Reliance Industries listing plans for its retail arm may yet just be on the drawing board, but investors are already valuing the business way above those of its listed peers. Valuations of Reliance Retail, India’s biggest retailer by revenue, crossed Rs 2.5 lakh crore last week in the unofficial market, or 75 percent more than the market capitalization of seven listed rivals put together.
Reliance Retail valuations dwarf those of Avenue Supermarts, owner of DMart, Future Retail, Trent and Spencer’s put together. Reliance Industries’ market capitalization is Rs 8.04 lakh crore. The limited supply of Reliance Retail shares has driven up prices by 30-40 percent in the grey market.
Reliance Retail became the first domestic retail company to post more than Rs 1 lakh crore in annual revenues. The company’s income in 2018-19 stood at Rs 1,30,556 crore, 89 percent more than the previous year’s Rs 69,198 crore. It reported Rs 6,201crore as profit before depreciation, interest, and taxes (PBDIT) for the year against Rs 2,529 crore in FY18, an increase of 145 percent.
The oil-to-telecom conglomerate has been looking at various options to reduce debt but has not decided on the specifics.
At Rs 500 apiece, Reliance Retail is at a Price to Earnings ratio (PE) — a popular valuation measure — of 200 times its FY2019 net profit. Its domestic competitors, Avenue Supermarts and Future Retail, are trading at 93 times and 33 times their FY19 earnings.
Global retail giant Walmart is currently trading at a PE of 22 while Tesco and Carrefour are traded at 17 times and 21 times, respectively.
