India’s Reliance Scores $1.02B Retail Investment From Silver Lake

Reliance Industries announced Wednesday that US private equity firm Silver Lake will invest $1.02 billion into its retail unit Reliance Retail Ventures Ltd. (RRVL), India’s largest retail chain.

Reliance said that Silver Lake’s investment will translate into a 1.75% equity stake in RRVL on a fully diluted basis. The investment values RRVL at a pre-money equity value of 4.21 trillion rupees. ($57.14 billion). It marks the second multi-billion dollar deal by Silver Lake in a Reliance subsidiary after the $1.35 billion investment in Jio Platforms announced earlier this year.

Reliance said that RRVL operates India’s largest, fastest growing and most profitable retail business serving close to 640 million footfalls across its 12,000 stores nationwide.

“I am delighted to extend our relationship with Silver Lake to our transformational efforts of building an inclusive partnership with millions of small merchants while providing value to Indian consumers across the country in the Indian retail sector,” said Reliance chairman Mukesh Ambani. “We believe technology will be key to bringing the much-needed transformation in this sector so that various constituents of the retail ecosystem can collaborate to build inclusive growth platforms. Silver Lake will be an invaluable partner in implementing our vision for Indian Retail.”

The move also means more competition for Amazon (AMZN) and Walmart’s (WMT) Indian grocery service, Flipkart, who are seeking to lure Indian consumers to their online purchase channels during the coronavirus pandemic.

Separately KKR is reportedly in advanced talks to invest up to $1.5 billion in Reliance Retail, according to Bloomberg.

Other large corporates have also injected funds into Reliance to expand their international reach. Earlier this year, Facebook (FB) poured $5.7 billion into Reliance’s Jio platform.

For Tigress Financial analyst Ivan Feinseth, Facebook’s international expansion plans are one of the reasons to reiterate a Buy rating on the stock earlier this month.

“International expansion represents a key growth opportunity as FB invests in India’s Reliance Jio Internet platform,” Feinseth wrote in a note to investors. “FB’s innovative abilities, along with strategic acquisitions to expand its services platform, will further enable it to realize more significant revenue opportunities and yields from its massive user base.”

The analyst believes “significant upside exists from current levels” and continues to recommend buying the shares.

Shares in Facebook have surged 31% this year with the $293.16 average analyst price target indicating the stock could advance more than 8% in the coming 12 months.

Overall Wall Street analysts have a bullish call on Facebook. The Strong Buy consensus boasts 30 Buy ratings versus 4 Hold ratings and 1 Sell rating. (See Facebook stock analysis on TipRanks).