Mubadala picks up 1.4% stake in Reliance Retail for Rs 6,247.5 cr

Abu Dhabi-based sovereign wealth fund Mubadala Investment Co will invest Rs 6,247.5 crore to buy a 1.4 per cent stake in Reliance Industries Ltd's retail arm -- the billionaire Mukesh Ambani-led firm's third such deal in less than two days.

Mubadala will be the fourth investor in Reliance Retail Ventures Ltd (RRVL).

Mubadala's Rs 6,247.5 crore investment "values Reliance Retail at a pre-money equity value of Rs 4.285 lakh crore," the Indian firm said in a statement.

"Mubadala's investment will translate into a 1.40 per cent equity stake in RRVL on a fully diluted basis," it added.

On Wednesday, global private equity firm General Atlantic picked up a 0.84 per cent stake in the company for Rs 3,675 crore. Also, US PE investor Silver Lake made a second investment of Rs 1,875 crore, taking its total fund infusion in Reliance Retail to Rs 9,375 crore for a 2.13 per cent stake.

KKR had previously taken a 1.28 per cent stake in the firm for Rs 5,550 crore.

Reliance has since September raised Rs 24,847.5 crore by selling 5.65 per cent in its retail arm.

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. Revenues for Reliance Retail in FY20 stood at 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.

This is the second investment by Mubadala in a subsidiary of Reliance Industries. It had previously invested Rs 9,093.60 crore for a 1.85 per cent stake in Jio Platforms.

Mukesh Ambani, chairman and managing director of Reliance Industries, said: "We value the partnership with a knowledge-rich organization like Mubadala and acknowledge their confidence in our mission to strengthen the core of India's retail sector - the millions of small retailers, merchants and shopkeepers - through the power of technology."

"Mubadala's investment and guidance will be invaluable support in this journey," he said.

Khaldoon Al Mubarak, managing director and group CEO, Mubadala Investment Company, said: "We are pleased to deepen our relationship with Reliance Industries through this investment in Reliance Retail Ventures. Their vision is the inclusive transformation of India's consumer economy through the power of digitization, creating opportunities and market access for millions of small businesses across the country, and we are committed to supporting the company's continuing development."

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.

Headquartered in Abu Dhabi, Mubadala has a portfolio of USD 232 billion spanning over six continents with interests in multiple sectors and asset classes.

Following the sell-down in its digital unit Jio Platforms, Reliance's focus has shifted to retail with the acquisition of Future Group's businesses and investment by global private equity firms/strategic investors.

All 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 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 position in offline retail through its recent acquisition of retail, wholesale, logistics and warehouse businesses of Future Group for an enterprise value of Rs 24,173 crore.

The firm in May this year launched JioMart, its 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 RIL's valuation of around Rs 15 lakh crore.

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 organized retail industry 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.

Food and grocery (F&G) forms about 60 per cent of the overall consumption basket -- a USD 600 billion market -- but only 4-5 per cent is organised.

Analysts expect a break-up of the company in the next three-four years through IPOs 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.