Reliance Industries doing a Jio with Retail

Anand Kalyanaraman BL Research Bureau | Updated on September 09, 2020

More stake sales could be on the way

First the acquisitions, then the stake sales. The template being followed by Reliance Industries (RIL) with Reliance Retail seems similar to what it did with Jio.

Soon after the acquisitions of digital pharma marketplace Netmeds for ₹620 crore and a major part of Future Group for ₹24,713 crore by Reliance Retail in August, RIL has now announced the sale of 1.75 per cent stake in Reliance Retail Ventures Limited (RRVL) to private equity player Silver Lake for ₹7,500 crore (about $1 billion).

A new trend

This could be the start of a series of investors buying into RRVL as had happened after Facebook first invested in Jio Platforms. Already, news reports indicate that private equity player KKR is in talks to buy a stake in RRVL for a billion dollars or more. This will be in line with Mukesh Ambani’s statement at the AGM of RIL a couple of months back: “We have received strong interest from strategic and financial investors in Reliance Retail. We will induct global partners and investors in Reliance Retail in the next few quarters.” As of March 2020, RIL held 94.63 per cent in RRVL.


Similar to Jio Platforms, RRVL, too, could opt for a fund-raising model adopted by many start-ups that raise capital from a series of investors within a time window. In this model, a company agrees with investors that a particular number of shares, eventually representing a certain percentage of the fully diluted share capital, will be allotted to them at the end of the fund-raise from multiple investors.

This seems to be the case, given the announcement that “Silver Lake’s investment will translate into a 1.75 per cent equity stake in RRVL on a fully diluted basis”.

An IPO for Reliance Retail could eventually follow in the coming years as is expected to be in the case of Jio Platforms.

Similar to Jio Platforms, which is the holding company for the digital businesses of the RIL Group, RRVL is the holding company of all retail companies under RIL Group. Again, similar to Jio Platforms, the stake sale in Reliance Retail seems to be at a significant premium. RRVL’s equity as of March 2020 was ₹7,656 crore (comprising equity share capital of ₹6,000 crore and ‘other equity’ of ₹1,656 crore).


RRVL’s total assets as of March 2020 was ₹7,728 crore. In FY20, the company’s revenue grew about 25 per cent y-o-y to ₹1,62,936 crore, while its operating profit rose 56 per cent to ₹9,654 crore, in line with its rapid growth trajectory in the past few years. The stake sale to Silver Lake values RRVL at a pre-money equity value of ₹4.21-lakh crore.

Unlike Jio Platforms that had completed its acquisition spree before its stake-selling spree, RRVL may continue to buy more businesses to bolster its retail muscle as part of an acquisitions-driven growth strategy. Reliance Retail is said to be in talks to acquire stakes in online furniture company Urban Ladder, online grocer Milkbasket, and lingerie brand Zivame.

RIL, which plans to take on Amazon India and Flipkart in the e-commerce sweepstakes in India, seems to be bolstering its position with acquisitions.

The Netmeds deal has given Reliance Retail a strong position in the high-potential online pharmacy space. The acquisition of the Future Group’s formidable operations of about 1,800 stores has given a quick scale-up to Reliance Retail, already the country’s largest organised retailer with 11,806 stores across the country as of June 2020.

Long-term prospects

The June 2020 quarter saw Reliance Retail’s performance take a hit due to the lockdown impact; revenue declined about 17 per cent y-o-y, while operating profit fell 47 per cent. With the easing of lockdowns, the business should move towards recovery.

Long-term prospects look bright, with the organised retail market in India having strong growth potential.

Published on September 09, 2020

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