RIL's big retail push: A dozen buys worth $4.2 billion in 2 years

Mukesh Ambani’s Reliance group has struck acquisition deals worth $4.2 billion with a dozen companies in just two years to expand its retail business.
 
The latest purchase was of a majority stake in Justdial last week for Rs 3,497 crore.
 
Elaborating on his acquisition strategy a few weeks ago during the AGM, Ambani stated that one of the key planks would be to acquire businesses that enhanced Reliance’s offerings and experiences to customers and that they would be both physical and digital.
 
The acquisitions straddle diverse areas from niche stores like Hamleys for toys and lingerie store Zivame to digital pharmacy Netmeds and omni-channel furniture and home décor retailer Urban Ladder.
 
Others are Grab A Grub, a last mile logistics and food delivery platform, Mesindus, a B2B artisan platform, C-Square software solutions for the pharma industry, Now­Floats which enables a digital presence for small and medium scale enterprises, and Shopsense Retail, the largest omni-channel platform helping retail businesses accelerate growth, among others. The group is also restructuring and aligning most of the acquisition assets (earlier various group companies were used for this) into Reliance Retail Ventures, the retail holding company.
 

Easily the largest deal was acquiring the Future group’s retail business for Rs 24,713 crore which is now stuck in legal battles owing to cases filed by rival Amazon. This deal is crucial for Reliance’s acquisition strategy as it accounts for over 78 per cent of the war chest it had committed to M&As.
 
The acquisitions are part of Ambani’s vision to become among the top 10 retail companies in the world. To put matters into perspective, with revenues of $20.6 billion from its retail business, Reliance is nearly a fourth of the size of UK retailer Tesco which is the tenth largest retailer in the world with revenues of $73 billion in FY21.
 
According to estimates, the addition of the Future group will help Reliance Retail add another $4 billion to its top line. The target set by Ambani is to grow by 3X in 3-5 years.
 
In a Deloitte report ranking top global retailers, Reliance is number 53, the only Indian company in the top 100. However, in terms of growth in revenue, it is pegged at number 2, just behind Coupang Corp of South Korea.
 
The top 10 retailers in the world based on FY’19 revenues in the report include Walmart, Amazon, Costco, Schwartz gro­up (Germany), Kroger, Walgr­eens Boots Alliance, and the Home Depot. Seven are based in the US, two in Germany and Tesco in the UK. There is no Asian company in the list.
 
In India, the digital e-commerce space is dominated by just Amazon and Flipkart who control over 60 per cent of market share. According to Bernstein Research, Flipkart’s Gross Merchandise Value (GMV) is expected to be aro­und $15 billion in FY’21 with mobiles and apparel constituting 70 per cent of GMV (this includes Jabong and Myntra).
 
Amazon’s GMV, based on Bernstein’s estimate, will be $12.5 billion in FY’20. For Reliance, only 10 per cent of its revenues come from digital e-commerce and according to Bernstein, the run rate for JioMart would be around $1 billion in GMV. 
 
The relative product mix, though, is different: 90 per cent of JioMart sales are in groceries – with the Tatas taking over Big Basket, the largest player in this space, it will be head on battle between the two. Amazon, meanwhile, is skewed in favour of consumer electronics and mobile pho­nes (about 55 per cent of GMV).