India’s retail market is estimated at Rs 60 Lakh Crores in FY 2019-20 and is expected to grow at a CAGR of 10% over the next 5 years to reach Rs 90 Lakh Crores by FY 2024-25. It accounts for around 10% of the country’s GDP. Only around 8-10% of the retail market is organised retail, the remaining 92% fall under unorganised retail.
To protect the interest of agriculturists and small retailers in India, the government has a restricted FDI policy for the retail sector. You can read more about FDI in the retail sector here.
Reliance Retail Ventures Limited (RRVL) is a subsidiary of Reliance Industries Limited. It was founded in 2006. It is one of the largest retailers across India by revenue. Reliance Retail has about 11,748 stores all across India, with 70% of them being consumer electronics stores. Additionally, it owns 328 warehouses or 310 Mn Sq. Ft of warehousing space.
Reliance Retail’s generates maximum revenue from Connectivity, which essentially is the from the sale of recharge coupons of Reliance Jio (the conglomerate’s telecom arm) and Jio Store. The Consumer Electronics Segment is next accounting for almost 28% of Total Revenue in FY20 followed by Grocery at 21%, Fashion and Lifestyle at 8% and Petro Retail at 8%.
Ever seen those Reliance gas stations? They are actually owned, managed and marketed by Reliance Retail. All of the gas stations fall under the Petro Retail Segment. Reliance Retail owns around 519 of such Petro retail outlets all over the country.
Reliance Industries and its subsidiaries have been in the news a lot lately. This is because they have been on an acquisition and fundraising spree. Over the past decade, Reliance Retail has grown tremendously. The charts given below shows Reliance Retail’s growth over the past 5 years in terms of Profit After Taxes and EBITDA.
During COVID, Store functioning was severely impacted by lockdown and restrictions. Consumer Electronics and Fashion & Lifestyle business remained suspended in April and partially in May/June. Around 50% of stores were fully shut throughout the quarter, 29% were operational partially.
Grocery stores continued operations with limitations and logistical challenges. Operations across the network including supply chain were disrupted by sporadic changes in regulations. Due to the current pandemic situation Reliance Retail did face a revenue drop of 17%.
Reliance Retail saw a 21% growth across fully operational businesses of Grocery and Connectivity.
Brands and Subsidiaries of Reliance Retail
Other Partner Brands
As stated in the section above, Reliance Retail has 5 income channels or segments viz.
- Consumer Electronics- Reliance Digital, Reliance ResQ, etc.
- Fashion & Lifestyle- AJIO, Trends Footwear, Reliance Jewels, Marks and Spencers etc.
- Grocery- Reliance Fresh, Reliance Smart, Reliance Market, JioMart
- Connectivity: JioStore
- Petro Retail: Reliance Petro Marketing.
With refined e-commerce especially in Grocery, JioMart, the newest member of Reliance Retail is expected to rise and it matters a lot to Reliance Retail, but why?
Why does JioMart matter?
Reliance Retail has ventured into the digital commerce space with JioMart in January, 2020. JioMart services were launched across 200 cities on a pilot basis. JioMart also uses WhatsApp ordering feature for consumers through its partnership with Facebook.
JioMart will operate on the Online to Offline business model. This means that it will connect with local retailers and deliver goods to customers by procuring them from the nearest store located in the customer’s vicinity.
This separates JioMart from its competitors like Amazon and Grofers who follow the Warehouse Model, where they stock pile inventories in warehouse spread over various locations.
JioMart will therefore save on fixed costs and other costs associated in maintaining the warehouses. Moreover, it can onboard any retailer in any part of the country into its system.
JioMart order flow is now 4 times more than what it was before the lockdown period.
Future of Reliance Retail
Reliance Industries Limited announced the acquisition of Future Group for Rs 24,713 crore, aiming to boost its presence in the offline retail market. Reliance Retail Ventures Ltd (RRVL), acquired the retail & wholesale businesses along with the logistics & warehousing businesses of the Future Group.
Reliance Retail will have access to around 1800 stores across Future Group’s Big Bazaar, FBB, Easyday, Central, Food hall formats, which are spread in over 420 cities in India.
To Read More about the Future Group Deal, Click Here.
Also, Reliance Retail acquired a majority equity stake in Vitalic Health Pvt. Ltd./ NetMeds for an amount of ~Rs. 620 crores. This marks a presence of Reliance Retail in the Pharma-Retail segment as well.
Reliance Retail acquired 100% stake in Shri Kannan Departmental Store Private Limited (SKDS) for a consideration of Rs 152.5 crores. SKDS is engaged in the business of retailing fruits & vegetables, dairy, staples, home & personal care and general merchandise to consumers. SKDS currently operates 29 stores across Coimbatore and nearby areas.
Reliance Brands Limited, another subsidiary of Reliance Retail acquired 100% equity shares of Hamleys Global Holdings Limited GBP 67.96 million. Reliance Lifestyle Holdings Limited, a subsidiary of the Company, runs and operates the Indian franchise of the Hamleys brand and has 88 stores in India. This acquisition will catapult RBL to be a major player in the global toy retail industry. (Source: Company Press Release)
Reliance Retail has also acquired men’s apparel company John Players in March,2019 for an undisclosed amount.
Investments flowing in
- Silver Lake picked up a 1.75% stake in Reliance Retail Ventures for ₹7,500 crore. Earlier this year, Silver Lake invested Rs 10,202 crore in Jio Platforms, RIL’s digital services platform.
- KKR & Co. is in advanced talks to invest at least $1 billion in Reliance Retail in what could be another U.S. investment following Silver Lake’s deal. Read More Here.
- ADIA is in discussions to invest about $750 million at a valuation of roughly $57 billion, while PIF could funnel as much as $1.5 billion into Reliance Retail. (Source: Financial Times)
- There have been reports of Reliance Retail offering 40% stake to Amazon for $20 Billion as well. This news report caused Reliance Industries Limited(RIL) shares to surge 7.2% in the markets.
What sets Reliance Retail apart?
Investment demands are pouring in so hard, that there have been reports of Mr. Mukesh Ambani, Chairman of Reliance Industries Ltd, has had to put investors like Soft Bank and Carlyle Group on a waiting list.
However, what remains common in all the investment rumours is the word “people familiar with the matter”. It is the people familiar with the matter and is anonymous to the public who are making disclosures about these deals. No confirmation has been obtained from the companies what so ever. One should keep their eyes and ears open before making any inferences.
With the Future Group in its pockets, Reliance’s Grocery segment can prove to be a tough competition for other retailers like D-Mart, Grofers, BigBasket and many more.
Additionally, Reliance Retail has its venture JioMart as its blue-eyed boy. JioMart is doing something which other retailers have failed to do so. It wants to include your next-door convenience store into its retail-ecosystem. Geographically too Reliance Retail intends expanding its trail. With the acquisition of Shri Kannan Departmental Stores, it’s set its foot in the state of Tamil Nadu’s niche retail market.
Reliance has managed to extend its wings in multiple retail segments like Toys, Pharma and Fashion & Lifestyle. Reliance has bagged investments and acquisitions for its Jio and Retail platforms, while Oil and Petroleum still continue to be a major source of income, it seems Reliance doesn’t want any sector to remain untouched by it.