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Reliance Retail and Jio to be growth drivers in near to medium term, ICICI Direct

Reliance Retail and Jio to be growth drivers in near to medium term.

  • Reliance Retail has been one of the fastest, largest growing retailers in recent times. In FY18-22, it recorded a staggering 30% revenue CAGR with sales worth nearly | 2 lakh crore in FY22.The company bolstered its offering and continued to fill white spaces through acquisitions and spent nearly | 10000 crore in FY22. It’s recent acquisition of Metro Wholesale business (B2B) for a consideration of | 2850 crore (0.4x EV/sales) would further strengthen its backend supply chain with accelerated growth in JioMart Kiran orders (up 4x YoY) and on-boarding of new HoReCA clients.
  • The 5G launch has begun for Jio in the last couple of months and is likely to reach pan-India by December, 2023. Superior spectrum portfolio along with superior digital ecosystem offering lends Jio a competitive advantage even in 5G (as seen in 4G foray). We expect ARPU, EBITDA of Jio to grow at ~12%, ~22%, respectively, over FY22-25E
  • Singapore GRMs, which had declined at the start of Q3, have started improving amid rise in product cracks and are at ~US$9/bbl. This would likely improve Reliance’s GRMs and its refining segment earnings. The company announced capex plans worth | 75000 crore in petrochemicals

Key triggers for future price performance

  • Increment value accretion from ‘digital ecosystem’ that will be captured at the Jio Platforms (JPL) level
  • Steady FCF generation in retail segment to enable it to maintain debt at lower levels & improve its ability to invest in future inorganic opportunities

For report,

CT Bureau

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