'Unlock Jio, Retail': How Mukesh Ambani will double Reliance's valuation

The recently-concluded annual general meeting of Reliance Industries Limited (RIL), not surprisingly, was filled with big-ticket announcements: Be it on the 5G rollout, retail, new energy, or even the decision to commit significant investments for its conventional businesses. One of the more significant announcements was related to RIL Chairman, Mukesh Ambani expecting the company to “more than double in value by the end of 2027.” The question is how will that take place?

There are three businesses that will help Ambani achieve the target. According to Ambareesh Baliga, a market tracker, a 16 per cent compounded annual growth rate is possible through the growth potential left in telecom and retail, and the upcoming new energy business. “At some point, the unlocking of value in telecom and retail is inevitable and that will only help in reaching this target,” he explains.

Importantly, Ambani has spoken of doubling in value and not by revenue. “Besides, the traditional businesses such as exploration and refining will see stability for the next 5-7 years,” Baliga adds.

Also read: Mukesh Ambani handover plan: Jio to Akash, Retail to Isha, new energy biz to Anant

Last year, Ambani outlined a capex of $10 billion for the new energy business and emphasised on setting up a manufacturing base and a thrust on hydrogen. Vinit Bolinjkar, Head (Research), Ventura Securities, says the revenue from new energy will kick in by 2025. “Eventually, hydrogen will be a big story as a part of the overall renewable energy piece. The unlocking of value in telecom can take place this year, and retail too will happen around the same time.”

Over the last few years, RIL has managed to reduce its debt by bringing in significant investments in both telecom and retail. “Now they are net debt free and in a very sound position. The possibility of raising money in the new energy business cannot be ruled out,” thinks Baliga.

Also read: What will decide the future of RIL stock? Ambani's speech at Reliance AGM were filled with hints

Clearly, RIL is looking at the old and new businesses to sustain its growth story. A note put out by KR Choksey Shares & Securities after the AGM says, “RIL generates the healthiest, (around 40%+ margins), in the digital business, which is likely to improve further with the expansion of its higher ARPU segments such as data Services, FTTX and 5G services along with industrial digital solutions,” it points out.

On retail, the note outlines how the retail piece is scaling up fast “with an aggressive expansion strategy on both the front and back end. It has crossed the 15,000 stores milestone as of FY22. Its increasing online revenue share, recovery in all revenue segments and high-margin foreign and domestic premium brands, collaborations/acquisitions bode well for its margin expansion going forward.”