Reliance Industries raises Rs 7,350 crore from GIC, TPG through retail unit stake sale

NEW DELHI: Reliance Industries on Saturday announced Rs 7,350 crore investments by Singapore sovereign wealth fund GIC and global private equity firm TPG Capital in its retail unit, taking the total fundraising in the last one month to Rs 32,197.50 crore.

While GIC invested Rs 5,512.5 crore in Reliance Retail Ventures Ltd (RRVL) for a 1.22 per cent stake, TPG took 0.41 per cent interest for Rs 1,837.5 crore, the company said in statements issued past midnight.

They said that these investments value Reliance Retail at a pre-money equity value of Rs 4.285 lakh crore. This is TPG's second investment in a subsidiary of Reliance Industries, following a Rs 4,546.8 crore investment in digital unit Jio Platforms announced earlier this year. With these, Reliance Industries has sold 7.28 per cent stake in the retail unit since September 9 for a total of Rs 32,297.50 crore.

US private equity firm Silver Lake has made two investments totalling Rs 9,375 crore for a 2.13 per cent stake in Reliance Retail, while General Atlantic has picked up 0.84 per cent stake for Rs 3,675 crore, and KKR put in Rs 5,550 crore for a 1.28 per cent stake. Abu Dhabi-based sovereign wealth fund Mubadala Investment Co invested Rs 6,247.5 crore for a 1.4 per cent stake.

Reliance Retail Ltd, a subsidiary of RRVL, operates India's largest, fastest-growing and most profitable retail business spanning supermarkets, consumer electronics chain stores, cash and carry wholesale business, fast-fashion outlets, and online grocery store JioMart.

It operates about 12,000 stores in nearly 7,000 towns, with 640 million footfalls across core categories of grocery, consumer electronics and apparel. Revenue for Reliance Retail in FY20 was Rs 1.63 lakh crore.

The investment will add fire to Ambani's battle for dominance in the retail market that is also being eyed by Jeff Bezos' Amazon.com and Walmart Inc's Flipkart. TPG has more than USD 83 billion of assets under management across a wide range of asset classes, including private equity, growth equity, real estate and public equity.

Over TPG's nearly 30-year history, the firm has built an ecosystem made up of hundreds of portfolio companies and a value-added network of professionals, executives, and advisors around the world.

Mukesh Ambani, Chairman and Managing Director of Reliance Industries, said, "TPG has a proven track record of being a valuable partner to global technology businesses and industry leaders and we look forward to their guidance and support in our journey."

TPG co-CEO Jim Coulter said, "Regulatory changes, consumer demographics and technological disruption are creating seismic shifts across the entire retail value chain in India.In the midst of this transformation, Reliance Industries has utilised technology and scale to position Reliance Retail as an incredibly strong, well-organised, and innovative leader."

"We are excited to join with them as they seek to create a more inclusive retail industry that allows Kiranas and Indian consumers to benefit from the connectivity, efficiency, and accessibility of the Reliance Retail omnichannel platform," he said.

The transaction is subject to regulatory and other customary approvals. Morgan Stanley acted as financial advisor to Reliance Retail and Cyril Amarchand Mangaldas and Davis Polk & Wardwell acted as legal counsels. Deloitte Touche Tohmatsu India LLP acted as financial advisor to TPG and Shardul Amarchand Mangaldas & Co acted as legal counsel to TPG.

Following the sell-down in its digital unit Jio Platforms, Reliance's focus has shifted to retail with the acquisition of Future and investment by global private equity firms/strategic investors. All the 13 investors, who had poured in a combined Rs 1.52 lakh crore in Jio Platforms, have been offered a chance to explore investing in the retail unit.

Besides Silver Lake, KKR, General Atlantic, TPG and Mubadala, the other investors in Jio Platforms - which houses India's youngest but largest telecom operator Jio - include Facebook and Google.

Reliance Retail has consolidated its dominant market positioning in offline retail through its recent acquisition of retail, wholesale, logistics and warehouse business of Future Group for an enterprise value of Rs 24,173 crore.

The firm in May this year launched JioMart, the e-commerce platform. Reliance aims to digitise Kirana stores through its new commerce business. In July, JioMart was serving 400,000 orders a day and is currently operational in 200 cities.

With this, Jio Platforms and Reliance Retail account for over Rs 9 lakh crore of Reliance Industries Ltd's valuation. Monetisation of retail, complemented by the capitalisation of Jio's tech assets, is expected to enable Reliance to take on Amazon and Walmart in India's online retail space.

The evolution of the organised retail in India has lagged infrastructure growth and improvement in demographics. Despite the large size of the consumption basket at USD 0.8-1.0 trillion, the share of organised retail is only 8 per cent of the total market, which offers a long growth runway.

Analysts expect a break-up of the company in the next 3-4 years through the IPO of the Jio and retail business segments which should unlock additional shareholder value. At the Reliance Industries' recent annual general meeting, Ambani had stated that it had been approached by strategic/financial investors for a stake in Reliance Retail.