The world’s largest retailer is emerging as one of the first candidates to acquire a stake in India’s largest retail company, Morning Context said, citing an executive familiar with the development.
On Saturday, RIL’s retail arm, Reliance Retail Ventures (RRVL), signed an agreement with Future Group, promoted by Kishor Biyani, to acquire its retail and wholesale business and the logistics and warehousing business as going concern on a basis of sale in recession for a total consideration of Rs. 24,713 crore.
The acquisition would help the online segment of Reliance Retail develop a deep discount strategy for JioMart, the e-commerce company that competes with Amazon and Flipkart.
Interestingly, Bengaluru-based Flipkart, which was acquired by Walmart for $ 16 billion in 2018, said that its wholesale unit will acquire the cash-and-carry business of parent Walmart in India.
Reliance, which recently launched JioMart in 200 cities, now averages 250,000 orders per day in weeks.
In a series of deals since April, RIL has sold a total of more than 33 percent stake in its Jio Platforms unit and raised Rs 1.52,056 crore from major investors and large tech companies such as Google and Facebook.
The recent agreement with Future Group substantially increases the business scale of Reliance Retail, which is already the largest retailer in India.
Global brokerage Nomura believes that the acquisition of Future Group’s retail business will help Reliance Retail scale its position in the market.
“A combined entity with a higher market share will also increase the potential interest of strategic investors, in our opinion,” said analysts at Nomura.
According to CLSA, the RIL-Future Group agreement further consolidates Reliance’s position as India’s largest retailer by expanding its retail outlets by 15 percent and retail presence and warehousing area by more than 80 percent, and will also add 4.1 percent to Reliance’s organized retail market share and bring it to 17.8 percent.
Goldman Sachs believes that after doubling EBITDA in the past four years, RIL may double it again for fiscal year 25, as the consumer businesses (telecommunications and retail) are on the cusp of a period of strong growth.
The global brokerage forecasts that consumer companies will generate an EBITDA CAGR for fiscal year 20-25 of around 30 percent and drive more than 50 percent of the contribution to EBITDA beginning in fiscal year 23, reaching 60 percent. percent for fiscal year 25, compared to 35 percent and 15 percent in fiscal year 2020 and FY18 respectively.
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