Oil-to-telecom conglomerate Reliance Industries Ltd (RIL) is likely to see its online and offline retail businesses driving the company’s growth, marking a powerful evolution for the largely-petrochemicals-powered giant, says a report from global investment bank and financial services company Goldman Sachs.
The report notes that 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.
Even during the disruptions brought about the Covid-19 pandemic, RIL focused on investing in end-to-end digital capabilities and the scale-up in omnichannel commerce is driving sizeable market share wins, Goldman Sachs said.
It predicts a 6x increase in modern grocery retail penetration in India by FY30, coupled with 15 percent market share gain for RIL.
It forecast a 50 per cent market share for RIL in online grocery by FY25, with a 30 per cent market share in overall e-commerce. This translates into USD 35 billion e-commerce GMV (gross merchandise value) for RIL by FY25, with USD 19 billion in grocery.
“We expect RIL core retail revenue to grow at a 36 percent CAGR over the next four years to USD 44 billion and e-commerce revenues to be 35 percent of total retail revenues in FY25, at USD15 billion,” it said.
“We value RIL retail business at USD 88 billion 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 USD 120 billion based on stronger than expected macro growth and market share wins.”