The retail arm of Reliance Industries, Reliance Retail is now valued at nearly twice that of its oil-to-chemicals (O2C) business, brokerage Bernstein said in its latest report on Wednesday.
The brokerage projects a valuation of $112 billion for its retail business, almost double the $57 billion valuation of its O2C division. The research firm has valued Jio Platforms, the company’s telecom arm, at $77 billion and the renewable energy business at $17 billion.
The reasons for the steep valuation of the retail business, including expansion of offline stores as well as JioMart and new commerce, partnerships with local kirana stores, potential margin expansion from scale and the anticipated initial public offering (IPO) of Reliance Retail.
The brokerage said: “Reliance has been unlocking value across segments. RIL bought out minority shareholders in Reliance Retail (RR) with a share buyback.” It also pointed to reports that a new investor is expected to buy 1% stake in RIL’s retail arm at a $100-billion valuation. Reliance Retail Ventures (RRV) had sold a 10.09% stake to financial investors in 2020 at a valuation of $57 billion. Since then, the retail arm’s valuation has almost doubled.
Bernstein also expects an increase in Reliance’s Ebitda (earnings before interest, tax, depreciation, and amortisation), from Rs 1.5 trillion in FY23 to Rs 2.4 trillion in FY27. This is likely to be driven primarily by growth in digital retail and new energy.
In terms of capacity expansion, Bernstein projects that RIL’s retail expenditure will reach Rs 18,900 crore by FY27, constituting approximately 19% of the conglomerate’s overall capital expenditure (capex). It expects this to moderate as store expansion slows down.