RIL Shares Down 18% from July Peak; Quick Commerce May Hamper Growth Prospects

Shares of Reliance Industries (RIL) have lost its sheen as they are down by 18% from its peak in July. Investors believe that disruption caused by quick commerce (QC) may have hammered Mukesh Ambani’s ambitions in the retail space.

Though, O2C side of business did rebound, brokerages are reluctant to give a premium valuation to Reliance Retail (RR) due to disappointing near-term growth, real estate costs and capex intensity.

Anil Sharma of Kotak Institutional Equities said, “The large market share gain by quick commerce companies is impacting Retail and can keep revenue growth and/or margins stagnant for the near term, in our view...While RR does have a large physical footprint as well as an extensive supply chain, we are unsure of its strategy to navigate the QC (quick commerce) threat.”

The brokerage firm reduced the target price of the retail major to Rs 1,405 from Rs 1,560 due to lower penetration of stores and quick commerce (QC) threat. It has also reduced the target EV/EBITDA multiple for the retail business to 28X from 32X.

The brokerage added that the brand could also witness a potential loss in its market segment on the back of margin pressure and tough competition from QC companies.

JP Morgan's Sanjay Mookim said, “With the passage of time, Reliance Retail (JPMe EV of $111bn) is now ~33x FY26E EBITDA, which is lower than DMart's multiple of ~42x. Any crystallization of this retail valuation upside – through an IPO process or through further stake sales – could lead to further upside in RIL's stock, in our view.”

The brokerage house given a target price of Rs 1,468 on RIL, while CLSA has pegged at Rs 1,650.

What happened to Jiomart?

Reliance Retail has forayed into the quick commerce segment by launching Jiomart.

Kotak said, “RRVL does hold a stake in Dunzo, the B2C hyperlocal delivery company; however, it has cut back its investments in the same. It does offer jiomart.com, which typically offers slotted delivery. Jiomart has pivoted to a self-delivery model from a local-shop-aggregator model and B2B business has also been scaled down. Customers on the other hand have come to prefer the super-quick fulfillment offered by QC players. This may have a negative rub-off on revenue growth of RR’s grocery business in the near to medium term.”

Quick Commerce business in numbers

As per Bernstein Research, total addressable market (TAM) of QC has potential to grow to $45 billion. It is expected to be valued at $77 billion by 2025.