 "Reliance Retail")
The Qatar Investment Authority (QIA), a sovereign wealth fund, is in talks with Reliance Industries Ltd (RIL) to invest up to $1 billion to buy a 1 per cent stake in the latter’s retail business-holding firm, Reliance Retail Ventures Ltd (RRVL), according to banking sources. The fund’s investment values RRVL at around $100 billion.
The Mukesh Ambani-owned firm is looking at ways to unlock the potential of its retail and telecom arms by listing them.
The QIA’s investment at the $100 billion valuation also means sizable gains by a slew of private equities that had invested close to $6.38 billion to pick up 10.09 per cent in RRVL in 2020.
Those investors included KKR & Co and Saudi Arabia’s Public Investment Board (see chart). RIL and its associate firms own the rest of the stake in RRVL.
An RIL spokesperson said: “The company evaluates opportunities on an ongoing basis. As a principle, we do not comment on market speculation and rumour.” A QIA spokesperson declined to comment.
In a recent report, JM Financial valued RRVL at $105 billion, saying the company’s Ebitda (earnings before interest, taxes, depreciation, and amortisation) in fiscal 2023 was 2-4 per cent higher than that of its subsidiary, Reliance Retail Ltd, because it has few other assets apart from its stake in RRL.
Since 2015, RIL has built Reliance Retail into an 18,000-store nationwide chain with sales of $30 billion, making it an attractive investment prospect for foreign investors.
The implied valuation of RRVL was 5-10 per cent higher than JM Financial’s previous $90-100 billion for the entire retail business.
The valuation was based on Reliance Retail’s recent announcement that equity shares of 0.04 per cent held by non-promoters would be extinguished at a potential outflow of Rs. 500 crore.
At the same time, JM Financial said, based on an independent calculation of Rs. 850-900 a share, the implied valuation for Reliance Retail was $100 billion.
In the June quarter, Reliance Retail reported revenue of Rs. 69,948 crore, rising 19.5 per cent year-on-year and led by growth in groceries, consumer electronics, and fashion and lifestyle products.
The firm delivered an Ebitda of Rs. 5,139 crore, up 33.9 per cent on a YoY basis.
“Beyond earnings, we believe potential value unlocking via stake sales/IPO/listings could be a material stock price driver over the next 2-3 years. We go back to the Chairman’s closing comments in last year’s AGM (annual general meeting) where he talked about doubling RIL’s market cap in five years and next-gen leaders taking over businesses, and this points to value unlocking in RIL,” wrote analysts at JP Morgan, referring to Ambani’s speech.
