Mid Cap Stock To Buy - RIIL

I recently came across a discussion on this mid cap stock recommended as multi bagger stock to buy. What is in Reliance Industrial Infrastructure that it has potential to be a multi bagger stock for investors?

Reliance Industrial Infrastructure (RIIL) is a Reliance group company from Mukesh Ambani’s stable. Reliance Industries directly holds 45.45% stake in RIIL. Reliance Industries is the promoter of company and they created this entity around 5 - 6 years back.

If you look at the financial numbers, company has no exemplary performance in past that may indicate towards possibility of bright future performance. It is a company with completely flat financials for past 5 years and no growth achieved at all.

What does RIIL do? Company owns roughly 56 kilometers of pipeline to transport the crude oil from Chembur to Patalganga plant. Company does not do anything except managing this pipeline as on today. It was doing same thing for past 5 years in a row with almost same revenue and profits. The EPS was around Rs 15 steady. At current stock price, RIIL has market cap of less than Rs 1,000 crore.

So essentially RIIL is a sleeping company doing only one business at the same scale for years. But that seems to be changing now. Recently Reliance Industries has acquired 74% stake in Bharti AXA Life and Bharti AXA General Insurance. Out of this 74%, 17% stake is acquired by RIIL. RIIL as a company has net worth of Rs 200 crores, out of this, Rs 170 crores is a cash.

Taking this development as a trigger, Reliance group management should have some plan for this company now. Being a Reliance company, RIIL cannot stay lagging for long for sure. When they start getting into such new businesses for growth, we would see the movement in company and so financials.

If the RIL plans more for RIIL in near future, this company can be well on it’s path to become a large cap soon. And so would grow the numbers with appreciation in stock price. RIIL stock trades at P/E of 35 for these hopes. It had touched almost Rs 3000 on such hopes in past. If business starts moving, stock price would certainly fetch big investment returns for sure. One may buy stocks of RIIL on these hopes for long term portfolio investment.

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