It’s easy to lose track of Reliance Industries’ (RIL) acquisitions, especially in retail and e-commerce.
Last week, the behemoth picked up a majority stake in fashion label Abraham & Thakore for an undisclosed sum. RIL had kicked off 2022 by writing a US$200 million cheque for a 26% stake in quick commerce startup Dunzo. A few months earlier, it spent US$470 million for over 40% of online listings company Just Dial.
On its own, the acquisition spree is incredible. Couple it with the fact that Reliance is India’s largest retailer by a distance, and you see why investors can’t control their excitement. An analysis by The Ken of eight global and Indian brokerages’ recent reports on RIL shows that six of them value the retail vertical higher than the company’s other two key businesses—refining and petrochemicals, and digital services (which includes India’s leading telco, Reliance Jio Infocomm).
The retail arm is estimated to be worth anywhere between US$80 billion and US$125 billion, accounting for 30-40% of RIL’s total valuation. Its holding company was worth ~$62 billion at the time of its fundraise in November 2020. RIL shares are currently trading lower, with its market cap at under US$200 billion.
The bullishness on Reliance Retail’s prospects is despite the vertical’s revenue in the year ended March 2021—Rs 1,62,940 crore (US$21.5 billion)—being just 40% of the topline of refining and petrochemicals, Reliance’s largest business. And its Ebitda Ebitda Ebitda Earnings before interest, taxed, depreciation, and amortisation; it's a measure of a company's operating profitability. —Rs 9,650 crore (US$1.3 billion)—was a similar percentage to what digital services, the company’s most profitable segment, brought in.
“Their positioning is exciting—they do value retail,” says a retail analyst with a domestic brokerage. It’s not for nothing that India’s largest listed retailer by market capitalisation is DMart, a supermarket chain that prides itself on discounts. “Purely by the power of their cash, they can build a successful online business,” the analyst adds. Reliance’s cash pile as of March 2021 stood at a whopping Rs 17,400 crore (US$2.3 billion). The analyst and several others quoted in the story requested anonymity since they are not authorised to speak to the media.
Given these numbers, it’s not surprising that Reliance Retail is one of the hottest stocks in the unlisted market. Its shares have more than doubled in the past year, with its market cap—US$207 billion—more than its parent’s. DMart, on the other hand, has risen just 25% in the same period. There is undoubtedly a scarcity premium to the stock, but the rally is also driven by Reliance Retail’s fundamentals, says Manan Doshi. He is co-founder of Unlisted Arena, which allows investors to buy and sell shares of companies that haven’t gone public. “If you merge all the other retailers, Reliance will still be bigger.”
If you are rushing to buy some Reliance Retail shares, though, you may want to hold on.