Reliance Retail Limited

SECTOR: RETAIL

ISIN: INE742O01010


Reliance Retail Limited operates as a supermarket. The Company provides vegetables, fruits and flowers, processed foods, cereals, spices, beverages, dairy, grocery, health, and personal care products, as well as travel, energy, entertainment, leisure, educational products, and services.

OTCSTOX: RELIANCE RETAIL



5,48,944.49

Market Cap(₹ Cr.)

105.66

P/E

30.31

P/B

10.41

EPS

18,115.18

Net Worth(₹ Cr.)

30.58%

ROE

99.93%

Promoter Holding

10

Face Value(₹)


(As on: 31MAR2020) | Consideration Price: 1100


PEERS

D-mart

TATA Group

AB Fashion & Retail

About

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Reliance Retail Limited is a subsidiary company of Reliance Industries Limited. Founded in 2006, despite of being unlisted company it is the largest retailer in India in terms of revenue. V Subramaniam is the CEO of the Venture.

Reliance Retail, the unlisted company is well-entrenched in all markets of India. With nearly 10,644 stores in 6,700 cities, Reliance Retail’s retail area spans approximately 23 million square feet of retail space.

Warehousing facilities to the tune of approximately 10 million square feet are also available at its disposal, which reduces the need to rely on external players for inventory management.

Accelerated expansion by the Reliance retail unlisted company is likely to continue in all segments – grocery, fashion/lifestyle, electronics, fuel retailing and Jio digital outlets. Impetus will be particularly laid on tier 3 and 4 regions, where the headroom for growth is huge and markets are relatively underpenetrated.

Top Subsidiaries / Divisions

There are over 45 subsidiaries and divisions of Reliance Retail. Following is the list of major divisions:

  • Reliance Fresh
  • Reliance Smart
  • Reliance Digital
  • AJIO
  • JioMart
  • Hamleys
  • SKDS Retail stores

Financials

₹ Cr.

Annual FY2020 FY2019 FY2018 FY2017 FY2016
Revenue 1,30,627.71 1,02,058.55 51,456.17 26,861.94 18,543.56
PAT 5,539.79 3,138.26 1,246.89 440.52 306.54
Networth 18,115.18 12,587.41 9,062.48 6,814.57 5,494.90
EPS 10.41 8.77 2.51 0.88 0.61

More Details

Retail Sector

The retail sector in India is emerging as one of the largest sectors in the economy. It contributes 10 per cent to GDP and 8 per cent to employment.

India has occupied a remarkable position in global retail rankings. The country has high market potential, low economic risk and moderate political risk. India’s high growth potential compared to global peers has made it a highly favourable destination. According to a study by Boston Consulting Group, India is expected to become the world's third largest consumer economy by reaching US$ 400 billion in consumption by 2025.

Reliance Retail contribution

The unlisted company, Reliance Retail is among the fastest growing retailers globally; A diverse store network and wide product range should keep revenue accrual intact. By FY21, the retail vertical may constitute 50-60 percent of RIL’s cuReliance Retailent market cap.

RIL acquired Hamleys, a global retailer of toys, gifts and games in April 2019. Although the company was an exclusive franchise for Hamleys for a while, the acquisition underscores the management’s intent to explore markets beyond India. There’s also the possibility that Reliance retail’s other brands, especially private labels, may one day find a place on shelves of foreign retailers.

The unlisted company, Reliance retail has been the preferred partner for several international marquee brands in India. As of now, approximately 45 foreign retailers have entered into partnerships with this company to promote and sell their products in India.

Some noteworthy licensed brands in Reliance retail’s (one of the most active script in unlisted share market) kitty include the likes of Armani Exchange, Emporio Armani, Marks and Spencer, GAS and Superdry. Reliance Retail’s unlisted share can be traded on OTCSTOX, a live share trading platform offered by OTC Capital.

Reliance Retail’s customer loyalty programme covers more than 100 million members. This, in itself, is a large chunk of India’s consumption universe to capitalise on. In due course, evidently, these numbers are slated to grow significantly.

Retail and Jio complement each other’s growth prospects. For instance, shoppers at Reliance Retail’s numerous outlets may be able to avail of better offers if they are Jio subscribers, implying that a lot of non-Jio users may want to consider switching to Jio’s SIM card. On the other hand, those on the Jio network would get details of schemes available at Reliance Retail’s stores from time to time. As a result, they would be more inclined to shop at Reliance Retail rather than visiting stores run by some other retailer.

Challenges

On an already high base, revenue growth may moderate from a quarter-on-quarter perspective. This could impact margins as well.

Consumption sentiment in the country remains subdued as of now. Weakness in demand may increase Reliance Retail’s inventory holding costs since dealers, distributors and stores may possibly slow their pace of placing new orders. Competition from other organised and unorganised players will continue to persist, Irrespective of the geographical location.

Lease rentals for commercial properties have been rising lately. Lower-than-expected asset turns, coupled with growing capex, could push downward pressure on RoCE (return on capital employed), free cash flows and earnings. A formal announcement pertaining to the launch of an all-encompassing e-commerce platform is awaited.

Though this will accelerate Reliance Retail’s revenue growth significantly, the portal will report losses in the short to medium term. This is because of high costs associated with discounts, promotions, dealer incentives, logistics, storage and competition (with well-entrenched players such as Amazon and Flipkart).

Conclusion

In spite of the heavy capex in connection with store openings, Reliance Retail’s operating margins increased pretty markedly compared to the competition in the fiscal year gone by. Having said that, there is scope for further improvement when compared to some of India’s other major retailers such as Aditya Birla Fashion and Retail, D-Mart, Future Lifestyle Fashions and Shoppers Stop. The contribution of Reliance Retail to RIL’s consolidated revenue and EBIT has been consistently increasing, notwithstanding some minor blips in certain quarters.

We remain optimistic about Reliance Retail’s revenue growth potential on the back of its wide store network, robust presence across diversified product categories and continued large-scale investments targeting aggressive/fast-paced expansion, this will have huge impact on Reliance retail share price.

While there’s no doubt that Reliance Retail’s revenue traction would remain steady, it will be important to keep an eye on how the margin trajectory pans out. This, in turn, would be predominantly dependent on benefits of scale and product mix.

Useful Links / News

Financial Performance

Company Address

Reg. Address: 3rd Floor, Court House, Lokmanya Tilak Marg, Dhobi Talao, Mumbai 400 002

Email: [email protected]

Website: www.relianceretail.com

FAQs

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    • There is no fix lot size from our side, lot size may vary from one trader to another.
    • Liquidity risk: unlisted shares are less liquid than listed shares.
    • Information availability: In unlisted shares there is less information available about the company, it may be difficult for investors to judge a company's performance and prospects without seeing latest information on its earnings, debts, operating expenses and other critical financial information..
    • The companies in unlisted share market are generally small but with ambitious plans for rapid growth and need investment to take their business to the next level.