Mukesh Ambani’s Reliance Retail is expected to emerge as the largest player in India’s organised retail sector this year, overtaking erstwhile market leader Future Retail.
It posted a turnover of Rs. 10,857 crore for the nine months ended December 31, 2013. Future group chairman Kishore Biyani had said in January that his group would clock revenues of about Rs. 11,000 crore for the full year. Reliance has already reached that figure in the first nine months of the year and so, is likely to be comfortably ahead by March 31, 2014.
Parent company Reliance Industries, which is sitting on a cash pile of Rs. 90,000 crore, has lined up massive expansion plans for the retail business. The target: a turnover of Rs. 50,000 crore from this segment by 2016-17.
“Reliance Retail will be one of our important growth engines in the next few years and will have amongst the highest growth rates and earnings potential,” Ambani had said at the company’s last AGM in June last year.
The company expects the bulk of this growth to come from the value and digital segments, where it can leverage its deep pockets, world class backend and well-oiled logistics chain to provide competitive prices.
“Retail is actually not as complicated a business as it is made out to be. Reliance has proved this – a sharp focus on right store formats and the ability to adapt and adjust to customer needs has been the key to the company’s success,” Arvind Singhal, chairman of Technopak, a retail consultancy firm, told HT.
Ambani, who entered the retail sector in 2006-07, has had to wait patiently for more than six years for his investments to pay off. His retail business, which incurred losses for the first five years, finally turned around in 2012-13 when it posted a profit of Rs. 78 crore. This year, it has earned a profit of Rs. 278 crore in the first nine months of 2013-14.
“Reliance Retail is growing at 40% year-on-year. It has touched the inflection point and I feel the business will get stronger in the coming months,” said Abneesh Roy, associate director, Edelweiss Financial Services, a leading financial services firm.
The company is making big investments across formats and will leverage group company Reliance Jio’s 4G mobile telephony rollout later this year to expand its reach, a senior source said. The primary beneficiary of this: Reliance Digital Express. “But the company is likely to lag in the jewellery segment,” Roy added.