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Retail business likely to be RIL's next growth engine
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SME Times News Bureau | 21 Jun, 2021
Oil-to-telecom giant Reliance Industries (RIL) which has largely seen
its growth coming on the back of its petrochemical business over the
past decades, is set to see a shift in the anchor's role with the retail
business, including its e-commerce operations, to drive the company's
growth.
A Goldman Sachs report noted that after growing 5x over
FY16-FY20, RIL's core retail revenue growth has taken a pause in FY21
due to Covid related macro headwinds.
"However, we believe retail
business (including e-commerce) is set to be the next growth engine for
RIL, with potential for retail EBITDA to grow 10x over the next 10
years," it said.
During the macro downturn, RIL has focused on
building strong digital capabilities and Goldman Sachs said that the
scale-up in omni-channel offering is driving sizeable market share wins.
It
sees a six-fold increase in grocery organised retail penetration in
India by FY30, coupled with 15 per cent market share gain for RIL.
"We
expect RIL core retail revenue to grow at a 36 per cent CAGR over the
next four years to $44 bn and e-commerce revenues to be 35 per cent of
total retail revenues in FY25, at $15 bn," it said.
"We value
RIL retail business at $88 bn in our base case with our offline business
valuation similar to comps and online business valuation at the high
end of the peer group given higher GMV growth. We also highlight our
bull case valuation of $120 bn based on stronger than expected macro
growth and market share wins."
Reliance's Retail business had
showcased significant pre-Covid growth, with core retail revenues
growing 5x during FY16-FY20 at a 50 per cent CAGR.
While growth
has taken a pause in FY21 due to Covid related lower footfalls causing a
downturn in the retail industry, RIL's retail business has focused on
building strong digital capabilities while continuing to expand its
physical reach. It expects significant market share, alongside the post
covid macro reset, to drive significant growth for RIL retail.
"We
expect RIL core retail revenue to grow at a 36 per cent CAGR over next
four years to $44 bn and expect e-commerce revenues to be 35 per cent of
total revenues in FY25 at $15 bn," it said.
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