India’s largest business group, Reliance Industries, has been battling geopolitical headwinds in its oil refining and, reportedly, in one of its new energy ventures. But those are not the oil-to-telecom conglomerate’s biggest worries.
The slowdown in its retail business, the group’s third largest vertical, has had analysts reduce earnings estimates and cut stock target price, even as they maintain a buy rating on Reliance shares.
Reliance Retail’s revenue grew just 8.1% on year and its earnings before interest, taxes, depreciation, and amortization, or EBITDA, improved a mere 2% during the last quarter, raising doubts over its ability to deliver high growth.
“We are confident of delivering 20%+ plus CAGR [compound annual growth rate] in retail revenues over the next three years,” Isha Ambani, who heads the retail business, told shareholders at the company’s annual meeting last year.
Macquarie Capital has removed Reliance from its Asia Marquee list. Reliance Retail “is a key swing factor” in the group’s sum-of-the-parts valuation due to the slowdown in its growth momentum, the global brokerage said in a report on Monday.
