Reliance Retail as a One-Stop Shop for Investors

“The future belongs to those who believe in the beauty of their dreams.”  ~ Eleanor Roosevelt

You all might have heard from a lot of people that, it all starts with a dream. And, the conglomerate we are talking about today proves it to be right. Yes, we are talking about Reliance Industries, which was founded by Dhirubhai Ambani, who came from a remote area of Gujarat and created an empire which now has a market capitalisation of ₹ 14,94,511.74 Cr.

Whenever you think of Reliance, what comes to your mind? Some of the common answers might be Mobile, telecom, retail and E-commerce. No matter which segment it might be, Reliance has always tried to establish a monopoly in the market.

In the last few months, Reliance Retail has received funding of around ₹37,710 crores by giving up a total of 8.5% stake in the company. So after Jio, and with the acquisition of Future Group, is Reliance trying to create a monopoly in the Indian retail market as well by using leverage? Here’s a detailed analysis.

Reliance Retail to become a one-stop shop for investors

The focus of Mukesh Ambani is now shifting from Jio to Reliance Retail. The way Reliance Retail is banging the digital thrust in India through Jio mart, Ajio and so on is commendable. Also Reliance retail has proved its ability in terms of raising funds, in the past one to two months which comes to a total of ₹37,710 crores which is huge.

This investment is made by the global giants such as Silver Lake, KKR, General Atlantic, Mubadala, GIC, TPG and ADIA in less than just four weeks. Apart from GIC rest all the investors were also there with Reliance and have invested on the Jio platforms as well. This shows the trust and confidence that the investors have on the company.

The below table with all the details of the above-mentioned investments

The Biggest Deal in Retail Sector - Acquisition of Future Group

The strategic decision of Reliance Retail to acquire the assets of the future group founded by Kishore Biyani for INR 24,713 crore is really a smart move. Now with this deal Reliance retail will now be able to reach more than 600 million customers across the 2,000 Future Group retail stores. Also, Reliance Retail will gain access to Future Group’s brands and businesses through eCommerce sites, social media and mobile apps like FuturePay and EasyDay Club.

With all this Reliance Retail will also own some of the prominent brand names like BigBazar, Central, Brand Factory, Golden Harvest, DreamLine and so which are used synonymously with ‘retail’ in India. All these brands are spread in over 400 cities and towns of India. With no doubt, we all know that the brands of the future group have bought a big change in the way retail business was done in India. 

In this deal Reliance Retail and Fashion Lifestyle Limited (RRFLL) have suggested investing ₹1,200 crores in the preferential issue of equity shares of Future Enterprises Limited (FEL), which will result in acquiring 7.05% stake in Future Enterprise Limited.

Will Reliance Retail Emerge as a Sector Leader?

First of all, India still lacks a big channel based retail player, so is Reliance Retail planning to be the one? This question can be something that investors could be betting for on Reliance Retail. Data-rich, Digital adoption and scale and size that none of the other Indian retail can provide could be one of the biggest attractions because of which several investors have lined up.

Also after the acquisition of futures group reliance retail has the competition in the sector. The Indian retail industry which is worth 635 billion will now have only two big competitors left in the market, Reliance Retail and Avenue Supermarkets, running its retail chains as DMart.

Though after the acquisition of future group Reliance Retail is much bigger in terms of revenue from DMart. While the DMart had the ability to outbid Kirana stores with heavy discounts may now face tough competition from Reliance Retail.

As a whole, Reliance Retail will now be exposed to different types of nature of demands throughout India. And there a partnership with global conglomerate apparel brands like Burberry, Armani will take time due to this Covid-19 pandemic. 

The Bottom Line

It’s of no doubt that Ambani has played his cards well on Reliance Retail. His new e-commerce strategies have already begun to change the way the retail sector was operating in India.

We all know that consumers are shopping more and more online these days as the impact of COVID, so the company has committed to expanding the network to over 20 million of these merchants and helping them through the digitalization of small and unorganised merchants, has already begun to show its colours.

The company also aims to help the merchants to use technological tools and will develop an efficient supply chain infrastructure to deliver a superior value proposition to their own customers. This can also be done by way of Reliance Fresh and Reliance Supermart which are already well established.