Retail asset monetization is gaining pace as US private equity firm KKR & Co announced that it will pick 1.28 per cent stake in Reliance Retail for Rs 55.5 billion ($ 0.75 billion), implying a pre-money equity value of $57 billion.
According to a report by Morgan Stanley, the valuation is in line with the last transaction valuation announced with Silverlake and compares to its retail base case valuation of $45 billion. “At these valuations, it would add 6 per cent to Morgan Stanley’s base case NAV for RIL. KKR earlier invested $1.51 billion for 2.3 per cent of Reliance Digital platforms. RIL has sold a 3 per cent stake in RIL retail till date for $1.75 billion,” the report said.
As per the report, the financial services company sees capital allocation, execution and de-gearing as key to the next leg of stock outperformance.
“With industry consolidation pickingup pace in telecom, retail,and global refining, we expect RIL to emerge stronger post-Covid-19 and margins to surprise as pricing power rises,” it added.
Reliance Industries Limited (RIL) and Reliance Retail Ventures Limited (RRVL) on Wednesday announced that KKR will invest Rs 5,550 crore into RRVL. This investment values Reliance Retail at a pre-money equity value of Rs 4.21 lakh crore. KKR’s investment will translate into a 1.28 per cent equity stake in RRVL on a fully diluted basis.
This marks the second investment by KKR in Reliance Industries (RIL) units. It had previously picked up a 2.32 per cent stake in the digital arm, Jio Platforms for Rs 11,367 crore.
Reliance Retail Limited, a subsidiary of RRVL, operates India’s largest, fastest-growing and most profitable retail business spanning supermarkets, consumer electronics chain stores, cash and carry wholesale business, fast-fashion outlets, and online grocery store JioMart. It operates almost 12,000 stores in nearly 7,000 towns.