Oil-to-telecommunications conglomerate Reliance Industries is constantly working to expand its presence in the retail sector. On Tuesday, the Abu Dhabi Investment Authority (ADIA) became the eighth investor in Reliance Retail Ventures, agreeing to choose 1.2 percent of the company’s share capital for Rs 5,512.5 million.
ADIA joins the Silver Lake league, KKR, General Atlantic, Mubadala Investment Company, GIC and TPG, who have cumulatively invested Rs 37,710 crore for an 8.48% stake.
Reliance Industries, owned by Mukesh Ambani, switched gears in August this year, when it agreed to buy Future Group, promoted by Kishore Biyani, as a going concern on a falling sale basis for Rs 24,713 crore. The sale would include key brands such as Big Bazaar, fbb, Foodhall, Easyday, Nilgiris, Central and Brand Factory.
As Reliance Retail aggressively establishes itself, leveraging online sales through JioMart, analysts believe established players should reorient or expand their businesses, seek mergers, and capitalize on a niche segment to exploit loyalty from the clients.
However, a UBS comparative study indicates that Reliance Retail is likely to emerge as the industry leader, while its closest competitor Avenue Supermarts (DMart) may not take advantage of digital opportunities arising from social distancing due to Covid-19.
“We are reducing our PAT estimates for Avenue Supermarts by 36.8% / 13% for Fiscal Year 21/22.
Our PAT estimates for Avenue are now 16.6% / 7.7% below the consensus estimates for FY21 / FY22. For Reliance Retail, we increased our revenue estimates given the increased visibility of its e-commerce business. However, we have reduced our expected EBITDA margin due to its increasing share of online channel sales, ”she said in a recent report.
Here’s why the brokerage thinks RIL can outperform Avenue Supermarts:
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