How Mukesh Ambani's Cash-Cow Reliance Retail's Equity Value Doubles To Rs 8.4 Lakh Crore In 3 Years

Abu Dhabi Investment Authority (ADIA) has announced to invest a further Rs 4,966.80 crore into billionaire Mukesh Ambani's Reliance Retail Ventures (RRVL). This investment will take ADIA's shareholding into RRVL to a 0.59% stake on a fully diluted basis. But the latest funding will also take RRVL at a pre-money equity value of Rs 8.381 crore, making the Reliance Industries-backed subsidiary among the top four companies by equity value in the country. Foreign investors have been liking RRVL since post Covid-19 outbreak, and in a span of three years, the valuation of the retail giant has doubled.

The birth of Reliance Retail took place as a fresh store in the city of Hyderabad, just a year before Amazon found its biggest competitor Flipkart in the Indian market which was founded in 2007. Years passed, Reliance Retail blossomed from selling groceries to electronics and even fashion & lifestyle stores in brick-to-mortar business, at the same time, Flipkart buckled up to take on Amazon's market reign in the country. Speeding up, Flipkart and Amazon are now in a neck-to-neck battle in the Indian e-commerce industry.

But the time when Reliance Industries' chief Mukesh Ambani decided to take his Reliance Retail into the e-commerce business, it was only a matter of time, before many eyes were bound to pay attention to this retail store chain company.

The Reliance Retail 2.0 was just the beginning, Ambani's vision was far greater ahead. The launch of the Ajio website, a curated fashion digital commerce platform in 2016, and the further unveiling of a multi-channel e-commerce platform for Reliance Trends in 2015, were all positive steps, but the game changer was in 2019, when Reliance Retail launched its e-commerce venture, a year before the first outbreak of Coronavirus that brought the world to standstill in early 2020.

While the Covid-19 pandemic impacted the world significantly and shockingly, Reliance Retail was on the winning front as many foreign investors took a liking to the company.

In the year 2020, Reliance Retail saw a bandwagon of investment from foreign companies such as Facebook's Rs 43,574 crore infusion, and Rs 33,737 crore investment from search engine Google International LLC. These two mega deals alone took Reliance Retail's equity value to Rs 4.36 lakh crore. More money flowed into RRVL from a host of foreign investors!

In September 2020 alone, Reliance Retail saw investments of Rs 7,500 crore by Silver Lake (1.60% stake), Rs 5,550 crore by KKR (1.17%), Rs 3,675 crore from, General Atlantic (0.78%), and another Rs 1,875 crore from Silver Lake's co-investors for 0.40% stake.

This was followed by an investment of Rs 6,247.50 crore by Mubadala (1.33% stake), Rs 5,512.50 crore from GIC-Singapore(1.18%), Rs 1,837.50 crore from TPG (0.39%), and Rs 5,512.59 crore from ADIA for 1.18% stake in October 2020. Lastly, the year ended with Saudi Arabia's wealth fund PIF buying a 2.04% stake in Reliance Reliance for Rs 9,555 crore in November.

The year 2023 has also turned fruitful for RIL's retail arm as Reliance Retail continues to register record-high earnings and scale up its business strategies. In three months, Reliance Retail saw investment of Rs 8,278 crore from Qatar's sovereign wealth fund QIA for a 0.99% stake in August 2023, followed by KKR's Rs 2,069.50 crore infusion in September for 0.25%, and the latest being ADIA's Rs 4,966.80 crore on October 6, 2023, for 0.59%.

With ADIA's latest funding, RRVL's equity value is now at ₹ 8.381 lakh crore, which makes it among the top four companies by equity value in the country. Hence, from 2020 to 2023 till date, RRVL's equity value has doubled.

What makes RRVL special?

On additional investment in RRVL, Hamad Shahwan Aldhaheri, Executive Director of the Private Equities Department, ADIA, said, "Reliance Retail has demonstrated strong growth and adaptability in a market that is evolving at an unprecedented pace. This investment aligns with our strategy of supporting our portfolio companies that are transforming their respective end markets. We are pleased to partner with the Reliance Group, and increase our exposure to India's dynamic and fast-growing consumer sector."

Meanwhile, Isha Mukesh Ambani, Executive Director, of Reliance Retail Ventures said, "ADIA's investment in RRVL is a further testament to their belief in the Indian economy and our business fundamentals, strategy and execution capabilities."

RRVL's vision is to galvanize the Indian retail sector through an inclusive strategy serving millions of customers, empowering micro, small and medium enterprises (MSMEs) and working closely with global and domestic companies as a preferred partner, to deliver immense benefits to Indian society, while protecting and generating employment for millions of Indians.

Further, through its New Commerce business, RRVL has digitized more than 3 million small and unorganised merchants. This will enable these merchants to use technology tools and an efficient supply chain infrastructure to deliver a superior value proposition to their customers.

Now, RRVL is operating India's largest, fastest-growing, and most profitable retail business serving 267 million loyal customers with an integrated omnichannel network of over 18,500 stores and digital commerce platforms across grocery, consumer electronics, fashion & lifestyle, and pharma consumption baskets.

And it sure has the game for taking the crown from Walmart's-backed Flipkart and Amazon in e-commerce platform in India, if we go by the success of its Reliance Jio which has taken over the telecom industry since its launch in 2016, outrunning decades-old players like Bharti Airtel, Vodafone and Idea.

A report by Bernstein in May 2023, revealed that Flipkart, Amazon and Reliance Industries currently hold about 70% of the e-commerce market in India, and the three are expected to dominate with a 90% share in the coming years. As per the report, Walmart-owned Flipkart and Amazon dominate the e-commerce with 60% share, and Reliance holds the third spot. But Berstein also believes Reliance could take the top spot in the country's e-commerce market with its development in retail and mobile networks along with Jio digital ecosystems.

According to Bernstein, the advantages of its retail network, mobile network, digital ecosystem and 'home field advantage' in a famously complex regulatory and operating environment could lead Reliance to claim the lion's share in the $150-plus e-commerce market in the long term. Also, it needs to be noted that, Reliance is the only profitable business at 6-7% EBITDA, while Amazon and Flipkart have recorded negative EBITDA.

In Q1 of FY24 as well, Reliance Retail continued on an escalator with revenue at Rs 69,948 crore recording growth of 19.5% YoY driven by growth in grocery boosted by consumer electronics (excluding devices) and fashion and lifestyle. Further, in the quarter, EBITDA stood at Rs 5,139 crore, up by 33.9% YoY, while EBITDA margin from operations on net sales expanded by 30 bps to 7.9%. Net profit was up by 18.8% YoY to Rs 2,448 crore.

Reliance Retail reported a turnover of Rs 2,60,364 crore for the financial year 2022-23.