Mukesh Ambani’s next goal seems to be the ‘retail king of India’

Mukesh AmbaniBCCL
  • Chairman Mukesh Ambani, with a net worth of $72.4 billion, is leaving no stone unturned ⁠— whether it is in adding physical stores or technological might for JioMart.
  • The RIL stock has gained 25.8% this year so far , analysts expect a lot more from RIL in the next few months.
  • While the big-ticket fundraising by Reliance Jio has caught the market’s fancy, the next round of unlocking potential value is likely to come from the retail vertical set for an IPO.
  • While a deal to buy out Kishore Biyani’s Future Retail is being worked out, here’s a look at the size and scope of Ambani’s existing retail unit, which is a giant in its own right.
  • Check out the latest news and updates on Business Insider.
According to Reliance Industries’ annual report, the retail vertical sold 20 million electronic units, 160 million garments, 2.6 billion units of grocery among other things last financial year.

Reliance is already the country’s largest retail chain but Chairman Mukesh Ambani ⁠— with a net worth of $72.4 billion ⁠— wants more and he is leaving no stone unturned, whether it is in adding physical stores or technological might (including the reach and scale of WhatsApp) for its e-commerce platform JioMart.

While the big-ticket fundraising by Reliance Jio has caught the market’s fancy, the next round of unlocking potential value is likely to come from the retail vertical, which is also headed for an initial public offering (IPO) soon.

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While a deal to buy out Kishore Biyani’s struggling Future Retail is being worked out, here’s a look at the size and scope of Ambani’s existing retail unit, which is a giant in its own right.

To start with Reliance Retail employs nearly 1.4 lakh people, and has almost 11,800 stores all across India selling everything from food and grocery, consumer electronics, to fashion and lifestyle. Adding Future Retail’s stores would straight away add 1,500 outlets to its network.

Profit is a habit for Ambani

Reliance Retail revenue and profit is twice as much as it was three years ago. In the last quarter, even with March being a tepid month, Reliance Retail posted an operating profit of ₹2,062 crore, up by 19.8% from the same quarter the previous year.
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BI India/Flourish

In the full year ending March 2020, it has added 1,500 stores and 30% to its total retail space. Reliance Retail saw 640 million footfalls during the year, and has a 125 million registered customer base, up 40% year-on-year. According to the report, the retail venture on an average adds three stores per day.


SegmentBrandsMargin (Source: BOB Capital Markets)
Food and GroceryReliance Fresh, Reliance Smart and Reliance Market6.5%
Consumer electronics Reliance Digital Jio stores6.2%2.2%
Fashion and lifestyleReliance Trends, Project Eve, Reliance Footwear, Reliance Jewels and AJIO.com. 24%

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Consumer electronics has been the big win for retail so far

BI India/Flourish

61% of the retail revenue comes from consumer electronics. “Reliance Retail, being the master distributor for Jio’s telecom services, is a strategically important entity. With 8,100+ Jio stores, the retail business is cleverly capitalising on Jio’s technology platform and moving between brick-and-mortar stores and the e-commerce business,” said a Bank of Baroda Capital Markets report.

Essentially, Reliance Retail is not just selling technology, it is also using tech to boost its business

Reliance is betting on e-commerce with its much talked about venture JioMart, which currently works on the offline-to-online model with kirana stores and is present across 200 cities. “The roadmap to this journey requires Reliance Retail to establish a complex yet robust physical and digital pan-India infrastructure and neatly weave this network to a smooth, sound and responsive operating system, which will enable Reliance Retail to serve consumers in partnership with traditional retailers,” Reliance’s annual report said.
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Facebook’s $5.7 billion investment in the company has meant that Reliance Retail and WhatsApp are now in a commercial partnership to accelerate JioMart’s growth.

Reliance's various startup investments have been boosting its technological prowess like Haptik in the conversational AI (Artificial Intelligence) space, Fynd in the e-commerce sector, among various other bets in education, cloud, robotics, SaaS (Sofware as a service) and more.

All this will take Reliance deep inside India’s heartland
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Reliance Retail already has extended beyond the big cities of India. “Under the Trends umbrella, retail operates Trends Small Town (a concept addressed to tier-3 and 4 towns). The concept has been well received by customers and has scaled up to 240 stores across 200+ towns in a short time,” said the report.

And the tech investments may help it go far deeper and grow much larger. “We expect revenues to surge to ₹3.4 trillion by FY23 (33% of which will come from connectivity),” said the Bank of Baroda Capital Markets report from July.

Post-covid retail
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All eyes will be on retail on the April-June 2020 earnings, as the coronavirus lockdown would have impacted the sales. But Reliance Retail with Mukesh Ambani’s deep pockets is likely to fare better than peers.

“Business is re-imagining the store in a post COVID-19 world and reworking its interactions with customers when they come back, how they come back, their shopping journey, checkout and so on. Taking a 360 degree view of the customers, business is strengthening digital commerce and omni-channel capabilities, bolstering its supply chain / fulfillment capacity to handle 10x home delivery,” said Reliance in its annual report.

The investments into the company and the planning for a future with new rules of the game have helped the stock

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BI India/Flourish

While the stock has gained 25.8% this year so far ⁠— at a time when the Sensex has fallen 12.5% ⁠— analysts expect a lot more from RIL in the next few months

Broking firmTarget price
Morgan Stanley₹1801
Angel Broking₹1937


SEE ALSO:

Mukesh Ambani is not done – Jio Fiber to get over $1 billion as Abu Dhabi and Saudi sovereign funds are set to invest in Reliance InvIT

Google will invest $10 billion in India, as CEO Sundar Pichai says India will lead the next wave of innovation

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