As Reliance Industries (RIL) inches close to enter the list of world's top 50 companies by market capitalisation (m-cap), the recent enterprise valuations given by research firms show that its traditional businesses - petroleum refining and chemicals - lag way behind it's new consumer businesses - Jio Platforms and Reliance Retail. While Credit Suisse valued Jio as the most valued in RIL's bouquet, HSBC valued both the consumer businesses as equal in size.
According to rating agency Credit Suisse, the enterprise value (EV) of RIL stands at $152 billion, after acoounting the debt, rights issue proceeds and net realisation of strategic stake sales, including in JPL. The agency in its recent report values Jio's telecom operation at $71 billion, the highest. The non-wireless business comes to $18 billion. The core retail is the second most valued business with an EV of $39 billion. Petrochemicals and refining EVs stood at $28 billion and $21 billion, respectively.
Credit Suisse expects that Jio will achieve a subscriber base of 550 million from 388 million in March. The average revenue per user (ARPU) is expected to go up to Rs 200 from Rs 130.6 in March. They said that Jio is gaining market share in higher-ARPU postpaid users and expected to start reducing its discount. They expect that most of the volume increase for Jio to come from upgrading 2G users who still constitute 35 per cent of the total subscriber base.
According to the report, Jio has competitive advantages with its full stack of services in many verticals like online health (digital consultation, diagnostics, e-pharmacy, online clinic for doctors) and education (K-12, test preparation for competitive exams, test preparation for jobs and higher education). It expects that many of these verticals can be scaled up significantly. For instance, on the health front, Alibaba Health in China already has a market capitalisation of $38 billion and 'Ping A Good Doctor' has a market cap of $16 billion. On the education front, BYJU's in India was valued at $10.5 billion in the latest funding round. Chinese players Yuanfudao and Zuoyebang were valued at $7.8 billion and $6.5 billion, respectively. Besides, the report said, Jio has started monetising through advertisements on MyJio and JioSaavn. Jio's foray into agri-tech, financial services (starting with mutual funds distribution), IoT, and enterprise services are in the early stages.
HSBC Global Research has given an EV of $50 billion each for organised retail and digital services businesses of Reliance Industries. The petrochemicals business has got EV of $38 billion compared to $27 billion of refining business.
RIL has been successfully integrating and cross-pollinating strengths between its digital and retail services in order to increase their reach, HSBC said its report a couple of weeks back. "Now, with the financial services portfolio being added, and with surplus liquidity available, we expect its consumer business growth to further pick up pace. We believe retail is set to take off with its presence now in more than 7,000 cities, with 11,500 stores and more than 125 million registered customers," the report said.
HSBC analysts added that the integration with the digital services business, and likely support from the financial services portfolio, should allow Reliance Retail to capture both B2B and B2C opportunities in the space and makes the business worth $50 billion.
Morgan Stanley valued RIL at $163 billion; the m-cap stands at $169 billion at present. The EV will further change if Saudi Aramco's $15 billion investment in Reliance O2C Ltd concludes as expected. In the upcoming annual general meeting (AGM) on July 15, RIL management is expected to update on Saudi Aramco deal announced by Mukesh Ambani last year and any stake sale steps in Reliance Retail. The company has also not yet clarified on the acquisition of Future Group companies. RIL is ranked 51 in the global MCap pecking order at present.