Report Says Walmart In Talks To Pick Up Stake In Reliance Retail

Oil-to-telecom conglomerate Reliance Industries (RIL) is in discussions to sell a minority stake in its retail business to Walmart Inc, a report suggested on Monday.

The world’s largest retailer is emerging as an early candidate to pick up a stake in India’s largest retail company, the Morning Context said citing an executive familiar with the development.

On Saturday, RIL's retail arm Reliance Retail Ventures (RRVL) inked a deal with Kishor Biyani-promoted Future Group for acquiring its retail & wholesale business and the logistics & warehousing business as going concerns on a slump sale basis for a lumpsum total consideration of Rs 24,713 crore.

The acquisition would help Reliance Retail’s online segment in building a deep discounting strategy for JioMart, the e-commerce venture that competes with Amazon and Flipkart.

Interestingly, Bengaluru-headquartered Flipkart, which was acquired by Walmart for $16 billion in 2018, said its wholesale unit will acquire parent Walmart’s loss-ridden cash-and-carry business in India.

Reliance, which recently launched JioMart in 200 cities, now averages 250,000 orders a day within weeks.

In a string of deals since April, RIL has sold a total of over 33 per cent stake in its Jio Platforms unit and raised Rs 1,52,056 crore from marquee investors and tech majors such as Google and Facebook.

The recent deal with Future Group, adds substantially to the scale of business of Reliance Retail, which is already India’s largest retailer.

Global brokerage Nomura believes the acquisition of Future Group's retail business will help Reliance Retail scale its position in the market.

"A combined entity with larger market share will also increase potential strategic investor interest, in our view," said Nomura analysts.

According to CLSA, RIL-Future Group deal further cements Reliance’s position as India’s largest retailer by expanding its retail outlets by 15 per cent and retail footprint and warehousing area by over 80 per cent, and will also add 4.1 per cent to Reliance’s market share of organised retail and take it to 17.8 per cent.

Goldman Sachs believes that after doubling EBITDA over the last four years, RIL can double it again by FY25 as the consumer businesses – telecom and retail -- are on the cusp of a strong growth period.

The global brokerage forecasts the consumer businesses to deliver FY20-25 EBITDA CAGR of around 30 per cent and drive over 50 per cent of EBITDA contribution starting FY23, reaching 60 per cent by FY25, in comparison with 35 per cent and 15 per cent in FY20 and FY18 respectively.

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