Outlook Business Desk
According to a Bloomberg report, Reliance Retail Ventures Ltd. is implementing significant cost-cutting measures, such as downsizing its physical store network, reducing marketing expenses, and integrating Reliance Brands Ltd. into its main retail division to enhance its valuation ahead of the expected IPO.
Ambani acknowledged Reliance Retail's rapid expansion, but this growth, coupled with declining sales, has led to a reduction in the retail unit’s valuation to $50 billion—half of its $100 billion value two years ago.
Ambit Capital Pvt. has reduced Reliance Retail’s valuation to $50 billion, significantly lower than the $125 billion target set for the IPO. Reliance aims to maximise the value of around $8 billion in global investments, with the IPO expected to involve only a 5% equity dilution.
In the third quarter of this fiscal year, Reliance Retail expanded to 19,102 stores, with footfall reaching nearly 300 million, reflecting a 5% year-on-year (YoY) increase. Digital and new commerce channels contributed 18% of total revenue.
Reliance Retail Ventures reported a 10% increase in consolidated net profit, with revenue growing by 7% year-on-year (YoY). Operating profit rose by 9% to Rs 6,828 crore, while margins improved by 20 basis points to 8.6% during the same period.
Despite concerns over valuation, Jefferies has maintained a ‘buy’ rating on Reliance Industries with a target price of Rs 1,660 per share. The firm argues that market pessimism is excessive, even as Reliance Retail’s value dropped to $48 billion from $106 billion.
Reliance Industries' stock has tanked more than 25% from its 52-week high, underperforming the Nifty index due to weaker retail sales and lower earnings in the oil-to-chemicals sector.
As part of cost-control measures, hiring employees with high salaries now requires direct approval from Mukesh Ambani.