IDBI Capital: Reliance Retail Stake Sale To Silver Lake - Key Highlights And Investment Rationale
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IDBI Capital Report
Reliance Industries Ltd. today announced that Silver Lake has agreed to invest Rs 75 billion for a 1.75% stake in Reliance Retail Ventures Ltd. (RRVL), valuing it at Rs 4.3 trillion (premoney equity value of Rs 4.2 trillion).
We expect the company to be in talks with its other existing investors and we expect few more deals in coming weeks as we had witnessed for Jio Platform.
Though, valuation is likely to remain unchanged for coming deals in line with Jio Platform stake sale.
The Silver Lake deal size reflects a valuation of Enterprise value/Ebitda of 38.4 times and EV/sales of 2.4 times on FY22E, significantly ahead of our earlier estimates.
We further expect a deal at O2C business would add value to its shareholders as making a separate subsidiary for order to cash (O2C) business would fasten the process.
We expect higher cash balance, rising average revenue per unit and strong growth at Retail division would continue to drive the company’s growth.
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