Reliance Retail

Indian retailing is a rapidly growing industry, amounting to nearly 10% of the overall GDP. It has a potential
market of nearly a trillion dollars. The point really is on the share of unorganized sector in Indian retailing,
nearly 90% of the market. Nevertheless, the trend is shifting more towards the ‘Organized Retail’ and ‘E-
commerce’. The modern retailing is expected to grow at a CAGR of 20% and the traditional retailing at 10%
per annum in the coming years [1]. The e-commerce is set to grow at an even faster rate. Therefore, the potential
for players like Reliance Retail, which spreads its wings through most of the consumer space, is huge.
Furthermore, with the organized sector expanding in to rural areas, the opportunities are huge. With the
changing aspirations and preferences, consumers are moving towards the modern retail shops, in turn
prioritizing quality.

The Mukesh Ambani led ‘Reliance Retail’ is the largest retailer in India with a Pan-India presence. There
are approx. 10,644 stores across 6700 towns and cities in India. Reliance Retail is looking to expand to tier-3
and tier-4 markets.

Reliance Retail has adopted a multi-prong strategy and operates a chain of neighbourhood stores, supermarkets,
wholesale cash & carry stores, specialty stores, and online stores and has democratized access to a variety of
products and services across diverse segments for Indian consumers. It has started its operations in 2006 and
branched into various divisions of the consumer space.

Reliance Retail Limited is a wholly owned subsidiary of Reliance Industries Limited (RIL) through one of its
subsidiary Reliance Retail Ventures Limited. It has started the retail revolution in India and is India’s
largest modern trade retailer by reach, scale, revenue and profitability. It is ranked 94th and is the 6th
fastest growing retail company in the world as per Deloitte’s Global Powers of Retailing 2019. Reliance
Retail aims to be amongst top 20 retailers in the next 5 years. It has established presence across key
consumption baskets and holds a leadership position in food, consumer electronics and fashion retailing. It
has a mission to provide millions of customers with unlimited choice, outstanding value proposition, superior
quality and unmatched experience across the full spectrum of products and services

Reliance Retail Limited achieves its robust growth due to its three core initiatives:
1. Integrating Value Chain – Connecting Suppliers, small and large, to B2B and B2C customers through pan-
India ecosystem.
2. Digitisation – Connecting Physical and digital spaces, with endless kiosks and multiple payment modes with
real-time analytical support.
3. Bridging Urban-Rural divide – Bringing quality products at affordable prices to smaller tier cities, meeting
demand gap and offering employment.

Performance as on Performance of Q3
Performance of Q2
Parameters Performance as on ending 31th December,
ending 30th Sept, 2019
31st March, 2019 2019
Retail Store Network 10,415 10,901 11,316
Retail Space Coverage 22 million sqft 24.5 million sqft 26 million sqft
Addition of new Stores 2,829 337 456
Customers served 1 Lakh per hour - -
Television Set Sold 1 in every 24 seconds - -
Phones sold 1 in every 2 seconds - -
Groceries sold 6.4 lakh tonnes - -
Garments sold 4 lakh per day - -

With the acquisition of Hamleys, it has increased its presence in 18 countries and is the global leader in
children premium toys category. In 2018-19, the company achieved a total revenue of ₹ 1,30,566 crore from
₹ 69,198 crore in 2017-18 which is an increase of 88.7% year on year.

The Retail arm of reliance operates through stores and service concepts such as:
 Reliance Fresh
 Reliance Smart
 Reliance Jewels
 Reliance Footprint
 AJIO
 Reliance Market
 Reliance Digital
 Reliance ResQ
 Reliance Trends
 Project Eye

Reliance Retail Limited also has exclusive partnerships with some of the most famous and iconic brands in India
as well as globally which include:
 Georgio Armani
 Marks & Spencer
 Mothercare
 Paul Smith
 Hamleys
 Satya Paul
 Michael Kors
 Steve Madden etc

Reliance Jio Deal with Facebook and its Impact on Reliance Retail

Reliance Industries Limited (“Reliance Industries”), Jio Platforms Limited (“Jio Platforms”) and Facebook,
Inc. (“Facebook”) on 22nd April, 2020, announced the signing of binding agreements for an investment of ₹
43,574 crore by Facebook into Jio Platforms. This investment by Facebook values Jio Platforms at ₹ 4.62
lakh crore pre-money enterprise value ($65.95 billion, assuming a conversion rate of ₹ 70 to a US Dollar).
Facebook’s investment will translate into a 9.99% equity stake in Jio Platforms on a fully diluted basis and
is also the largest investment for a minority stake by a technology company anywhere in the world and the
largest FDI in the technology sector in India.

Concurrent with the investment, Jio Platforms, Reliance Retail Limited (“Reliance Retail”) and WhatsApp
have also entered into a commercial partnership agreement to further accelerate Reliance Retail’s New
Commerce business on the JioMart platform using WhatsApp and to support small businesses on
WhatsApp. WhatsApp already plays an important role in helping people and businesses connect in India. A look
at the following table can give us a brief idea of how Reliance JIO and Facebook’s WhatApp can put Reliance
Retail on a path of exponential growth.

