Reliance Chairman Mukesh Ambani is building ammunition for his next
burst of investments for his retail venture – Reliance Retail. With the
e-commerce debut with JioMart and a spree of acquisitions ready for Reliance
Retail, Ambani is not just living up to his claim of being India’s largest
retailer but also has global ambitions.
During the company’s annual general meeting in July, Ambani
had said that Reliance Retail is the fastest-growing retailer in the world, and
the only Indian retailer to feature in the Top 100 global retailers.
The behemoth, Reliance Industries' retail vertical is headed
for an initial public offering (IPO) soon. Here’s how Reliance Retail stacks up
against its global listed peers Walmart (US) and Tesco (UK).
Reliance Retail might be a small player when compared to the global
giants Walmart and Tesco, but here’s where Mukesh Ambani brings true value to
its investors – its enterprise value to EBITDA (earnings before interest,
taxes, depreciation, and amortization) ratio is double than Walmart, and triple
than that of Tesco. The higher the EV/EBITDA ratio, the more value the investor
sees in the company.
But what makes for Reliance Retail’s high EV/EBITDA ratio?
Arvind Singhal, Chairman and MD of consulting firm Technopak, explains that
most Indian companies enjoy a much higher EV/EBITDA ratio than their
competitors in the US and Europe.
“There are two factors. Firstly, the perception of investors is that
India will show more growth in consumer product industries compared to mature markets
where the consumers are spending less on merchandise and more on services.
Retailers like Tesco or Walmart, they have to grow by taking a share of the
market from someone. The demography of India is such that people will spend on
merchandise consumption, therefore you can support higher multiples,” he said.
Singhal also believes that Reliance Retail also enjoys the
stance of being part of a conglomerate as opposed to other listed peers within
India like DMart, Trent or a Shoppers Stop.
“When Reliance Retail does go on to list, the valuation will
be higher because of the limited number of ‘good’ companies in India and that
too of a certain scale. So, when a global investor comes looking at investments
in India, they are going to put their money on those few companies,” he said.
From Reliance to Walmart and even Tesco, grocery is at the centre stage
of their e-commerce bets, a business that has only accelerated due to the
coronavirus pandemic.
Reliance in its first-quarter earnings of FY21 reported that
grocery alone saw a 21% growth year-on-year in the operational business of
grocery in the first quarter. Ambani’s e-commerce bet, JioMart clocked in big
numbers during the lockdown – the company claimed it received over 4 lakh
orders on a single day. And now, expansion plans for JioMart are underway.
Sandip Ginodia , CEO
ALTIUS INVESTECH PVT LTD
We deal in over 60 unlisted companies with 15 years of experience
For latest prices visit : www.abhisheksecurities.com/unlisted.htm / call : 09830271248 .
Email : ginodiasandip1@gmail.com
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