Reliance Retail Q3 pre-tax profit zooms over 62% to Rs 2,727 crore

Firm's revenue grew 27.4 per cent YoY during the quarter to touch Rs 45,327 cr

The retail arm of Reliance Industries (RIL) posted earnings before interest, tax, depreciation and amortisation (Ebitda) of Rs 2,727 crore for the quarter ended December 31, 2019 (Q3), a year-on-year (YoY) growth of 62.3 per cent as it reaped benefits of scale during the period.

This is third straight quarter that Reliance Retail’s Ebitda has crossed Rs 2,000 crore. Along with telecom venture Jio, Reliance Retail now contributes 37 per cent to RIL’s Ebitda, the company said on Friday, adding that it plans to take this contribution to 50 per cent in the next few years.

However, the bigger surprise was on the revenue front. Reliance Retail’s revenue grew 27.4 per cent YoY during the quarter to touch Rs 45,327 crore, bucking the slowdown trend in the market.

The bulk of this growth, said Dinesh Thapar, group chief financial officer, Reliance Retail, was led by the company’s core retail operations in consumer electronics, fashion and lifestyle, and food and grocery, which now contributes 60 per cent of its topline and 87 per cent of earnings.

Excluding petro retail and Jio sales points, which are clubbed with Reliance Retail, revenue from core retail operations grew about 36 per cent in Q3, Thapar said.

The company also added 456 stores in Q3, taking its total store count to around 11,400 across 7,000 towns and cities.

70 per cent of these stores, said Gaurav Jain, head, strategy and planning, Reliance Retail, were in tier-II, tier-III and tier-IV markets, with the company focusing on optimum value, segmentation and efficiency in sourcing to drive growth, he said.

In terms of retail area, the company covers 26.3 million sq ft in Q3, a growth of about 28 per cent from a year ago.

In a statement, RIL chairman Mukesh Ambani said Reliance Retail saw record footfalls led by a superior shopping experience, value and consistent same-store sales growth (SSG).

SSG for the quarter across the company’s retail formats was in the region of 11-14 per cent, said Jain, at a time when overall market sentiment remained weak.

The statement acquires significance given that overall consumer goods and retail market growth has slipped to low single digits in Q3, market research agency Nielsen and sector experts said. Yet, the country’s largest retailer continues to bet on aggressive store expansion, launching new brands and coming up with aggressive offers, they said.  During the quarter, the grocery business saw the launch of a new store concept called ‘Smart Point’, positioned as a neighbourhood shop offering fresh food, pharmacy and assisted e-commerce. In consumer electronics, the company opened its 400th store in Q3, while fashion and lifestyle touched its 2,000-store milestone, it said.

Jiomart, which is the company’s new commerce venture, is currently being piloted in Navi Mumbai, Thane and Kalyan, Thapar said. He also said all options were open, as far as getting a strategic partner goes. 

Rival Amazon has just committed $1billion to the India market, while Flipkart is investing in verticals such as grocery and food apart from electronics, fashion and lifestyle.

A recent Bank of America-Merrill Lynch (BoFA-ML) report had said that Reliance Retail would be key in driving up RIL’s market value to $200 billion in two years. On Friday, RIL touched Rs 10.02 trillion in market capitalisation after its shares rose nearly 3 per cent during trading session.