- Reliance Industries’ retail segment could reap the benefits of sales traction driven by growth in the network, highlighted Yes Securities.
- The company has spent close to a billion dollars on assets and building its capabilities in the retail sector.
- Reliance Retail has over 14,400 stores in India and it also sells 50 high-end international brands in the country.
The retail arm of oil-to-chemical conglomerate Reliance Industries Limited (RIL) may bring positive news for its shareholders in the upcoming earning call, scheduled for Friday (May 6, 2022).
According to ICICI Securities, a muted third wave of Covid-19 may see Reliance Retail’s EBITDA — or earnings before interest, taxes, depreciation, and amortisation — at a new high in the fourth quarter of fiscal year 2022, between January and March 2022.
The report was released in October, 2021, a few months before India entered the third Covid-19 wave. Even though India did cross 300,000 daily COVID-19 cases during the third wave at one point, it was largely muted in terms of government restrictions, death toll and hospitalisations.
Yes Securities, in its quarterly preview, mentioned that Reliance Industries is expected to report improvement in its earnings — on both quarterly and annual basis — on account of stronger refining margins. The revenue, however, would face a partial offset due to weaker margins in petrochemicals.
Lastly, the report also mentioned that the telecom segment is expected to benefit from higher average revenue per user (ARPU) realisation whereas the retail segment would reap the benefits of sales traction driven by growth in network. Notably, RIL has invested more than $1 billion in acquiring assets and building capabilities of Reliance Retail.
Key investments by Reliance Retail in FY2022:
| Companies | Deals | Timeline |
| Clovia | 89% stake in lingerie brand company for ₹950 crore ($124 million) | March 2022 |
| Abraham & Thakore | Bought an undisclosed majority stake in fashion label Abraham & Thakore. | March 2022 |
| Dunzo | 25.8% stake for $200 million | January 2022 |
| Mandarin Oriental New York | $98.15 millon for 73.37% stake | January 2022 |
| Addverb Technologies | 54% stake for $132 million | January 2022 |
| Amante | Acquired lingerie brand Amante from Sri Lanka-based MAS holdings. | November 2021 |
| Ritu Kumar | 52% stake for undisclosed amount | October 2021 |
| JustDial | 40.95% stake for ₹3,497 crore (approximately $450 million) | July 2021 |
Source: Reliance Industries Limited (RIL)
Bank of Baroda Capital Markets (BOBCaps) expects Reliance Retail’s EBITDA to bump up 32% annually over the next three years to reach ₹22,500 crore by FY2024. The company also expects Reliance Retail to close the last fiscal year at ₹11,800 crore, the report added.
“On the back of expansion of physical stores, integration of acquisitions, digital commerce with stores and merchant partnerships, we build in 32% growth in revenue over FY21-FY24. RIL has invested ₹76 billion in 9MFY22 in assets/ capabilities to improve customer reach, quality of products and services,” BOBCaps said.
The stock brokerage firm expects Reliance Retail’s EBITDA margin to recover from 5.9% in FY2021 to 7.1% in FY2024 as the retail business leverages its large scale and national presence.
“The company plans to accelerate the growth momentum and expansion as the operating context normalizes by: Increasing the pace of new store rollouts Scaling up the Digital Commerce business Fast-tracking new merchant onboarding Integrating new acquisitions and scaling up new businesses Strengthening the supply chain infrastructure, product, and design ecosystem in line with business expansion,” a report by Motilal Oswal added.
Notably, Reliance Retail has over 14,400 stores in India. It also currently sells 50 high-end international brands — like Steve Madden, Jimmy Choo, SuperDry, Diesel, Gas, Armani, Burberry, Hugo Boss and others — in India under Reliance Brands Limited (RBL) banner. RBL, which is a brand licensing arm, operates 680 stores and 916 shop-in-shops in India.
