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Reliance Industries shares hit new record

Reliance Industries shares hit new record

Last updated: 10 Sep, 2020 | 08:58 am

Reliance Industries shares hit new record
  • Reliance Industries shares zoomed more than 6% this afternoon to hit a fresh record high of ₹2,343.90 after reports that Reliance is looking to sell 40% stake in its retail unit to Amazon for $20 billion
  • “With today’s surge in stock price, Reliance Industries has become the first Indian company to command a market capitalization of $200 billion (₹14.60 lakh crore)”

Reliance Retail update

  • Reliance Industries is looking to sell 40% stake in its retail unit to Amazon.com Inc. for $20 billion, according to a Bloomberg report
  • PE firm Silver Lake picked up a 1.75% stake in Reliance Retail Ventures for ₹7,500 crore, valuing the retail vertical at ₹4.21 lakh crore or $57 billion. Silver Lake had already invested about ₹5,656 crore to pick-up 1.15% stake in Reliance Jio Platforms
  • Apart from this, there are also reports saying that Reliance Industries is set to draw additional investments worth $5 billion from KKR and Co., Mubadala Investment Co. and Abu Dhabi Investment Authority (ADIA). These PE firms are investors in Reliance Jio Platforms too.

What makes Reliance Retail attractive?

  • “Reliance Retail is the fastest-growing retailer in the world. In the last five years, the revenues in the retail business have grown 8 times and profits have multiplied 11 times.”
  • Reliance Retail had reported a consolidated turnover of ₹162,936 crore and net profit of ₹5,448 crore for the year ended March 31, 2020.

  • Reliance Retail has consolidated its dominant market positioning in offline retail through its recent acquisition of retail, wholesale, logistics & warehouse business of Future Group. It also aims to digitise kirana stores through its new commerce business.
  • The recent deal with Future Retail will help Reliance Industries to further expand its position, adding over a network of nearly 1,800 stores and brings in Rs 26,000 crore in additional sales to create a Rs1.89 lakh crore ($26 billion) retail empire, seven times bigger than its nearest rival Avenue Supermarts, that runs D'Mart
  • ‘Grocery, which contributed to about ₹35,000 cr in FY20, has emerged as a very important segment under Reliance Retail. With this acquisition of Future Retail, Reliance Retail will become the largest grocery player in the country with close to Rs 65,000 crore of business.’ Reliance Retail and WhatsApp have announced creating a JioMart platform using WhatsApp and to support small businesses on WhatsApp.

INDmoney Analysis

  • In the last few years, Reliance Industries has shifted its focus away from Oil & Refinery towards its Consumer Businesses. The Consumer Business (which includes Reliance Retail, Reliance Jio and Media & Entertainment) now account for more than 35% of the overall Consolidated EBITDA (in FY20).
  • As it stands today, the future growth and the roadmap of the company is oriented towards its consumer businesses (Reliance Retail, Jio and Jio Platforms). These high growth areas have driven the valuations in the stock and will continue to do so.

Do read our previous blog (July 19th), where we tried to estimate Reliance Industries share price value using Sum-of-the-parts valuation.

We are a SEBI registered investement advisor