Reliance Shares Rally 3% As Report Says Qatar's Sovereign Fund May Buy Stake In Retail Arm

Qatar's sovereign wealth fund, Qatar Investment Authority (QIA) is likely to be looking to buy a minority stake in billionaire Mukesh Ambani-backed Reliance Retail Ventures, as per the Finance Times report on Wednesday. The sovereign fund is likely to pump in a $1 billion investment in Reliance Industries' retail arm. Currently, RIL's share price rallies by nearly 3% on BSE.

At the time of writing, RIL's share price traded at Rs 2545 apiece, surging by Rs 64.05 or 2.62% on BSE. The stock traded near its intraday high of Rs 2547.25 apiece, and has gained by at least 2.7% on the exchange.

RIL's market cap at the current share price stood at Rs 17,21,442.97 crore, rising by nearly Rs 40,391 crore as against the previous day's print of Rs 16,81,052.25 crore.

FT cited sources which revealed that QIA is considering a $1 billion investment in Reliance Retail, which will result in a stake purchase of around 1% and will value the business to approximately $100 billion.

However, the newspaper also said that QIA has not yet approved the deal and hence might change going ahead.

Both QIA and Reliance Retail Ventures did not respond to Reuters request for comment on the development.

Earlier this week, RIL announced entering into an agreement to invest alongside Brookfield Infrastructure and Digital Realty in their Indian SPVs set up for developing data centers in India. RIL will hold a 33.33% stake in each of the Indian SPVs and become an equal partner.

In the first quarter of FY24, Reliance Retail posted a record-high quarterly revenue at Rs 69,948 crore, up 19.5% Y-o-Y led by growth in Grocery, Consumer Electronics (excluding Devices) and Fashion & Lifestyle. The company also garnered record quarterly EBITDA at Rs 5,139 crore, up 33.9% Y-o-Y; and the EBITDA margin was at 7.9%, up over 30 bps YoY driven by efficiencies. Further, the company recorded a net profit of Rs 2,448 crore which grew by 18.8% YoY.

During the quarter, Reliance Retail registered highest ever footfalls at 249 million across formats. Also, it added 555 new stores during the quarter taking the total count to 18,446 stores; while the addition of 5 mn sqft of operated area to 70.6mn sqft.

Post Q1 results of RIL, JM Financial in its report said, "We believe concerns on debt are overdone as we expect RIL's net debt to peak in FY24 and then decline gradually as capex will not only moderate (INR 1.2trln-1.4trln p.a. vs. INR 2.3trln in FY23) but, importantly, also be fully funded by a gradual increase in internal cash generation. RIL's guidance on keeping reported net debt to EBITDA below 1x (0.8x in Mar 23) also gives comfort. Be that as it may, we believe RIL could still drive a robust 14-15% EPS CAGR over the next 3- 5 years with Jio's ARPU expected to rise at 10% CAGR over FY23-28 with ARPU being on a structural uptrend given the industry structure, future investment needs, and the need to avoid a duopoly market."

Further, it added, "Strong growth momentum continues in the company's Retail business as RIL is driving omni-channel capabilities across segments. Hence, we reiterate BUY (unchanged TP of Rs 2,900/share)."

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