2 min read.Updated: 09 Sep 2020, 08:34 PM ISTLivemint
Mukesh Ambani’s deal-making spree seems endless. Silver Lake has purchased a sliver of Reliance’s old retail business too, lured perhaps by its chances of overall market dominance
It has turned into a virtual stampede, the rush to invest in a Reliance business of the future, as the company’s chairman and managing director Mukesh Ambani goes about retiring its debt and opening its subsidiaries up further to global equity participation. The sale of equity slices adding up to ownership of about a third of its digital venture, Jio Platforms, has drawn in about $20 billion already. But Ambani’s deal-making spree is far from over. Early Wednesday, Reliance announced that American private equity firm Silver Lake Partners, which had earlier taken a sliver of Jio, had picked up a 1.75% stake in its other subsidiary Reliance Retail Ventures Ltd for ₹7,500 crore (over $1 billion). Soon after, reports surfaced that another US-based investment firm, KKR & Co, was in advanced talks to invest even more in it. If Reliance’s digital wing is aiming for e-com success with JioMart, its retail unit is looking to consolidate its leadership of brick-and-mortar retailing. It runs about 12,000 stores in 7,000 urban centres and recently snapped up the Future group’s Biz Bazaar chain as well. Coupled with a competitive edge that eased its e-com debut, a well-integrated supply network at the back-end may be all that India’s largest company needs for the creation of a unique hybrid model. If it clicks, it could shortly be in a position to dominate the country’s organized retail market. This, however, is not inevitable.
While Reliance has traditional formats wrapped up, its main challenge being to co- opt mom-and-pop stores, it is online retail that promises to expand vastly even as a battle royale breaks out for the Indian consumer’s loyalty. Amazon and Walmart-owned Flipkart have already clashed in this space and seem to have developed the rivalrous aggression that close arch-rivalry tends to evoke. Two years ago, their other worry was our twitchy rules for foreign investment in e-com. Now, they are up against the might of Reliance, which is armed not just with a huge war chest of funds, but also a comprehensive strategy that looks likely to deploy weapons from an arsenal that the two incumbents may be unable to match. To begin with, it is clearly India’s strongest telecom operator now, equipped with a technological backbone for mobile connectivity and raring to get our webless multitudes onto the internet by offering them cheap handset-cum-data deals. It also has Facebook as a partner, whose WhatsApp chat service has an enviable reach across the country that could conceivably be leveraged to attract traffic, especially if its e-payment function catches on. Its other big tech ally, Google, runs the world’s main interface between humans and their devices, Android, which has reportedly been adapted for Reliance’s low-cost mobility initiative. This software could technically serve as an app gateway, nudging users to swipe open pre-loaded apps. All this spells a big starting advantage. Plus, Reliance is keen on specialized e-shops as well. Last month, it bought control of digital pharmacy Netmeds, just days after Amazon launched an online service for such products in India. It is said to be eyeing other finely-focused portals as well.
For all the technology in play, retail success tends to go by the old pile-it-high-and-sell-it-low formula. For high volumes and low costs, Reliance will have to squeeze synergies out of hybrid operations. Online, its weightless rivals Amazon and Flipkart would be busy shaping up, too. They won’t yield market share easily.