Qatar's QIA fund mulling a minority stake in Reliance Retail

Following the news, shares of its parent Reliance Industries [the owners of Network18 that publishes Forbes India] jumped a little over two percent to hit a high of Rs 2,533 on BSE.

The deal, however, is yet to be finalised and may be subject to change.  

Back in 2020, RRVL raised roughly $5.8 billion by selling a 10.1 percent stake to investors, including US private equity firms KKR and General Atlantic, the Saudi Public Investment Fund and the UAE's Mubadala.

That PE investors would be eyeing a piece of India’s $800 billion retail market is unsurprising. Within that, for them to be eyeing RRVL is also unsurprising. After all, it is India’s largest retailer by revenues, clocking ₹62,159 crore in the three months ending June 2023, up 20.5 percent from the corresponding quarter last fiscal. Net profit shot up 18.8 percent in the same period to Rs 2,448 crore. Reliance Retail added 555 stores in the reported quarter and witnessed its highest-ever footfalls at 249 million across formats.  

On a run rate basis, RRVL’s revenue is likely to cross Rs 2.5 lakh crore, or roughly $30 billion, this fiscal. For perspective, the second-closest competitor to RRVL is DMart, which has a run rate of roughly Rs 50,000 crore.  

“That’s at least a 4x gap,” points out Arvind Singhal, founder and chairperson of Technopak Advisors, a Delhi-based retail consultancy. “Plus, RRVL is profitable. Not too many retailers in India or globally can boast of that. The investment by QIA [if it goes through] is validation that RRVL has done exceptionally well in demonstrating growth with profitability,” he says.  

Also read: How Mukesh Ambani is aiming to strengthen his businesses for the next decade—from telecom to retail and financial services

Underlying RRVL’s success is its strategy of adopting a multi-format approach, that is, online, offline and omni-channel, across multiple categories, including electronics, fashion, beauty, FMCG and ecommerce through Ajio.com and JioMart, among others. It caters to varied customer needs at various price points. In apparel, for example, which forms a significant part of RRVL’s overall operations, it has Reliance Trends, a cut-price fashion shop; the soon-to-be-launched Azorte, which will compete in the premium segment against Mango and Zara; and in the luxury segment, it has partnered with a bevy of brands including Balenciaga, Burberry and, closer home, Manish Malhotra. Similarly, in the toy segment, RRVL has Hamleys, the iconic British toy retailer that it acquired in 2019, to cater to the top-end consumer, and Rowan to cater to the more price-conscious consumer.   

Over the years, RRVL has grown organically, as well as through franchises and joint ventures. Of late, it has been on an acquisition spree, snapping up homegrown fizzy drink brand Campa Cola, Metro Cash and Carry as well as Just Dial.  

There’s also a lack of competition for RRVL at scale. DMart serves as competition in the general merchandise category; Shoppers Stop, H&M and Puma in the fashion and lifestyle segments; HUL, ITC and Tata in the FMCG space; Amazon, Flipkart and BigBasket in ecommerce, and the recently-launched beauty portal Tira contends with Nykaa. But there isn’t a conglomerate structure that straddles value, mid and luxury retail across product categories in the way RRVL does. “RRVL is in a class of its own,” says Singhal.  

Ambani has previously said he plans to list his retail operations at some point but stopped short of giving a timeline. However, earlier this month, RIL announced that it will buy out the minority shareholders of Reliance Retail. After the Rs 1,071-crore buyback, RRVL, the holding company of Reliance Retail, will be fully promoter-owned.  

The move can be seen as paving the way for an eventual initial public offering of the retail business.