Reliance Retail’s nearly Rs 5 lakh cr valuation was expected: Deven Choksey

As we move towards reducing dependence on hydrocarbon related fuel, Reliance is working on creating a more specialty fuel portfolio in Reliance O2C, says the MD, KR Choksey Investment Managers.

Sometime back, you talked about a possible monetising spree to kickstart the retail business of Reliance as one of the next triggers for the market. That has started with SilverLake investing Rs 7,500 crore in Reliance Retail for 1.75%, valuing the company at Rs 4.91 lakh crore.
Well I think this is known and I guess it has started. We were anyway counting valuations of around Rs 5 lakh crore for the retail business. This is closer to that so I am not completely surprised about the valuations. Reliance Retail is basically working on O2O model (offline to online) wherein they will integrate their offline stores and the offline kirana stores with the online platform that they have created which is a ride on the Jio platform.

It is obvious that the O2O model requires a good amount of technology which will be provided by the Jio platform and could possibly drive their future business. In my view point, we validated the numbers at some point of time, but if we are talking about 60-70% of the kirana stores selling on Jio platform, then you are talking about a significantly large amount of grocery business which will possibly put them much ahead of even the global peers who are operating in this market.

So this will create a significant amount of disruption in the market. I will not be surprised if the Amazons and the Flipkarts of the world start running with this kind of a model which Reliance has created. So, the beginning of investment has started and it can only go into one direction. They know their partners are strategically known for investing in technology related businesses and media, entertainment, ecommerce kind of businesses.

Having invested in Reliance Retail, they are only doing the forward integration as far as their investment activity goes.

We also saw the details coming out of the O2C (oil to chemicals) business which has been hived off. How valuable could this be and would foreign investors be interested in picking stake here as well?
Yes, absolutely. I think they are leaving aside the exploration business on one end. But the refining, petrochemical, specialty chemical and the retailing part of the fuel is being brought into this particular entity of O2C. This is fundamentally very important because as we move towards reducing dependence on hydrocarbon related fuel, they are working in the direction of creating more specialty fuel portfolio. That is where I guess the Saudi Aramco kind of players are interested. “RIL has been exploring various opportunities to bring in strategic/other investors in the O2C business,” the company has said.