QIA deal reaffirms Reliance Retail Venture’s $100 billion valuation, say brokerages

Qatar Investment Authority will pick up a 0.99 percent stake in Reliance Retail Venture Limited for Rs 8,278 crore

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Qatar Investment Authority’s (QIA) Rs 8,278-crore investment for a 0.99 percent stake has cemented Reliance Retail Venture Limited’s (RRVL) valuation in-line with earlier estimates of Rs 8.28 lakh crore, or $100 billion, brokerages have said.

“With Jio Financial Services listing, we believe this investment could raise expectations of positive updates on final listing of RRVL,” foreign broking firm Citi said in a note, a day after the decision was announced.

It has a “buy” rating on Reliance Industries, which now holds 88.9 percent in RRVL, with a target price of Rs 2,750.

Also Read: QIA to invest $1 billion in Reliance Retail for 0.99% stake

In its previous raise round in 2020, RRVL drew an aggregate amount of Rs 47,625 crore from various global investors at a pre-money equity value of Rs 4.21 lakh crore.

This indicates that the company’s valuation has doubled in three years.

The company’s earnings before interest, taxes, depreciation and amortisation (EBITDA), too, has doubled in the last three years and stood at Rs 17,900 crore in FY23, domestic broking firm Motilal Oswal Financial Services said.

“We have assigned 37x EV/EBITDA on FY25E, arriving at an EV of Rs 11.7 lakh crore, with a per share value of Rs 1,670. This translates to Rs 1,485 in RIL share price,” it said.

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The deal comes a month after the conglomerate announced that the shares held by minority investors in Reliance Retail Ltd would be cancelled and extinguished.

RRVL holds 99.91 percent of Reliance Retail with the remaining 0.09 percent being held by non-promoter shareholders.

Along with Reliance Retail, RRVL also has other subsidiaries and joint ventures such as Reliance Brands and Marks & Spencer, which oversee the remaining apparel and other retail operations.

MOFSL expects RRVL to deliver revenue/EBITDA CAGR of 25 percent/34 percent over FY23-25 to reach Rs 4.1 lakh crore/Rs 32,000 crore by FY25.

Reliance Retail, with its leading number of stores and growing online platforms, investments throughout the buying and selling process, and history of successful execution, is well positioned to be at the forefront of the industry in the next decade, the company said in its annual report.

The company said the spending habits of people in India were set to grow due to many long-lasting factors. These include a young population, rising average income, growing aspirations fuelled by cheap internet access, and better access to both physical stores and online shopping in rural areas.

Disclaimer: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.

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