Zero to hero: RIL’s consumer biz drives stock’s valuation upgrade

Three years ago, when Reliance Industries Ltd’s (RIL’s) telecom unit, Reliance Jio Infocomm Ltd, launched commercial operations, investors were uncertain, even sceptical, about how the business will shape up. Back then, analysts at Kotak Institutional Equities had assigned zero equity value to the telecom piece in their sum-of-the-parts (SOTP) valuation.

RIL’s other consumer play, Reliance Retail Ltd, contributed merely 3.7% to Kotak’s SOTP back then as well, and along with the debt in Jio’s books, the two consumer businesses accounted for about 25% of total enterprise value estimate of the broker.

Now, both consumer businesses put together account for nearly 55% of the brokerage firm’s enterprise value (EV) estimate for RIL. EV is a measure of valuing companies by adding their market capitalization and net debt.