KKR hikes stake in Reliance Retail Ventures, brokerages estimate fair value at Rs 1,200

Shares of Reliance Industries opened higher on September 12, a day after global investment firm KKR said it increased its stake in Reliance Retail Ventures.
The KKR deal makes Reliance Retail Ventures one of the top four Indian companies by net equity value in the country.
On September 11, the global investment firm invested Rs 2,069.50 crore in the company for a pre-money net worth of Rs 8,361 lakh crore. This follows Qatar Investment Authority’s investment of Rs 8,278 crore in RRVL on August 24 at a pre-money value of Rs 8.27 lakh. This is essentially the same funding round, with a valuation close to $10 billion. However, at 9:34 am, Reliance Industries shares pared their opening gains and were trading at Rs 2,467.40 on NSE, down 0.2 per cent.
KKR’s current investment, combined with the investment made in 2020, will bring its total stake in RRVL to 1.42% on a fully diluted basis. RRVL’s previous capital raising in 2020 from various global investors was done at a pre-money equity value of Rs 4.21 lakh crore.

As the retail arm grows, brokers are also becoming more and more optimistic about this division. Based on RIL’s current market price, brokerages value Reliance Retail at Rs 1,100 to Rs 1,200 per share on a sum of parts basis. After QIA’s investment, foreign brokerage firm CLSA said: “It will be interesting to see whether this is a longer share sale cycle by Reliance or just a one-off transaction.” confirms this new reference point in terms of valuation. Additionally, it can help establish a soft floor for retail pricing.

CLSA pegs Reliance Retail’s fair value at Rs 1,181 based on FY25 earnings. Jefferies pegs it at Rs 1,111 per share.
The fresh investments come a month after the group announced that shares held by minority investors in Reliance Retail Ltd would be canceled and destroyed. RRVL owns 99.91% of Reliance Retail, with the remaining 0.09% held by non-promoter shareholders.
Apart from Reliance Retail, RRVL also has other subsidiaries and joint ventures such as Reliance Brands and Marks & Spencer, which oversee the rest of its clothing and other retail operations.
The Ambani family is focusing on the retail sector to become the group’s most dynamic business. This will be driven by Indians becoming wealthier, companies opening more stores and making shopping easier on mobile and digital devices.
“I am confident that as India moves from a $2,500 per capita economy to a $10,000 per capita economy, Reliance Retail will be our fastest growing business in terms of revenue and growth .

In FY23, the retail business contributed 12% to group EBITDA, compared to 7% in FY19. The retail business expanded its network to over 3,300 stores new in FY23, taking the total store count to 18,040 stores across India. This represents approximately 22% growth over the previous year.

“Reliance Retail currently meets more than 90% of the daily needs of Indian households; and now serves over 98% of India’s PIN codes through integrated online and offline channels,” Mukesh Ambani said at the Annual General Meeting.