Even though Reliance Retail is ahead of its peers when it comes to digitisation of its services, it will need to make large investments to consolidate the back-end and digitise operations to take on Amazon and Flipkart.
Reliance Industries (RIL) on Thursday said Abu Dhabi-based sovereign investor Mubadala Investment Company will invest Rs 6,247.5 crore in its subsidiary, Reliance Retail Ventures (RRVL), for a 1.40% stake.
The investment values Reliance Retail at a pre-money equity value of Rs 4.285 lakh crore. This is the second-largest investment in RIL’s retail arm after two rounds of investments earlier made by US private equity firm Silver Lake.
This marks the second investment by Mubadala into an RIL subsidiary. It earlier invested Rs 9,093.60 crore in Jio Platforms for a 1.85% stake.
The investment in RRVL by Mubadala comes just a day after US private equity firm General Atlantic announced its investment in Reliance Retail, and Silver Lake announced an additional investment in the company of Rs 1,875 crore. This is the fifth investment in RIL’s retail arm within a month. Thus far the retail firm has sold 5.68% stake, raising total funds of Rs 24,847.5 crore.
Even though Reliance Retail is ahead of its peers when it comes to digitisation of its services, it will need to make large investments to consolidate the back-end and digitise operations to take on Amazon and Flipkart. Brokerage firm UBS had earlier said the digitisation and consolidation process requires higher capex and that Reliance Retail is on course to raise capital for the same.
Commenting on the transaction with Mubadala, Mukesh Ambani, chairman and MD, Reliance Industries, said, “We value the partnership with a knowledge-rich organisation like Mubadala and acknowledge their confidence in our mission to strengthen the core of India’s retail sector – the millions of small retailers, merchants and shopkeepers – through the power of technology. Mubadala’s investment and guidance will be an invaluable support in this journey.”
Reliance Retail has acquired Future Group’s retail business which has a portfolio of strong retail assets across grocery, fashion and lifestyle. This would add around 1,300 stores to its current 800 stores in grocery and 440 stores in fashion and lifestyle, taking its total network to 2,400. With the acquisition of Future Group’s assets, Reliance Retail’s share in the organised retail market is expected to be in the region of 15% after this merger and the retailer now accounts for nearly 10% sales of top FMCG firms.
Khaldoon Al Mubarak, MD and group CEO, Mubadala Investment Company, said, “Their (Reliance Industries) vision is the inclusive transformation of India’s consumer economy through the power of digitisation, creating opportunities and market access for millions of small businesses across the country, and we are committed to supporting the company’s continuing development.”
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