Company Name No. Of Subscribers

Reliance Jio Infocomm 38.8 Crores
Facebook 32.8 Crores
WhatsApp 40 Crores
Instagram 6.9 Crores

Reliance Industries is already working with retailers, producers, merchants and small traders at a grassroots
level and equipping them with technology such as Point of Sale (POS) Solution as the company plans to take
over India’s ecommerce as it sees it as a $700 billion opportunity.
Reliance and Facebook has outlined a common goal with this investment which is to enable new
opportunities for businesses of all sizes, but especially for small businesses as India has 60 million micro,
small and medium (MSME) businesses, 120 million farmers, 30 million small merchants and millions of
small and medium enterprises in the informal sector, in addition to empowering people seeking various digital
services to fulfil the needs of Indian people
and the economy.
Reliance Retail’s New Commerce platform, JioMart, is being built in partnership with millions of small
merchants and kirana shops to empower them to better serve the needs of Indian consumers. The companies
 will work closely to ensure that consumers are able to access the nearest kiranas who can provide products
and services to their homes by transacting seamlessly with JioMart using WhatsApp.
All these recent developments combined with already existing leadership position of Reliance Retail in the
retail segment of India can lead to creation of market defining shareholder value which is in line with the
core business vision of the Mukesh Ambani led Reliance Group.

Key Highlights

 Reliance Retail Ventures Limited has a shareholding of 99.5% in Reliance Retail limited.
 India’s largest and fastest growing retailer with 11,316 retail stores across the across the country as on
Q3 ending 31st Dec’19.
 CRISIL as on June, 2019 has rated its long term instruments of ₹ 250 crore Proposed Fund-Based
Bank limits and ₹ 2,750 crore Fund Based Facilities to CRISIL AAA and has a stable outlook on its
instruments.
 CRISIL has also reaffirmed its rating of CRISIL A1+ to its ₹ 20,000 crore worth of commercial paper.
 It is virtually a debt free company with zero long term borrowings as of FY2018.
 The retail stores have witnessed over 176 million footfalls for Q3 ending 31st Dec’19 which has
increased by 26.60% year on year.
 The Revenue has seen a 7 fold increase and the Profit has witnessed a 14 fold increase in the past 6
years.
 The Total Revenue of Q3 of FY2019-20 is at ₹ 45,327 crore which has grown at 27.40% year on year.
 The Net Profit (PAT) of Q3 of FY2019-20 stood at ₹ 1,757 crore which has increased by 102.40% year
on year.
 The PBDIT for Q3 of FY2019-20 has grown at 62.30% year on year to ₹ 2,727 crore from ₹ 1,680
crore.

Growth Story in Graph

Financial Highlights

Q2 ending
Q3 ending 2019-20 3 Year
Metrics 2016-17 2017-18 2018-19 30th
31st Dec'19 Extrapolated CAGR
Sept'19
Net Worth 6,819.57 9,066.46 12,587.41 12587.41** 12,587.41** 16,363.63 35.86%
Total Assets 11,672.42 24,084.41 34,377.55 39,250.00 39,250.00** 48,128.57 71.62%
Total Revenue 26,473.13 51,501.73 1,01,946.52 41,202.00 45,327.00 1,52,919.78 96.24%
PAT 442.6 1,243.14 3,138.26 1,148.00 1,757.00 4,079.74 166.28%
Basic EPS (in ₹ per
0.83 2.34 6.29 2.3 3.52 8.18 175.28%
share)
Diluted EPS (in ₹ per
0.83 2.29 6.29 2.3 3.52 8.18 175.28%
share)
*All figures have been taken as per annual report of Reliance Retail for the FY2017-18 and Reliance
Industries Limited for the FY2018-19 and Q2 of FY2019-20. Growth rate for the FY2019-20 has been
taken at 30%.
**Net Worth and Total Assets kept same as on 31st March’2019 as the data has not been released for the
same in Q2&Q3 of FY2019-20.

Valuation Highlights

2019-20
Metrics 2017-18 2018-19
Extrapolated
Market Capitalization - 3,24,320.10 -
Promoter Shareholding (%) 99.95% 99.95% 99.95%
Net Worth 9,066.46 12,587.41 16,363.63
Total Revenue 51,501.73 1,01,946.52 1,52,919.78
Earnings per share (in ₹ per share) 2.29 6.29 8.18
Return On Equity (ROE) (in %) 13.71% 24.93% -
EBIT Margin (in %) 3.00% 4.20% -
PBT Margin (in %) 3.64% 4.73% -
PAT Margin (in %) 2.41% 3.08% -
Market Cap./Sales ratio - 3.18 -
Forward Market Cap./Sales ratio - - 2.12
Face Value per share (in ₹ per share) 10/- 10/- 10/-
*For calculation of forward Market Cap to Sales ratio, growth rate for the year 2019-20 has been taken
at 50%.

Challenges-Peers:

The retailing sector is very competitive in nature and with almost no-barriers of entry to setup shops. Not only
does Reliance Retail face fierce competition from domestic retailers like Future Group, Pantaloons, Avenue
Supermarts, and Spencer’s Retail, but also from the likes of Wal-Mart, the biggest retailer on the planet.
Another challenge retailer is facing is thee-commerce platforms, with digitization growing so rapidly, platforms
like ‘Big Basket, ‘Grofers, ‘Myntra’, ‘Flipkart’ and ‘Amazon’ are increasing their sales quite rapidly. However,
Reliance Retail has started AJIO, an e-commerce platform, for clothing to establish itself, even in the e-
commerce sector

However, to conclude, with the consumer spending that is prevalent in the economy, due to various reasons,
‘Reliance Retail’ is bound to grow. It has established a brand image in the minds of consumers, the modern
Indian family, the youngsters and the local shops as well. However, competition is intense, be it from players
like Amazon, Wal-Mart or D-Mart. Reliance Retail has to stay ahead of its peers in order to grow and maintain a
competitive advantage. Finally, with its expansion in to mid and low tier cities, it has tremendous opportunity to
capitalize the growth of consumerism in those markets. The differentiators, we hope ‘Reliance Retail’ will
sustain in the coming decades, are its reach, exclusivity, reputation, and value proposition for everyone.