ADIA, KKR invest Rs 12,864 crore in Reliance Retail warehousing assets

Abu Dhabi Investment Authority (ADIA) and investment management company KKR have made investments in Reliance Retail Ventures Limited (RRVL) warehousing assets, in a transaction valued at Rs 12,864 crore ($1.5 billion), according to a report in The Economic Times (ET).

This investment is separate from the infrastructure investment trust (InvIT) established by RRVL last year, which was intended to accommodate approximately half of its retail warehousing assets.

In March, RRVL transferred 11-12 million sq ft of warehousing assets to Reliance Logistics and Warehouse Holdings (RLWH), a company established in December 2022. KKR and ADIA equally invested $1.5 billion in this entity. However, the transaction has not been formally announced yet.

According to the report, the acquisition was financed through senior debt amounting to Rs 7,075 crore, equity-like instruments such as subordinated non-convertible debentures (NCDs) totaling Rs 5,275 crore, and the remaining portion through equity infusion. Reliance Projects and Property Management Services Ltd (RPPMSL), a wholly-owned subsidiary of Reliance Industries Ltd (RIL), will handle the operations and maintenance of the assets. KKR and ADIA are investors in both RRVL and Jio Platforms, which oversees RIL’s digital and telecom ventures.

In October last year, RRVL transferred warehousing assets valued at Rs 5,150 crore to an InvIT named Intelligent Supply Chain Infrastructure Trust. These warehouses are held within a special purpose vehicle (SPV) named Intelligent Supply Chain Infrastructure Management Pvt. Ltd (ISCIMPL). However, the Securities and Exchange Board of India (Sebi) only permitted RRVL to transfer warehouses exceeding 100,000 sq ft in area to the InvIT. Assets of smaller size were required to be transferred to RLWH, which is not an InvIT, the report said.

Similar to the InvIT arrangement, the company, supported by KKR and ADIA, will also establish long-term lease agreements with RRVL and its subsidiary Reliance Retail Ltd (RRL) to ensure cash flow stability for at least 20 years. However, this duration could potentially be extended further, the report stated.

Sources cited by the ET said the investment from KKR and ADIA may potentially increase to $2 billion in the future.