Target: ₹3,050

CMP: ₹2,924.75

Reliance Industries, Viacom 18 and Disney have announced a binding agreement to form a joint venture to merge the media undertakings of Viacom18 (which includes JioCinema) and Star India (Colors, StarPlus, StarGOLD, Star Sports and Sports18).

RIL will invest ₹1,150 crore in the JV for its growth strategy; however, it highlighted that the transaction values the JV at ₹70,400 crore. The JV will be controlled by Reliance, which will have 16.34 per cent stake; Viacom18 will own 46.82 per cent and Disney 36.84 per cent.

Given that RIL’s effective stake in Viacom18 is about 71 per cent, RIL’s effective stake in the JV could be 49.6 per cent. Hence, net value from the JV for RIL could be ₹23,400 crore or ₹35/share (which is 49.6 per cent of ₹70,400 crore less ₹11,500 crore of investment to be done by RIL).

We reiterate Buy on RIL (unchanged TP of ₹3,050) as we believe net debt concerns are behind us, and also because RIL has industry leading capabilities across businesses to drive robust 14-15 per cent EPS CAGR over the next 3-5 years.