With Qatar Sovereign Fund’s investment into Reliance Retail, I mean, the retail valuation has gone up 2x in about three years. Do you think this move could act perhaps as a soft floor to Reliance Industries, if not significant upside?
It certainly establishes a value that everybody in the research reports have read that Reliance Retail would be valued at 1300, 1400, 30 times sales or 33 times EV to EBITDA, so various numbers based on growth patterns and number of outlets they have established so far.
Based on what I can make out, Qatar, is it the first investment which they have accepted or like three years back in COVID they will accept a few more rounds of investment before they plan the listing.
So, how Mukesh Ambani’s speech on AGM on Monday, 28th, pans out on this direction that needs to be seen but it is definitely a direction that now three years are done for the previous round of investment, which had come in at half the value than what current round has happened so Reliance Retail future looks promising because these people will be investing more and more money in rolling out more outlets, more formats.
Now Jio Financial will be supporting all the retail distribution and marketing in terms of financing and the competitors have, so the growth path is very open and looks like Reliance Retail firmly establishes the value which all the brokerage reports have indicated so far in the region of 1300.
But it is good that the market is established with a dollar check which is put in the balance sheet and it sustains from here and grows faster from the current value.
This deal in a sense is only endorsing the real value what brokerages are doing, brokerages had really projected for Reliance Retail. So, do you think while this is positive, it is endorsement of the obvious, it is not going to move the needle for the stock per se in the short term?
My personal take today is Reliance Retail news will drive the Reliance stock up and possibly if there are any further add-on announcements on the AGM, the stock would move in the same direction as the previous peak we saw before Reliance demerger happened because today we have seen news on retail, we do not know how many more news Reliance Retail plus Jio Telecom and the new energy ventures wants to throw out. Based on various other parameters, you need to look at what is going to happen in terms of direction where stock is concerned but it definitely establishes that Reliance Retail at Rs 1300-1400 deducting the stock which is held by outsiders, Jio valuation in the region of 900-1000 bucks, petroleum at around Rs 700 to Rs 800 and Jio Financial is already valued in the market, the new vertical.
Sum of parts, if you take a two-three-year vision, still the stock has definitely a chance to perform better than the market. And looking at that direction, possibly people will establish that 24 is a challenging year for the globe, current year is already surprising where dollar strength and US interest rates are concerned, India interest rates are not going to go down this year, next year there is a possibility, we have high inflation and looking at all the parameters, hiding in a large cap like Reliance where the direction is positive would make sense to a long-term shareholder and that is what people will look forward to with this kind of announcement.