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Business News/ Companies / RIL infuses funds into retail biz after a year
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RIL infuses funds into retail biz after a year

RIL infuses funds into retail biz after a year

Reliance Trends Store in Ambi Mall in Gurgaon (Mint)Premium

Reliance Trends Store in Ambi Mall in Gurgaon (Mint)

Mumbai: After a year’s gap, Reliance Industries Ltd (RIL) invested fresh capital in its retail business last year, a reflection of its belief in the long-term prospects of the business.

Reliance Trends Store in Ambi Mall in Gurgaon (Mint)

The last time RIL put capital into Reliance Retail was in 2009-10, when it invested around 1,220 crore in the partially paid-up shares of the entity.

“During FY2011-12, Reliance stressed on its back-end operations and store expansion capability by successfully adding more than 200 stores across value and specialty formats," the RIL annual report said.

Saloni Nangia, president (retail) at retail consulting firm Technopak Advisors Pvt. Ltd, said the investment made by RIL in its retail business last fiscal was “large", but added that it has to be seen whether Reliance Retail utilized this cash to expand its footprint or strengthen its supply chain.

A spokesperson for RIL didn’t respond to an email seeking comment.

RIL said in its annual report that the retail business in India is expected to grow to $675 billion (around 36 trillion today) by 2016 from the current $470 billion, offering immense opportunities for expansion in organized retail.

“Saturating markets and gaining market share in certain key markets is integral to Reliance Retail’s strategy for future growth," the report added.

New investment from the parent may also have been encouraged as a result of RIL’s retail business paring losses in FY12, after they substantially widened year-on-year in 2011.

In FY09, the retail business posted a loss of 264.20 crore. In FY10, losses grew to 491.40 crore. According to information available in RIL’s latest annual report, the combined loss of the firm’s 34 retail entities dropped to around 434 crore in FY12.

Among the better-performing retail entities were Reliance Gems and Jewels Ltd, which posted a net profit for the first time and is RIL’s first retail arm to make money. Other companies such as Reliance Hypermart Ltd, Reliance Home Store Ltd, Reliance Leisures Ltd, Reliance Retail, Reliance Supply Chain Solutions Ltd and Reliance Vantage Retail Ltd significantly narrowed their losses.

Reliance Fresh Ltd, however, saw its losses increase to 273.76 crore, a 71.16% year-on-year rise. Losses nearly doubled at Reliancedigital Retail Ltd as well.

Nangia said RIL was always committed to its retail business and may have slowed down in-between to take corrective action. The business, which is still loss-making, has seen the management of its most-valuable value retail format change thrice in six years.

The format, which comprises 700 stores under brands such as Reliance Fresh, Reliance Super, Reliance Mart, Delight and Autozone is now led by two former executives of Walmart Stores Inc.’s Chinese arm. These executives, Rob Cissell (chief executive of Reliance Retail’s value format) and Shawn Gray (chief operations officer) were hired in July.

In December, Reliance Retail merged six of its loss-making subsidiaries into Reliance Fresh to create a consolidated entity so as to leverage the benefits of scale. Despite the many challenges facing the Indian retail sector, deep-pocketed conglomerates such as RIL are continuing to expand, Nangia said.

On 30 April, Aditya Birla Nuvo Ltd, a unit of the $28 billion-by-revenue Aditya Birla Group, announced that it would acquire a majority stake in Pantaloon, the debt-laden retail chain of Kishore Biyani-promoted Pantaloon Retail (India) Ltd, India’s largest listed retailer.

A day after RIL released its annual report, its share price lost 1.91% on BSE on Wednesday to close at 695.10. The bourse’s benchmark equity index lost 0.4% to end at 16,479.58 points.

aveek.d@livemint.com

Also Read |RIL borrows $2 billion to purchase equipment

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Published: 10 May 2012, 01:09 AM IST
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