According to banking sources, the Qatar Investment Authority (QIA), a sovereign wealth fund, is currently in discussions with Reliance Industries Ltd (RIL) to make a significant investment of up to $1 billion. The investment aims to acquire a 1 per cent stake in Reliance Retail Ventures Ltd (RRVL), the holding firm for RIL’s retail business. As per the discussions, the proposed investment by the QIA would value RRVL at approximately $100 billion.
The firm owned by Mukesh Ambani is exploring options to unleash the potential of its retail and telecom divisions through public listings.
At the $100 billion valuation, the Qatar Investment Authority’s investment would result in significant profits for several private equity firms that had previously invested approximately $6.38 billion to acquire a 10.09 per cent stake in RRVL back in 2020.
The list of investors comprised KKR & Co and Saudi Arabia’s Public Investment Board. The remaining stake in RRVL is held by RIL and its affiliated companies.
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.
According to a recent report by JM Financial, RRVL was valued at $105 billion. The report highlighted that the company’s Ebitda (earnings before interest, taxes, depreciation, and amortisation) for fiscal year 2023 was 2-4 per cent higher than its subsidiary, Reliance Retail Ltd. This was attributed to RRVL having relatively fewer assets apart from its stake in RRL.
Since 2015, Reliance Industries Ltd (RIL) has undertaken a remarkable journey, transforming Reliance Retail into a nationwide powerhouse boasting an impressive network of 18,000 stores. Its remarkable sales of $30 billion have captured the attention of foreign investors, making it an enticing and attractive prospect for investment.
The implied valuation of RRVL surpassed JM Financial’s previous estimate of $90-100 billion for the entire retail business by 5-10 per cent.
The valuation was determined based on Reliance Retail’s recent announcement regarding the extinguishment of equity shares, amounting to 0.04 per cent, held by non-promoters. This move is anticipated to result in a potential outflow of INR 500 crore.
Simultaneously, JM Financial stated that, following an independent calculation of INR 850-900 per share, the implied valuation for Reliance Retail amounted to $100 billion.
During the June quarter, Reliance Retail witnessed substantial growth, with revenue amounting to INR 69,948 crore, marking a remarkable 19.5 per cent increase compared to the previous year. This growth was primarily driven by the impressive performance of its groceries, consumer electronics, and fashion and lifestyle product segments.
The company achieved a commendable Ebitda of INR 5,139 crore, indicating a significant YoY growth of 33.9 per cent.
“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.
