The Hindu Business Line : Taking the call on Reliance Info, post-demerger

THE imputed value of Reliance Infocomm, the telecom venture under Mr Anil Ambani, works out to Rs 146 per share, post demerger. This is based on the price discovery in the special trading session held today for Reliance Industries, in which the demerged entity was listed at a price of Rs 715 and closed at Rs 694.

At this price, the notional market capitalisation of Reliance Infocomm works out to Rs 17,900 crore, marginally higher than the book value of net assets transferred at Rs 15,389 crore to the telecom entity. Shareholders will be sitting on gains if the initial public offering from Reliance Infocomm takes place at any price higher than this level.

As Reliance Infocomm is an unlisted entity, Bharti Tele-Ventures, its only listed peer and competitor, can be used as a proxy to arrive at the valuation of the former. As the mobile business is the biggest contributor to revenues for both companies, this line of business will dictate the valuation to a large extent.

For Bharti, about 65 per cent of the revenues accrue from the mobile business. If we apply this percentage to Bharti's market capitalisation of Rs 64,000 crore, the mobile business valuation works out to Rs 41,600 crore. Even though both Bharti and Reliance Infocomm have a similar subscriber base of 16 million currently, the quality of Bharti's mobile business in terms of average revenue per user, operating margins and profitability is distinctly superior. In this backdrop, if we apply a conservative 30 per cent discount factor to Bharti's valuation, the value attributable to Reliance's mobile business alone may work out to about Rs 30,000 crore.

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