Reliance Industries taps Facebook, KKR for investment in retail biz

Silver Lake Partners reportedly eyeing stake worth $1 billion in Reliance Retail

Reliance Industries (RIL) has started preliminary talks with Facebook and private equity fund KKR, the two entities that bought stake in RIL-run Jio Platforms, to make an investment in its retail business too.

The two are among the 13 that have invested over $20 billion in Jio Platforms for over a 30 per cent stake.

It is believed these investors have informally been given an option to also put in money in Reliance Retail once the monetisation process of the company starts after the acquisition of the retail business of Kishore Biyani’s Future Group.

US private equity fund Silver Lake Partners, according to reports, is also in discussion and is eyeing a $1 billion investment in Reliance Retail.

A Facebook India spokesperson declined to comment. Neither did Sanjay Nayar, chief executive officer, KKR India.

A Reliance spokesperson responded: “As a policy we do not comment on media speculation and rumours. Our company evaluates various opportunities on an ongoing basis. We have made and will continue to make necessary disclosures in compliance with our obligations under SEBI and our agreements with the stock exchanges.”

Sources say while talks are on, there is no guarantee that a deal will happen because it will be based on expected valuations of the retail business after the acquisition of the Future group companies.

Analysts have valued the retail business at Rs 3.6-4 trillion without Future, but it was $83 billion (about Rs 6.22 trillion) in the over-the-counter market in August amid talk of stake sale.

Facebook is the largest investor among the 13 in Jio Platforms, picking up 9.9 per cent for Rs 43, 574 crore.

But it has an alliance in the retail business of the Ambanis, the promoters of Reliance. As part of a tripartite agreement between Reliance Retail, Jio Platforms, and WhatApp (Facebook arm), Jio Mart, the e-commerce platform of the group, is integrating with the messaging site to make it easier for customers to make orders and kirana shops to fulfil them. It will also give Jio Mart access to over 400 million WhatsApp users in one go. The two partners are also working on other areas of collaboration.

Private equity fund KKR has put in Rs 11,367 crore for a 2.32 per cent stake in Jio Platforms. Some other investors are the Abu Dhabi Investment Authority, Mubadala, Vista Equity Partners, Google, Qualcomm, and Intel.

The acquisition of Future Group’s retail, wholesale, and logistics business will give scale to Reliance. At macro level, with a 12 per cent revenue share of the country’s modern retail market of over $102 billion in 2019, Future Group’s business will help Reliance increase its share to 16 per cent, according to the data from Technopak.

Reliance will also have a substantial presence in the over $26-billion modern retail food and grocery business with its revenue share going up from 20 per cent to 27 per cent.

It is a space where e-commerce has not taken off, with a current gross merchandise value of $2 billion annually. The market is dominated by Grofers and BigBasket. Even Amazon and Flipkart are small players. But this is about to change, now that Reliance is ready for an onslaught in this space through its app JioMart, which has also seen the two global players push the pedal. In the more fragmented $20-billion modern apparel trade business, Reliance faces more competition from e-commerce players. The acquisition will help it to increase its revenue share from 18 per cent to around 26 per cent.

But currently about half the sales come from e-commerce platforms and Reliance also is a player in the game. But according to Technopak, Flipkart and its various other platforms such as Myntra would still be larger than Reliance, given its business of over $6 billion annually.