Broker's call: Reliance Ind (Buy)

| Updated on June 22, 2021

Motilal Oswal

Reliance Ind (Buy)

Target: ₹2,430

CMP: ₹2,226

FY21 has been a landmark year for Reliance Industries (RIL). The new-age retail and digital businesses flourished despite the Covid-led disruption, led by the emergence of RIL's disruptive and aggressive growth philosophy. As a result, this cushioned the impact on the overall business and provided the much needed capital raise and deleveraging. RIL’s fossil fuels business struggled with a 37 per cent decline in EBITDA in FY21. However, the retail business, partially supported by the online retail and digital businesses, came in much stronger, arresting the decline to just 9 per cent on a consolidated basis to ₹80,700 crore. RIL managed to raise ₹2.6 lakh crore in capital through an asset monetisation and rights issue.

Although, at the end of FY21, as per our calculation —gross debt for standalone was at ₹1,93,800 crore and consolidated was at ₹2,23,800 crore. We delve into the company's annual report, highlighting the key initiatives and business outlooks for the various segments. Using SOTP, we value the O2C business at FY23 EV/EBITDA of 7.5x, arriving at a valuation of ₹764/share for the standalone business, and add ₹68 for the E&P assets. We ascribe an equity valuation of a) ₹847/share to RJio on FY23 20x EV/EBITDA and ₹755/share to Reliance Retail on FY23 35x EV/EBITDA, factoring in the recent stake sale.

Published on June 23, 2021

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