Reliance Industries (RIL) last week became the first Indian company to cross the $200-billion market capitalisation mark after its stock surged over 8% on the back of reports that global retailing giant Amazon has been offered a $20-billion worth of stake in its retail venture. From being an entity with a market cap of nearly $43 billion a little over five years ago and a pure-play business-to-business (B2B) entity, RIL’s market value has risen almost five times as it scaled up its two consumer-focused businesses - telecom and organised retail - during the intervening period. In the process, it has leap frogged to become one of the 10 most valued companies in Asia and also among the top 40 globally. RIL is the only Indian company in these exclusive clubs, Bloomberg data showed.
Data shows that in the last two years, while the BSE’s market cap has remained stagnant at around £1,550 billion, RIL’s market cap has almost doubled from close to £80 billion to £150.3 billion. So if RIL is taken out from India’s total market cap, the fall in value is about £75 billion. Seen another way, while RIL’s market cap has grown about 92% since September 2018, the combined market cap of all other Indian companies has shrunk by 5%.
The phenomenal rise in RIL’s market cap came during the past five years as it again transformed itself from being a major B2B focused company to a business-to-consumer (B2C) entity, in a country with over 1.3 billion people, said Arun Kejriwal, director at investment advisory firm KRIS. “Reliance began as a textile company and in the ’70s and ’80s its brand ‘Only Vimal’ was well known, when the increased demand for polyester and polyester fabric was strong. Its B2C focus changed when the company entered the refining business around the turn of the century in a major way and became a petroleum and refining company - a B2B player,” Kejriwal, a veteran of Dalal Street, said.
As its refining business grew at a fast clip, RIL tried its hands at petro-product refining, but that didn’t take off as was expected. “In its current avatar, it’s back to being a major consumer-focused company with data turning out to be the driving force. It may also be highlighted that the acquisition of Future Group assets would add clout to its retail business, which is again a B2C venture,” Kejriwal said.
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Silver Lake acquires 1.8% in Reliance Retail
Private equity firm Silver Lake will pay £750 million to acquire a 1.8% stake in the retail business of billionaire Mukesh Ambani, making the Silicon Valley fund the first external investor in the consumer-focused unit. The transaction, which is Silver Lake’s third investment in India this year after education technology startup Byju’s and digital services company Jio Platforms, values Reliance Industries’ retail unit at £42 billion. This valuation, when compared with listed companies, ranks the retail unit at the fifth spot in India after HUL, HDFC Bank, TCS and RIL itself. The American fund’s investment in Reliance Retail Ventures (RRVL), a subsidiary of RIL and the holding company of its retail business, sets the pricing benchmark for the consumer-focused unit that is expected to see more external investors in the coming weeks.
