Global private equity firm General Atlantic will invest Rs 3,675 crore to buy a 0.84 per cent stake in Reliance Industries Ltd's retail arm, extending the fundraising spree by the firm of billionaire Mukesh Ambani.
General Atlantic will invest in Reliance Retail Ventures Ltd (RRVL), a subsidiary of Reliance Industries Ltd, the Indian firm said in a statement.
This is the third private equity investment in Reliance Retail, following US-based private equity firm Silver Lake's Rs 7,500 crore investment for a 1.75 per cent stake and global private equity firm KKR's Rs 5,550 crore investment for a 1.28 per cent stake earlier this month.
The transaction values Reliance Retail at a pre-money equity value of Rs 4.285 lakh crore.
"This marks the second investment by General Atlantic in a subsidiary of Reliance Industries, following a Rs 6,598.38 crore investment in Jio Platforms announced earlier this year," the statement said.
Reliance Retail Limited, 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. Revenues 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's Amazon.com and Walmart Inc's Flipkart.
General Atlantic has a longstanding tradition of backing disruptive entrepreneurs and companies around the world, including Airbnb, Alibaba, Ant Financial, Box, ByteDance, Facebook, Slack, Snapchat, Uber and other global technology leaders.
Following the sell-down in its digital unit Jio Platforms, Reliance's focus has shifted to retail with the acquisition of retail and wholesale business of Future Group 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 and General Atlantic, the other investors in Jio Platforms—which houses India's youngest but largest telecom operator Jio—include Facebook, Google and Abu Dhabi's sovereign wealth fund Mubadala.
Mukesh Ambani, Chairman and Managing Director of Reliance Industries, said, "like Reliance Retail, General Atlantic believes in the fundamental ability of digital enablement to drive progress, growth, and inclusion across India and the world."
"We look forward to leveraging General Atlantic's extensive expertise at the intersection of technology and consumer businesses, and two decades of experience investing in India, as we create a disruptive new commerce platform to redefine retail in the country," he said.
Bill Ford, Chief Executive Officer of General Atlantic, said, "General Atlantic is thrilled to be backing Mukesh's new commerce mission to drive substantial positive change in the country's retail sector".
Sandeep Naik, Managing Director and Head of India & Southeast Asia at General Atlantic, said, "There is a pressing need for change in the Indian retail ecosystem. Reliance Retail's strategy is unique—highly disruptive, and yet fully inclusive, it demonstrates a deep understanding of the diverse needs of India and Bharat, and the opportunity to provide more holistic omnichannel retail solutions to Kiranas and consumers."
The transaction is subject to regulatory and other customary approvals.
Morgan Stanley acted as financial adviser to Reliance Retail and Cyril Amarchand Mangaldas and Davis Polk & Wardwell acted as legal counsels. Shardul Amarchand Mangaldas & Co and Paul, Weiss, Rifkind, Wharton & Garrison LLP acted as legal counsel to General Atlantic.
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 digitize Kirana stores through its new commerce business. In July, JioMart was serving 4,00,000 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 RIL's valuation.
Monetisation of retail, complemented by the capitalization 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 industry in India has lagged infrastructure growth and improvement in demographics. Despite the large size of the consumption basket at $0.8-1.0 trillion, the share of organized retail is only 8 per cent of the total market, which offers a long growth runway.
Food and grocery (F&G) forms about 60 per cent of the overall consumption basket—a $600 billion market—but only 4-5 per cent is organised.
Analysts expect a break-up of the company in the next 3-4 years through the IPO of 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.