India’s largest retail chain has further fortified its already-dominant position in the country by acquiring most of India’s second-largest bricks-and-mortar retailer.
On 29 August 2020, Reliance Retail announced that it had struck a $3.4-billion acquisition deal Future Group to acquire the latter’s retail and wholesale business, and its logistics and warehousing businesses.
Ambani-lead Reliance Group now owns a third of the brick-and-mortar stores of India’s modern retail sector.
How Ambani Beat Bezos
The move must have made Amazon and Walmart’s Flipkart rush back to their drawing boards, because, unlike what most people think, e-commerce clocks only 3 per cent of all retail sales in India.
According to consultancy firm BCG and local trade group Retailers’ Association of India, the country’s retail market is estimated to reach $1.3 trillion by 2025, up from $700 billion in 2019.
It is not that only Reliance had its eyes on Future Retail, Amazon was also eyeing the retail giant and had acquired a 3.58 per cent stake in Future Retail in early 2019. Financial terms of the Amazon—Future deal were not disclosed, though based on Future Retail’s current market cap, market experts have pegged it at around $2.9 billion.
Looks like Reliance Group took a cue from that deal and beat Amazon at its own game.
About the Future Group:
The group started its journey in the 1980s as a stonewashed-fabric seller and today serves millions of its loyal customers through more than 1,500 stores in more than 400 cities.
The deal with Reliance will help it reduce its debt.
Other Moves by Reliance in 2020
Prior to this deal, Reliance Industries (of which Reliance Retail is a subsidiary), had already secured about $20 billion from Facebook, Google, and eleven other high-profile investors Jio Platforms, its telecom venture.
It is also not that Ambani is treating e-commerce like a stepchild. In 2019, Jio Platforms and Reliance Retail had announced JioMart, its e-commerce venture, that has expanded from select suburbs in Mumbai to over 200 towns and cities in India.
JioMart is further looking to take e-commerce to India’s 60 million mom-and-pop stores, and other small- and medium-sized businesses. In this, it will be assisted by Facebook, which has invested $5.7 billion in Jio platforms till now.
Reliance’s “Golden Decade” Announced
Ambani has announced that Reliance Industries Ltd (RIL) aims to double sales in the next seven years and also said that he is exploring ways of boosting the profitability of its mainstay refinery and chemicals businesses.
He has made it apparent though that he will not rely solely on what he has inherited and, as the Future Group deal proves, is placing outsized bets on new consumer businesses.
For example, to drive growth, the group RIL has invested around ₹2.5 trillion in Reliance Jio Infocomm Ltd and plans to use it as a Launchpad for venturing into e-commerce, healthcare, education and agriculture, by 2022.
“As India starts on its high-growth journey to double the size of its economy by 2025, I assure you that the size of Reliance will more than double in the same period,” Ambani told shareholders at the company’s 41st annual general meeting (AGM) in Mumbai.
We Give Ambani a 10/10 for a 20/20 Vision
The year 2020 has been very forgettable for most of us, but not for Mukesh Ambani.
It is in this year—nearly 20 years after foraying into the telecom business—that RIL has emerged at the top in India. As mentioned earlier, Jio has already raised $20 billion by selling minority stakes to a raft of marquee global names—including Facebook, Google, and Intel.
At the very start of the Corona-year, in January 2020, Jio outran Vodafone Idea, and Bharti Airtel to become the number one telecom company in India. Simply put, the pecking order in India’s telecom sector has been altered.
But, knowing Ambani and his business acumen, it’s business as usual.
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