The second phase of Mukesh Ambani's multi-brand retail business plan is ready for take-off on a much bigger scale. The plan will involve a mix of retail and wholesale cash-and-carry trade housed in single mega stores averaging 1,50,000 sq ft each.
The move was first hinted by Ambani in his speech at Reliance Industries Ltd's (RIL's) annual general meeting in June. "Reliance Retail will soon launch a cash and carry format that is built on the principle of offering inclusive growth to all our retailer partners," he had said.
In the first leg of Reliance Retail's expansion plan, 14 such stores will be set up in cities including Ahmedabad, Amritsar, Bhatinda, Ludhiana, Jallandhar, Patiala, Rai, Hissar and Panipat among others.These will be branded under Reliance Market and in some cases the existing hypermarkets will be expanded to be later merged into the new business model.
This will mark the second coming of Reliance Retail in the wholesale business. Ranger Farms, its earlier cash-and-carry format launched in 2007 was merged into Reliance Fresh, its food and grocery business, a year later.
Reliance Retail will utilise the land and commercial property bank created by group firm Reliance Ambit Trade, said sources on condition of anonymity.
When contacted, a RIL spokesperson said the company cannot share details of the wholesale cash-and-carry rollout and other strategic plans, but ruled out the possibility of hiving off Reliance Retail into a separately listed entity.
Reliance Ambit Trade, formerly known as Nettles Farms, is a RIL subsidiary specifically mandated to carry out development of commercial properties for use of other group firms.
In 2007, the company had acquired about 5,00,000 square feet of commercial space spread over seven locations in Delhi including Dwarka, Rohini and Vikaspuri in a competitive auction for more than Rs 1,100 crore.
As on March 31 last year, Reliance Ambit Trade had created a free-hold commercial property bank of Rs 4,337 crore spread across several Tier-1 and Tier-II cities in India.
Reliance Retail, which posted a net loss of R476 crore on turnover of Rs 6,662 crore, has brought in top executives from Walmart China to carry out the expansion plan. Rob Cissel, former chief operating officer of Walmart China, is joining as chief executive, value formats. Shawn Gray, former vice-president, Walmart China will join as chief operations officer.
The company, which has 46 subsidiaries, scaled rapidly to 1,000 stores in 86 cities in three years since its launch in November 2006. Around 650 such stores are run by Reliance Fresh, while others deal with non-food retail such as apparel, footwear, gems and jewellery.
RIL's current cash balance of Rs 42,393 crore (March 31, 2011) and expected proceeds of Rs 32,000 crore from BP Plc will help the firm wipe out its outstanding debt of Rs 67,397 crore and still leave robust enough resources on the balance sheet to fund its expansion plans.