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Friday, 7 August 2020

Reliance Retail off-market valuation more than doubles this year amid Future deal buzz

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Increased activity in the shares of Reliance Retail has also been attributed to the rush of investments flowing into Reliance Jio.

New Delhi: Off-market valuation of Reliance Retail has more than doubled in this year as the deal buzz with Future Group reaches a crescendo. According to a report in the Economic Times, shares of Reliance Retail are trading between Rs 1,225 and Rs 1,250 apiece in off-market trade as compared to Rs 500 in December 2019. At this price, Reliance Retail is valued at more than Rs 6 lakh crore, analysts say.

The current market capitalisation of Reliance Industries is Rs 13.5 lakh crore, while the equity value assigned to Reliance Jio is nearly Rs 5 lakh crore.

“Investments flowing into Reliance Jio and the anticipation of a deal with the Future Group have made this stock a darling of investors; it recently hit a high of 1,350,” Rahul D Thalia, director, Sarffin Financial Advisors, told the business daily. “Investors should understand the market capitalisation at this price point. The price increase in the off-market is simply because of a demand-supply mismatch and considering further dilution, the market cap at 1,250 could touch valuations of 8.12 lakh crore.”

Increased activity in the shares of Reliance Retail has also been attributed to the rush of investments flowing into Reliance Jio. So far, 11 global investors have bought 25.09% stake in Jio platforms for Rs 1.18 lakh crore. RIL has also separately raised Rs 53,124 crore through a rights issue.

According to an earlier ET report, RIL is also close to buying out a majority stake in the Kishore Biyani-led Future Group, a move that will eliminate competition for the Mukesh Ambani-owned company and boost growth prospects at Reliance Retail.

RIL holds about 99.95% stake in Reliance Retail and the remaining 0.5% stake which is about 25 lakh equity shares have been distributed to the senior management. At present, less than 5 lakh shares from that float are in circulation in the unlisted market, the publication mentioned.

“If Future Retail is being bought by RIL, DMart is the only company it will compete with. Given all these facts, the current valuations are too high and (the shares) should eventually settle at a lower price when the euphoria around the money flowing into Reliance Jio fades,” the business daily quoted another investment banker, who trades in Reliance Retail shares, as saying

At the end of March 2019, Reliance Retail had a revenue of Rs1.3 lakh crore, almost double of that in the year prior. It posted a full-year Ebitda of Rs 6,201 crore. Reliance Retail operates 10,415 stores covering over 22 million square feet of retail space.