RIL shares down 18% from peak. Is quick commerce the biggest threat for Mukesh Ambani's retail empire?
Reliance Industries (RIL) is ending 2024 on a muted note and is down about 18% from its July peak as investors fear that the quick commerce disruption may impact billionaire Mukesh Ambani's ambitions in retail business.
While refining margins, which fell sharply from June, have rebounded on the O2C side of the conglomerate’s business, Reliance Retail (RR) growth continues to disappoint and brokerages are reluctant to give it a premium valuation against other retail peers on lower near-term growth, real estate costs and capex intensity.
«The large market share gain by quick commerce companies is impacting Retail and can keep revenue growth and/or margins stagnant for the near term, in our view...While RR does have a large physical footprint as well as an extensive supply chain, we are unsure of its strategy to navigate the QC (quick commerce) threat,» said Anil Sharma of Kotak Institutional Equities.
The domestic brokerage firm has lowered its target on RIL to Rs 1,405 from Rs 1,560 earlier on weak store additions and QC threat.
Kotak has trimmed its target EV/EBITDA multiple for the Retail business to 28X from 32X and assigned nil option value to new/emerging businesses given curtailment of operations of Jiomart B2B and limited scale-up of jiomart.com.
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