• Three baby RILs in the making with RIL as holding entity

    Reliance Industries is working towards a strategy to carve out at least three independent companies from its different businesses, making itself a holding firm for these entities.

    Chairman Mukesh Ambani said RIL was embarking on its most ambitious value creation strategy, at the heart of which would be partnerships with global players who would be inducted as strategic partners in various businesses.

    “We are the only diversified multi-sector Indian enterprise with three major growth engines in one single corporate entity — oils-to-chemicals division, Jio (in telecom) and retail. All three have done exceedingly well in the past year. We are also incubating newer growth engines,” Ambani said.

    “If these two consumer businesses (Jio and retail) had been separately listed companies, each would be ranked among the top 10 in India today, in terms of value,” he added.

    At the company’s 42nd Annual General Meeting, Ambani announced a deal to sell a 20 per cent stake in its oil-to-chemical business to Saudi Aramco, and said RIL would look at strategic partners for retail and telecom and eventually list those. The deal with Aramco will cover all of RIL’s refining and petrochemicals assets, including 51 per cent of the petroleum retail joint venture with BP.

    The move is seen as a precursor to carving out different companies from Reliance Industries. Analysts said this strategic plan would help the company deleverage its balance sheet. They also speculated that it could be a part of the company’s long-term succession plan.

    “Right now, we are carving out the oil-to-chemical business into a division. We have committed that this business would be a standalone entity in five years. If then RIL and Aramco decide it should be listed at some later time, they may do so; there is no decision yet,” executive director PMS Prasad said.

    RIL has plans to hit the capital market with initial public offers for Reliance Retail and Reliance Jio Infocomm to list those separately by 2024. Before that it may induct strategic investors in these businesses.

    Co Plans to Tap Global Investors for Retail, Jio

    Analysts expect the retail business to be listed first.

    “RIL’s plans to list Jio will help improve the parent company’s balance sheet, and at the same time make adequate cash available for funding Jio’s fibre-based home broadband expansion and other digital initiatives,” said Rajiv Sharma, co-research head at SBICaps Securities.

    “If these two consumer businesses had been separately listed companies, each would be ranked among the top 10 in India today, in terms of value,” Ambani said.

    Reliance Retail shares started trading in the last week of June in the unlisted market, at between Rs 475 and Rs 500 apiece, with a market capitalisation of Rs 2.5 lakh crore in the unofficial market.

    “Over the past month, the stock has appreciated further to Rs 550 apiece with a market cap of Rs 2.75 crore,” said two brokers. The valuation is bigger than all listed retailers put together.

    One analyst expects Jio’s valuation to be at least 13 times the EV/ Ebitda ratio compared with rival Vodafone Idea’s valuation, which he estimates at 8 times the ratio.

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