Reliance on path of unlocking value across business segments
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Reliance Industries is on the path of unlocking value across business segments, evident from the recent IPO of Jio Financial Services (JFS), buyout of minorities/potential investor in Reliance Retail and the stabilizing of Telecom capex, foreign brokerage, Bernstein said in a report.
The report analyses the potential unlocking opportunities across businesses with 'path to potential IPOs' a key medium term catalyst.
Reliance has sold strategic stakes over the years across various business - E&P stake sale to BP in 2011, 10 per cent stake in Reliance Retail and 33 per cent stake in Jio platforms to global investors in 2020.
Recently it de-merged Jio Financial Services (JFS) into a separate listed company.
Reliance has been unlocking value across segments. RIL bought out minority shareholders in Reliance Retail (RR) with a share buyback, the report said.
Recent news article reported that a new investor is expected to buy 1 per cent stake in RR at $100 billion valuation. RRVL (hold co) had sold stake sales of 10 per cent to financial investors in 2020.
JPL (Jio platforms) has 33 per cent global investors and could be on IPO route in short/medium term. Capex cycle stabilizing. Jio has completed 60 per cent 5G roll out and capex is expected to stabilize from FY25/26 as earnings scale up.
Digital/Telco represent 35-40 per cent of total EBITDA over the next 5 years while Retail (offline + online) will expand to 15-20 per cent, the report said.
Reliance targets to fund future capex from operating cash flow and maintain net debt to EBITDA of less than 1x. Net debt to EBITDA was 0.6x in FY23.
Reliance has repositioned the company to focus on four key growth pillars: Expansion of O2C business into downstream chemicals with investments by strategic partners. The company has build out of Reliance Retail (18K stores) & scaling omnichannel (eCommerce mix at 18 per cent).
The Telco/Jio platform segment is expanding (currently 450 Mn subs) with 5G rollout and the company continues to scale up in new energy by accelerating investments in energy transition.
Jio Platforms has 33 per cent global investors, Retail has 10 per cent investors. The company has not diluted stake in the new energy segment, the report said.
