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QIA to invest in RRVL; 0.5% dilution for RIL shareholders QIA picks 0.99% stake for INR82.8b

Deal reaffirms RRVL’s robust valuation

* Reliance Industries (RIL) has announced that Qatar Investment Authority (QIA) would invest INR82.8b in Reliance Retail Ventures Ltd (RRVL) through a wholly owned subsidiary. This investment is set at a pre-money equity valuation of INR8.3t. At an estimated net debt of INR332b in FY25, the RRVL’s enterprise value stands at INR8.6t and equity per share value stands at at INR1,200.

* Compared to previous deals in FY20 where the company raised ~INR473b at EV/EBITDA of ~25x in FY25 and average equity value of INR710 per share. EV has almost doubled to INR8.6t from INR4.4t. The valuation aligns with prior transactions, hovering around ~27x EV/EBITDA based on a 2-year forward. Notably, EBITDA has doubled in the last three years, reaching INR179b in FY23. We have assigned 37x EV/EBITDA on FY25E, arriving at an EV of INR11.7t, with a per share value of INR1670 (INR1485 for RIL).

RRVL’s core business garnering steady scale and profitability

* RRVL, a subsidiary of RIL and the holding entity of its retail operations, maintains a diverse portfolio including consumer electronics, food and grocery, and fashion and lifestyle segments. It is also present in petro retail and connectivity businesses, catering to RJio’s customer base. In addition to Reliance Retail, RRVL has other subsidiaries and JVs such as Reliance Brands and Marks & Spencer, which oversee the remaining apparel/other retail operations.

* RRVL’s revenue/EBITDA stood at INR2.6t/INR179b in FY23. We expect the company to deliver revenue/EBITDA CAGR of 25%/34% over FY23-25 to reach INR4.1t/INR320b by FY25. Its core revenue/EBTDA including grocery, fashion and lifestyle as well as consumer electronics (excluding connectivity and petro retail) currently stands at INR1.7t/INR155b.

Valuation and view

* We estimate RRVL’s revenue/EBITDA CAGR at 25%/34% to INR4.1t/INR320b in FY25. Of this, core revenue/EBITDA should contribute 72%/90%, i.e,. INR2.6t/INR290b.

* With the QIA’s stake in RRVL increasing by 0.99%, RIL’s ownership in RRVL has decreased to 88.9% (earlier 89.9%). This resulted in a slight reduction in RRVL’s value within RIL’s SOTP to INR 1,485 (vs. INR 1,500 before). This dilution impacted RIL’s SOTP valuation by ~INR15 (0.5% of RIL SOTP).

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