RIL offers investors in Jio a slice of retail pie2 min read . Updated: 05 Sep 2020, 06:45 AM IST
- Reliance Retail may follow the Jio Platforms model, onboarding multiple investors by selling stakes in the firm
- These investors, include Facebook, Google, KKR, Silver Lake and TPG
Reliance Industries Ltd (RIL) has offered all 13 financial and strategic investors of Jio Platforms the option to invest in its Reliance Retail Ventures Ltd (RRVL) unit, two people aware of the developments said.
These investors, include Facebook, Google, KKR, Silver Lake and TPG. They helped RIL amass a total of ₹1.52 trillion in the past few months by picking up a combined 33% stake in its digital unit, Jio Platforms.
With foreign direct investment in multi-brand retailing barred in India, strategic and financial investors can help RIL raise funds to grow its retail business and also support efforts to trim debt.
RRVL can also tap technology giants such as Facebook and Google to catapult its retail business and take on competition from Amazon and Walmart in India’s online retail market at a time when the coronavirus pandemic has disrupted supply chains and hit sales at retail stores.
“Reliance Retail may follow the Jio Platforms model, onboarding multiple investors by selling stakes in the firm," said a senior retail consultant, aware of the talks.
Arvind Singhal, chairman at Technopak Advisors, said: “Reliance Retail cannot partner with a retailer for the deal due to FDI restrictions. So, it can only look for a financial or strategic investor like it did for Jio Platforms."
Mukesh Ambani, RIL’s chairman and managing director, last month said that Reliance Retail will induct global partners and investors into the company in the next few quarters.
According to RIL’s annual report, the company’s gross debt at the end of the last fiscal stood at ₹3.36 trillion. This included ₹4,618 crore of Reliance Retail.
Responding to emailed queries, a spokesperson for Reliance Retail Ltd said, “As a policy, we do not comment on media speculation and rumours."
“Our company evaluates various opportunities on an ongoing basis," the spokesperson said, adding that the company will make disclosures, whenever necessary, in compliance with its listing obligations.
On 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 at an enterprise valuation of $57 billion.
Silver Lake had earlier picked up a 2.08% stake for $1.34 billion in Jio Platforms.
RIL operates its retail business through unit Reliance Retail Ventures, the holding company for Reliance Retail Ltd and Reliance Brands. The latter operates joint ventures with international brands.
Analysts, however, are divided on the valuation of Reliance Retail.
“If RRL is valued at $57 billion and includes JioMart, this would be underwhelming versus our valuation. We value RRL and JioMart at $65 billion," JP Morgan said in a report on Friday.
It said that though a stake sale will add balance sheet flexibility, the key will be whether RRL is able to attract strategic investors (global retailers and e-commerce companies that are currently competing with RRL in India), that could drive re-rating on expectations of reduced competition for the company.