Nearly the entire incremental profit growth at Reliance Retail in the last fiscal year stemmed from the conversion of an interest-bearing loan from its parent to a zero-coupon instrument that allows it to buy shares in the company, a Mint review of their financials showed. The conversion reduced the finance costs of the operating retail company, lifting its profit.
Reliance Retail Ltd (RRL) reported a profit of ₹13,476 crore in FY26, which was ₹3,503 crore more than the previous year. Meanwhile, the company’s finance costs, or the interest it paid, declined by nearly the same amount, from ₹4725 crore in FY25 to just ₹1,510 crore.
Reliance Retail Ventures Ltd (RRVL), the holding company of RRL, converted ₹40,000 crore in interest-bearing inter-company loans into zero-coupon quasi-equity instruments called optionally fully convertible debentures (OFCDs) in February 2025. Following this, RRL's finance costs paid to its parent RRVL dropped from ₹4,580 crore in FY25 to just ₹879 crore in FY26. The two companies had several other debt-related transactions in FY26, detailed later in this story.
Zero-coupon OFCDS pay no interest, and investors can convert them later into shares at a predetermined price within a specified period.
RRL also has bank loans that account for the remainder of its interest payments.
To be sure, since RRVL is the parent of RRL, the fall in interest costs for RRL was fully offset by a similar decline in RRVL’s interest income when the financials of the two companies were consolidated. The transaction moves profits from the holding company to the operating company and shores up its financial health, an investor said, as the company looks to list its retail business in the coming years.
“The important thing here is that the profitability of the operating company, which will be looked at by investors, is getting a boost because of this change (from loan to OFCD),” said the Bengaluru-based head of portfolio management services firm. “It is a deleveraging exercise”.
In FY26, RRVL reported consolidated revenue of ₹3.27 trillion and profit of ₹13,842 crore, according to disclosures by Reliance Industries. RRL accounted for nearly 90% of the parent’s revenue and 97.5% of the profit. The retail business accounted for over a quarter of RIL's consolidated revenue and over an eighth of the consolidated earnings before interest, tax, depreciation and amortization (Ebitda).
Reliance Industries, which owns 83.56% of RRVL, did not respond to Mint’s queries on the rationale for the transaction. The remaining shares are held by sovereign wealth funds such as Abu Dhabi Investment Authority (ADIA), Qatar Investment Authority (QIA), and Singapore's GIC, as well as private equity giants including TPG, Silver Lake, and KKR.
RRVL is a subsidiary of RIL, operating the conglomerate’s ₹3-trillion-revenue retail business. Besides owning RRL, it also controls Reliance Brands Ltd, which operates luxury retail stores under exclusive partnerships with brands like Burberry, Valentino, and Giorgio Armani. It also provides supply chain infrastructure and operates as an investment arm for the retail business of its subsidiaries.
Reliance Industries chairman Mukesh Ambani’s daughter Isha Ambani oversees the retail business. “FY26 marks a year of profitable growth at scale for Reliance Retail,” Isha Ambani said in a press statement on 24 April. “The most significant shift this year was structural,” she said, adding that hyper-local commerce orders grew more than fourfold year-on-year. Reliance operated India's widest hyper-local delivery network across grocery, electronics, and fashion through over 3,100 stores across over 1,200 cities, she said. “This is a uniquely Indian platform, built on a uniquely Reliance scale-advantage.”
More debt restructuring
In April 2024, RRL owed its parent RRVL ₹45,656 crore through inter-corporate loans. As discussed earlier, on 3 February 2025, RRL converted about ₹40,000 crore worth of these loans into OFCDs. Each of these zero-coupon OFCDs was allotted at ₹60 a share. This sharply reduced RRL's interest obligations while reducing RRVL's interest income by a similar amount.
After converting this loan to OFCD, RRL owed ₹5,656 crore to RRVL in long-term loans at the beginning of April 2025. Additionally, RRL had ₹15,477 crore in current loans to RRVL, which needed to be repaid within a year. By the end of March 2026, the ₹5,656 crore in long-term loans was completely repaid and the short-term loans declined to ₹11,300 crore.
This reduction in loans by ₹9,833 crore during the year was again made possible by converting them into OFCDs. RRL issued OFCDs worth ₹19,000 crore to RRVL through three transactions in June and July.