Mukesh Ambani's RIL may list retail arm Reliance Retail Ventures in 2019

Buoyed by rising sales of its retail arm, Reliance Industries (RIL) is considering listing Reliance Retail on the domestic stock exchanges by mid-2019 to unlock value. The blockbuster listing of Avenues Supermarts, a much smaller company which runs D-Mart brand of superstores, has prompted Mukesh Ambani-owned company to fast forward its plans and is in talks with investment bankers, say sources.
 
In October, Reliance Retail was valued by global brokerage firm Jefferies at Rs 1.4 trillion on discounted cash flow model but peer-based valuations could imply Rs 2 trillion. Avenues Supermarts market value was Rs 882 billion as of Tuesday’s closing.
 
When contacted, a RIL spokesperson said the company did not comment on media speculation and rumours. “Our company evaluates various opportunities on an ongoing basis. We have made and will continue to make necessary disclosures in compliance with our obligations under Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015 and our agreements with the stock exchanges,” the spokesperson added. Analysts said the stock markets were giving a premium to the RIL stock given the higher growth being witnessed in the retail sector of 20 per cent plus per annum earnings growth. “We factor in revenue growth of about 25 per cent, 24 per cent and 19 per cent over FY18-20E for the grocery, consumer electronics and fashion & lifestyle business segment respectively,” Jefferies wrote to its clients in October.
 
While Reliance is planning to list its subsidiary based on rising demand from India, the Aditya Birla group exited the organised grocery retailing sector citing mounting losses.  In September, the Birla group said it had sold its grocery retail arm More to Samara Capital and Amazon.

The acquirers took over a debt of Rs 42 billion of Aditya Birla Retail. The Birlas exited the sector with close to a billion-dollar loss. Another rival, the Future Group, is in talks to sell a 10 per cent stake to Amazon. Reliance Retail, on the other hand, reported that its revenue had more than doubled for a fourth quarter in a row to Rs 324.4 billion for the September quarter. In the same period, RRL reported a rise of 273 per cent in its earnings before interest and tax (Ebit) at Rs 12.4 billion.
 
Reliance operates its retail business through its subsidiary Reliance Retail Ventures, which, in turn, is the holding company for various retail businesses. The key subsidiaries of Reliance Retail Ventures are Reliance Retail and Reliance Brands.
 
While Reliance Retail is the largest subsidiary of the company that houses the grocery, fashion and lifestyle, connectivity, electronics and petro retail (through a separate subsidiary) business, Reliance Brands houses the partnership JVs with the international brands.
 

In 2019, Reliance is also planning to double the capacity of its oil refinery in Jamnagar for Rs 730 billion to process 30 million tonnes of crude oil per annum.