The Hindu Business Line : RIL gearing for retail foray?

RELIANCE Industries Ltd, after demerger of its power, telecom and financial services businesses on Wednesday, is getting ready to enter the greenfield area of retail.

If the size of investment, said to be Rs 20,000 crore over the next four years, is anything to go by RIL could well emerge the single largest player in this sector.

While the company continues to parry queries in this direction as `too premature,' fact is that no one denies it either. The market buzz is that project `Reliance Home' has been at least six months in the making. And the men reportedly in charge — Mr Anand Jain and Mr Manoj Modi — have been involved in similar project executions in the past.

The rationale behind such a foray is not hard to find, given that RIL generates surplus cash to the tune of Rs 13,000 crore annually. With existing avenues for cash deployment drying with the demerger, RIL urgently needs to identify fresh avenues of growth.

While the company has announced investments to the tune of Rs 42,600 crore in petroleum refining and E&P over the next four years, the need to deploy surplus cash would still be totally unfulfilled. And a retail foray would give Reliance such a chance, if it adopts the owned model and not the leased-out one.

Those in the know point out that Reliance has been actively scouting for large tracts of land in a number of medium and large cities for a while now. Gujarat — considered the home State by Reliance — has already witnessed some action and it is learnt that the company has already cornered significant space along the Ahmedabad - Gandhinagar highway, situated on the outer ring road that will shorten the distance between the twin cities.

The story is not too different in cities such as Hyderabad and Bangalore.

Mr Mukesh Ambani, Chairman and Managing Director of RIL, said at the company AGM on Wednesday that life sciences would be the next major initiative. Industry watchers are not entirely convinced that the next big shout from Reliance would be life sciences and healthcare given its limitations in scaling up.

"With life sciences, RIL may not get the kind of scale that it feels comfortable with. It cannot be ruled out that RIL will suddenly attempt to emerge a major player in healthcare through the inorganic growth route, but it is unlikely," said an analyst. However, inorganic growth could hold good for the retail foray.

Even as market pundits have begun debating whether RIL would now be positioned as strictly a commodities player (petroleum and petrochemicals), a retail push could get back the company in direct connect with the customers once again. And it can only be a profitable venture as the branded domestic retail is estimated at Rs 10,000 crore currently, but only accounts for four per cent of business, the rest being in the unorganised sector. This puts the size of the domestic retail market at Rs 4,00,000 crore.

For Reliance, the retail foray, when it happens, would indeed be a homecoming of sorts, the last initiative came way back in the late 70s when it rolled out hundreds of `Only Vimal' showrooms across the country.

Whether or not the Wal-Marts, Tescos or Safeways eventually land in the country, it seems clear that Reliance is going to rub shoulders with the Shoppers' Stops, Pantaloons, Lifestyles and Westsides in the coming months. More than the Wal-Marts and Tescos, it will be the likes of Reliance, Tata and Godrej that will to reach into the country's interiors.

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