Here’s how Reliance Retail stacks up against some of its global peers – Walmart and Tesco

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Here’s how Reliance Retail stacks up against some of its global peers – Walmart and Tesco
BI India/Wikipedia Commons
  • Mukesh Ambani had said that Reliance Retail is the fastest-growing retailer in the world.
  • Here’s how the retailer stacks up against its global listed peers Walmart (US) and Tesco (UK).
  • It has been a busy 2020 at Reliance Retail too – with JioMart taking off, NetMeds and Zivame acquisitions, and now Future Retail and Urban Ladder on the cards.
Reliance Chairman Mukesh Ambani is building ammunition for his next burst of investments for his retail venture – Reliance Retail. With the e-commerce debut with JioMart and a spree of acquisitions ready for Reliance Retail, Ambani is not just living up to his claim of being India’s largest retailer but also has global ambitions.

During the company’s annual general meeting in July, Ambani had said that Reliance Retail is the fastest-growing retailer in the world, and the only Indian retailer to feature in the Top 100 global retailers.

The behemoth, Reliance Industries' retail vertical is headed for an initial public offering (IPO) soon. Here’s how Reliance Retail stacks up against its global listed peers Walmart (US) and Tesco (UK).

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Reliance Retail Walmart Tesco
Retail sq ft28.7 million 783.9 million141.5 million
Revenue for FY20$21.7 billion$524 billion$73.2 billion
Total number of stores11,80611,50010780
Market Value$4-5.3 billion(estimated) $381.49 billion$22.25 billion
Enterprise value/EBITDA26.5x12.79x8.74x
(Source: company reports, HDFC Securities)

Reliance Retail, the unlisted entity, is estimated to share a higher valuation

Reliance Retail might be a small player when compared to the global giants Walmart and Tesco, but here’s where Mukesh Ambani brings true value to its investors – its enterprise value to EBITDA (earnings before interest, taxes, depreciation, and amortization) ratio is double than Walmart, and triple than that of Tesco. The higher the EV/EBITDA ratio, the more value the investor sees in the company.

But what makes for Reliance Retail’s high EV/EBITDA ratio? Arvind Singhal, Chairman and MD of consulting firm Technopak, explains that most Indian companies enjoy a much higher EV/EBITDA ratio than their competitors in the US and Europe.

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“There are two factors. Firstly, the perception of investors is that India will show more growth in consumer product industries compared to mature markets where the consumers are spending less on merchandise and more on services. Retailers like Tesco or Walmart, they have to grow by taking a share of the market from someone. The demography of India is such that people will spend on merchandise consumption, therefore you can support higher multiples,” he said.

Singhal also believes that Reliance Retail also enjoys the stance of being part of a conglomerate as opposed to other listed peers within India like DMart, Trent or a Shoppers Stop.

“When Reliance Retail does go on to list, the valuation will be higher because of the limited number of ‘good’ companies in India and that too of a certain scale. So, when a global investor comes looking at investments in India, they are going to put their money on those few companies,” he said.

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Grocery at the centre stage for all three

From Reliance to Walmart and even Tesco, grocery is at the centre stage of their e-commerce bets, a business that has only accelerated due to the coronavirus pandemic.

Reliance in its first-quarter earnings of FY21 reported that grocery alone saw a 21% growth year-on-year in the operational business of grocery in the first quarter. Ambani’s e-commerce bet, JioMart clocked in big numbers during the lockdown – the company claimed it received over 4 lakh orders on a single day. And now, expansion plans for JioMart are underway.

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According to a Goldman Sachs report, JioMart is poised to sell half of all online grocery in India, which is expected to see 5 million orders every day by 2024. It also helps that global tech players like Facebook and Google have invested billions in Jio and backed Ambani’s digital plans.

Meanwhile, Walmart has nearly doubled its e-commerce sales during the April-June quarter, thanks to the rising demand in online grocery.

And at the other end, Tesco continues to remain the leader in the British market, even with Amazon being bullish about its e-commerce grocery sales in the region. During the lockdown, Tesco saw its grocery sales jump by 12.8%.

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Reliance Retail is stocking up

Reliance Retail current offerings

Offline RetailE-commerce
Reliance FreshJio Mart
Reliance TrendsAjio.com
Reliance DigitalReliance digital
Reliance JewelsHome Shop18
Reliance MarketBookMyShow
Reliance SmartReliancesmart.in
Reliance FootprintNetMeds
Qwik martZivame

2020 might be an agonising year for most, and especially those businesses that operate in the segments that Asia’s richest man Mukesh Ambani seems to be interested in.
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The spate of acquisitions continues. With the buyout of online pharmacy startup Netmeds, and a stake in lingerie retailer Zivame, Reliance Retail is now looking to close the acquisition deal with Kishore Biyani’s mammoth enterprise Future Retail, which runs the chain of Big Bazaar stores over the next few days. It is also in talks with furniture retail startup Urban Ladder.

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