The valuation of Reliance Retail (RRL’s) has inched upwards of $100 billion, according to estimates by brokerages. Based on this, only three other companies — RIL, TCS, and HDFC Bank — have higher valuations.
Reliance Industries on Friday proposed to reduce the share capital of its unlisted subsidiary by buying it back from shareholders, other than promoters and holding company, at Rs 1,362 per share — based on the valuation by two independent valuers, it had said in an exchange update.
“Accordingly, we estimate equity value for RRVL at Rs 8.60 trillion or $105 billion, given RRVL’s EBITDA is 2-4% higher than that of RRL, as it also has a few other investments/assets apart from its stake in RRL,” said the JM Financial report.
A UBS report says besides RRL, RRVL owns other businesses (Reliance Brands, Justdial, Reliance Consumers, etc), thus implying a higher value for RRVL.
“We value RRVL at $110 billion and RIL’s 85% stake in RRVL at $93 billion. We think this sets a floor price to future value unlocking, and should bring confidence to retail business value in the SoTP (sum of the parts),” says the bank.
RIL plans to buy back shares trading in the grey market and offer to employees as stock options, and will extinguish the shares once approvals are in place. It owns an 85.06% in Reliance Retail Ventures — the entity that owns 99.93% in RRL. The remaining 7.86 million shares are held by others.
JP Morgan values the conglomerate’s retail business (RRVL + RRL) at an enterprise value of $112 billion, based on FY24 financials. It says that though RIL does not provide details on entity-wide debt, its FY22 annual report of RRL implied a net debt of Rs 40,000 crore (close to $5 billion), which could have likely increased in FY23 thanks to multiple acquisitions and capexincurred by the retail business in FY23.
“Assuming a net debt of $12 billion at Retail, the implied equity value in our current SoTP stands at $100 billion. This is closer to the $92-$96 billion valuation by the valuers of RRL, and does not take into account the logistics and warehousing services provided by RRVL. It is also at a sharp premium to the transacted value in 2020,” says the report.