The Abu Dhabi Investment Authority (ADIA) is injecting $597 million into Reliance Retail, a move that values the largest Indian retail chain at a staggering $100 billion. This investment follows the recent infusion of $1.7 billion by KKR and the Qatar Investment Authority into the Indian firm, which is a subsidiary of Mukesh Ambani’s Reliance Industries.
As a result of ADIA’s investment, the sovereign-wealth fund will acquire a 0.59% stake in Reliance Retail.
Mukesh Ambani expressed his satisfaction, stating, “We are delighted to further strengthen our partnership with ADIA, as they continue to support us as investors in Reliance Retail Ventures Limited. Their extensive experience, spanning decades of global value creation, will greatly assist us in realizing our vision and revolutionizing the Indian retail sector. ADIA’s investment in RRVL underscores their confidence in the Indian economy, as well as our business fundamentals, strategic approach, and execution capabilities.”
This investment arrives at a pivotal moment for Reliance Retail, as it expands into new market segments, including affordable fast fashion, and considers the possibility of going public. The company has also recently collaborated with Shein to facilitate the re-entry of the Chinese e-commerce giant into India, alongside integrating several other businesses into its operations.
In recent years, Reliance Retail has also made significant strides in the e-commerce sector, including a partnership with Meta’s WhatsApp to offer groceries through the instant messaging app. While Walmart-owned Flipkart and Amazon India currently dominate the local e-commerce landscape, analysts anticipate that Reliance will eventually surpass both giants.
AllianceBernstein, in an earlier note this year, estimated that Reliance’s robust retail network, extensive mobile infrastructure, digital ecosystem, and familiarity with the intricacies of the Indian regulatory environment will position the conglomerate to outperform its online competitors.
JPMorgan analysts stated in a recent note that the medium-term investment outlook for Reliance Industries Limited (RIL) is underpinned by strong cash flows and the ability to invest in growth-oriented businesses. They also noted the potential for value realization in the medium term, highlighting that the earnings downgrade cycle for RIL is likely over, with energy driving performance in FY24 and an upswing expected in the consumer segment in FY25. Additionally, they anticipate a significant reduction in Jio+Retail capital expenditure starting in FY25, coinciding with earnings growth. Beyond earnings, the analysts emphasized the potential for value unlocking through stake sales, IPOs, or listings, which could serve as substantial drivers of the company’s stock price over the next 2-3 years.
Reliance Industries, the majority owner of Reliance Retail Ventures and the largest company in India by market capitalization, has vigorously diversified its portfolio over the past decade. This diversification spans various sectors, including telecommunications and on-demand video streaming, as the company seeks to reduce its reliance on the oil industry. The retail business is spearheaded by Isha Ambani, Mukesh Ambani’s daughter.
Hamad Shahwan Aldhaheri, Executive Director of the Private Equities Department at ADIA, shared his perspective on the investment, stating, “Reliance Retail has demonstrated strong growth and adaptability in a market that is evolving at an unprecedented pace. This investment aligns with our strategy of supporting our portfolio companies that are transforming their respective end-markets. We are pleased to partner with the Reliance Group and increase our exposure to India’s dynamic and fast-growing consumer sector.”
