KKR Snaps Up $755M Stake In Reliance’s Retail Unit; Street Is Bullish

Private equity company KKR & Co. said it will invest $755 million in Reliance Industries retail unit joining a list of companies pouring money into India’s largest retail chain.

KKR (KKR) said the investment translates into a 1.28% equity stake in the retail arm on a fully diluted basis. The stake values Reliance Retail at a pre-money equity value of 4.21 trillion rupees ($57 billion), according to the statement. This marks KKR’s second investment in a subsidiary of Reliance Industries, following a $1.5 billion stake in telecommunications and digital services company Jio Platforms announced earlier this year.

“We are pleased to deepen our relationship with Reliance Industries through this investment in Reliance Retail Ventures, which is empowering merchants of all sizes and fundamentally changing the retail experience for Indian consumers,” said Henry Kravis Co-CEO of KKR. “Reliance Retail’s new commerce platform is filling an important need for both consumers and small businesses as more Indian consumers move to shopping online and the company offers tools for Kiranas to be a critical part of the value chain.”

“We are thrilled to support Reliance Retail in its mission to become India’s leading omnichannel retailer and ultimately to build a more inclusive Indian retail economy,” Kravis added.

Mukesh Ambani-led Reliance has in recent weeks attracted a lot of investor interest. US private equity firm Silver Lake Partners injected $1.02 billion into the retail unit. Silver Lake has already poured $1.35 billion in Reliance’s Jio Platforms, which has also seen an investment by Facebook.

KKR opened its first of eight Asia offices in 2005 and the firm currently has about $5.1 billion in private equity investments across more than 15 Indian companies, including JB Chemicals, Max Healthcare, Eurokids International and Ramky Enviro Engineers.

Shares in KKR have jumped 19% year-to-date and the global investment company scores a bullish Strong Buy Street consensus. That’s alongside an average analyst price target of $40.38, indicating 17% additional upside potential lies ahead.

Citigroup analyst William Katz last month raised the stock’s price target to $47.50 from $40 and reiterated a Buy rating. Katz added KKR to his US Focus List after returning from the company’s results and earnings call “increasingly favorable” around its “flywheel drivers and scaling footprint”.

The analyst sees potential upside to current estimates saying the impacts of “nascent” retail opportunities and the Asia platform expansion “reflect a degree of conservatism.” (See KKR stock analysis on TipRanks).