Deven Choksey of KR Choksey spoke to CNBC-TV18 about Jio Platform's valuations and on the retail business's strong points.
Edited excerpts from the interview:
Q: Your views, of course this net debt free status was something that the street already was expecting, but now they are looking to list within 5 years as well, your thoughts here?
A: Not very surprisingly though, I think as we have been discussing that the possibility of listing will be arising in next 2 years itself. They have laid down the roadmap between the two companies to get listed in next 5 years, so it is a very clear roadmap. My take would be that Jio Platforms would be the first one to go listing and Reliance Retail would be the second one thereafter within the span of this 5 years.
As I see it, the ingredients for the Jio Platforms for getting listed one of the main factors to get better premium and valuation would be higher EBITDA. Currently from the mobility platform they have achieved Rs 10,000 crore annualised EBITDA in the last quarter itself. If in FY22, they achieve the annualised EBITDA of around Rs 25,000 crore that will be the first mile stone which would probably allow them to think of global listing and that would be a large-sized listing at the same time.
So assuming that happens in FY22, one could possibly find Jio Platforms going into the listed market, with somewhere around close to USD 175-200 billion market value.
Q: This quote is from Mukesh Ambani, he says - we have received strong interest from strategic and financial investors in our consumer business Jio and Reliance Retail. We will induct leading global partners in these businesses in the next few quarters and move towards listing both. Which means like in the Jio Platforms Deven would you count on people putting in their investments in Reliance Retail as well? You don’t have to wait till listing, you will start seeing big investors trooping already and will that change your view of the stock or price of the stock?
A: Answering the first question, the retail platform definitely I think demands a very close look. This company has actually built a complete framework of stores and I think connecting it will a supply chain mechanism at the ground level which is always giving them a better earning opportunity because of the margins are better when you are connected with the supply chain mechanism and I think with the store in different formats.
Now connecting these particular stores with the online model and I think typically we call it offline to online – O2O model which basically emerges out of it is likely to drive business in a systematic manner. Because if an online customer is required to be serviced in a quickest possible manner with the lowest cost I think as far as last mile delivery is concerned and when you have such kind of stores, your supply and logistic is already in place.
Online platform under Jio is already built in and the properties like Jio Mart has already started functioning. It is a matter of time that other properties - like Ajio is also functioning, but other properties also start getting into the mode, probably you will find a complete integration of O2O model which is offline to online model and online to offline model. In such a situation I would think that the retail business will command better valuation. At this point in time, I think I am not putting any numbers before anybody as far as the valuation is concerned.
Disclaimer: Network18, the parent company of CNBCTV18.com, is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.