Reliance Industries Ltd (RIL) has offered Jio Platforms’ 13 financial and strategic investors the option to invest in its Reliance Retail Ventures Ltd (RRVL) unit, two people familiar with the developments said.
These investors include Facebook, Google, KKR, Silver Lake, and TPG. They helped RIL accumulate a total of ₹1.52 trillion in recent months by acquiring a combined 33% stake in its digital unit, Jio Platforms.
With foreign direct investment in multi-brand retail banned in India, strategic and financial investors can help RIL raise funds to grow its retail business and also support efforts to cut debt.
RRVL may also leverage tech giants like Facebook and Google to catapult its retail business and face competition from Amazon and Walmart in India’s online retail market at a time when the coronavirus pandemic has disrupted supply chains and it has affected sales in retail stores.
“Reliance Retail can follow the Jio Platforms model, bringing in multiple investors by selling stakes in the company,” said a senior retail consultant, aware of the talks.
Arvind Singhal, President of Technopak Advisors, said: “Reliance Retail cannot partner with a retailer for the deal due to FDI restrictions. Therefore, you can only search for a financial or strategic investor as you did for Jio Platforms. “
Mukesh Ambani, RIL President and CEO, said last month that Reliance Retail will bring global partners and investors into the company in the coming quarters.
According to RIL’s annual report, the company’s gross debt at the end of the last fiscal year was at ₹3.36 billion. This included ₹Rs 4,618 crore from Reliance Retail.
Responding to emailed inquiries, a Reliance Retail Ltd spokesperson said: “As a policy, we do not comment on speculation and rumors from the media.”
“Our company assesses various opportunities on an ongoing basis,” the spokesperson said, adding that the company will make disclosures, when necessary, in accordance with its listing obligations.
Thursday, the Financial times reported that private equity firm Silver Lake is in talks to invest $ 1 billion in Reliance Retail Ltd (RRL) for a 10% stake with a business valuation of $ 57 billion.
Silver Lake had previously acquired a 2.08% stake for $ 1.34 billion in Jio Platforms.
RIL operates its retail business through the Reliance Retail Ventures unit, the holding company of Reliance Retail Ltd and Reliance Brands. The latter operates joint ventures with international brands.
Analysts, however, are divided on Reliance Retail’s valuation.
“If RRL is valued at $ 57 billion and includes JioMart, this would be disappointing compared to our valuation. We value RRL and JioMart at $ 65 billion, “JP Morgan said in a report on Friday.
He said that while a stake sale will add flexibility to the balance sheet, the key will be whether RRL can attract strategic investors (global retailers and e-commerce companies currently competing with RRL in India), which could drive the revaluation in expectations of reduced competition for the company.
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