Rel Retail plans takeovers to dwarf competition

Reliance Retail, which is already creating ripples in the organised domestic retail market, is poised to acquire smaller rivals in order to take on serious competition from the likes of the Bharti-Wal-Mart combine.

The Mukesh Ambani-spearheaded venture is bidding to buy out smaller competitors like Adani Retail, and also has plans to gobble up other well-known brands including Subhiksha and Landmark, the book and music store chain in which the Tata Group has a controlling stake through its retail arm Trent.

"Reliance is the highest among the three bidders for Adani, and is looking at all others - even Subhiksha and Landmark," an industry source familiar with the development said, but did not elaborate on the proposed Adani takeover.

Adani has a network of over 50 retail stores, which includes formats ranging from neighbourhood stores to supermarkets in Gujarat. On the other hand, acquiring Subhiksha, a Chennai-based discount retail chain, would give Reliance a large presence across various states, including more than 100 stores in the national capital.

Sources said the inorganic growth route suits Reliance's plans, which includes rolling out 300 stores by this year and another 4,000 in three years.

When contacted, a Reliance Industries spokesperson declined to comment on the company's acquisition plans.

Since unveiling Reliance Fresh, its first retail format store that sells vegetables, fruits and groceries in Hyderabad last month, the company has added 16 more outlets to the pilot project in the city.

Plans are afoot to roll out Reliance Fresh in four other cities, including Delhi, this month.

Sources said the company's first hypermarket is expected to be unveiled by the end of February next year.

The Reliance Retail blueprint envisages a nation-wide chain of hypermarkets, supermarkets, discount stores, department stores, convenience stores and specialty stores at an investment of over Rs 25,000 crore in the next five years. The company expects the venture to log sales of around Rs 90,000 crore by 2010.

Industry estimates suggest that India's retail industry is worth $300 billion (Rs 13,50,000 crore), and could grow to $427 billion in the next four years. Of this, organised retail accounts for just over Rs 35,000 crore.

The potential for organised retail in the country, with a population of 1.1 billion including a 300 million-strong middle-class, makes it an attractive market for foreign retailers who have reached saturation point in other markets.

Global retail giant Wal-Mart has made an entry into India through a tie-up with Bharti Enterprises. While the Indian partner would manage the front-end of its operations, Wal-Mart would take care of logistics and supply chain.

Reliance, however, is going about establishing its own supply chain for its retail venture. In fact, Reliance Fresh stores represents the front-end of RIL's farm-to-fork project, which involves procuring farm products through agri hubs, establishing a supply chain and providing logistics and finally retailing the products.