Earlier this month, when
MSCI is one of the world’s largest providers of equity, currency and fixed income indices.
added 44 companies to its India Small Cap index, capping off an incredible year for a little-known 12-year-old company.
Even before the announcement, shares of RattanIndia Enterprises (REL) had jumped 6 times since it changed its name from RattanIndia Infrastructure in April 2021. This was after it moved from backing a d thermal energy to an investment and holding company for new-aged businesses such as electric vehicles, e-commerce, fintech and drones.
On the day of the MSCI news, REL’s stock jumped 20%. The next day, it increased again by 15%. REL’s share price has now increased 8 times since April 2021, and the company has a market capitalization of Rs 5,800 crore (~US$750 million).
And get this: REL’s operating revenue in the year ending March 2021 was just Rs 10 lakh (US$12,850). In the nine months to December 2021, it improved to Rs 2.2 crore (US$283,000). During the same periods, the company recorded profits of around Rs 70,000 (~US$900) and losses of around Rs 11 crore (US$1.4 million), respectively.
Since REL is currently in the red, it is not possible to gauge its valuation using earnings-based metrics. But its market cap is a staggering 1,975 times its annualized revenue for the fiscal year ending March 2022.
This is not the first time that a company’s valuation has been decoupled from its financial statements and seemingly based on its outlook. This is normal in the world of startups. But one would assume that public markets are a different beast.
“Ninety percent of the market is looking to make a quick buck. Very few people actually read what a company does,” says Tariq Hussain, independent investor and equity analyst. “And once you have a narrative around a hot topic, no one is going to leave the stock.”
At first glance, REL appears to have narratives around several burning themes.
In April 2021, he invested 150 crore rupees ($19.3 million) for a 43% stake in Indian electric motorcycle maker Revolt Intellicorp. Months later, he made an undisclosed strategic investment in US drone-based logistics platform Matternet.
Then, earlier this year, it rolled out a loan aggregation platform, Bank Se, and became a seller on the Amazon marketplace through its subsidiary Cocoblu Retail. REL plans to invest 350 crore rupees ($45 million) in Cocoblu, which sells headphones, books and clothes, among other things, on Amazon.
Founded in 2010, REL is an offshoot of Indiabulls Group, a two-decade-old Indian conglomerate that operates in real estate and financial services. “We like to think of ourselves, structurally, as a combination of Adani Enterprises and Info Edge,” REL founder Rajiv Rattan says on a Zoom call with his wife, Anjali Rattan Nashier.