Following the footsteps of Silver Lake, another US firm KKR will invest £5.55 billion for a 1.3% stake in Reliance Retail Ventures (RRVL). The transaction has valued RRVL at £42 billion, similar to the value assigned by Silver Lake. With the KKR deal, Mukesh Ambani has sold just over 3% in RRVL to external investors for £1.31 billion. The retail unit, established by Ambani in 2006, is part of his sprawling energy-to-telecom conglomerate Reliance Industries (RIL).
The foreign money will help RIL finance its acquisitions (it has recently announced the purchase of Future Retail and is in discussions to buy majority stake in a few online startups). It will also aid the assault on rivals Amazon and Walmart-owned Flipkart in the world’s second-most populous country where Covid has accelerated a shift in consumer behaviour from brick-and-mortar retail to e-commerce.
While Ambani had said that he has received strong interest from investors in the retail business, he had not specified the total quantum of stake he intends to sell in RRVL. He has, however, offered existing financial investors of his digital services and telecom unit Jio Platforms an opportunity to invest in the retail business. Both Silver Lake and KKR had invested in Jio Platforms - the former had put in £1.02 billion (stake of just over 2% in the company), while KKR had infused £1.14 billion (for 2.3%).
More investors are expected to check into RRVL as Ambani increases his focus on the consumer business, which will power the conglomerate’s profits in the coming years. L Catterton, Abu Dhabi Investment Authority, Saudi Arabia Public Investment Fund and Mubadala - the investors in Jio Platforms - are in discussions to acquire a piece of RRVL, which reported a profit of £544.8 million on a turnover of £16 billion in fiscal 2020. The share-sale in RRVL is part of Ambani’s broader plan of taking the consumer business public.
The profile of investors who have invested or speculated to invest in Reliance Retail indicates that they see a lot of synergy between Jio Platforms and the retail business of RIL, said an analyst. Powered by Jio Platforms’ technology, JioMart, Reliance’s online grocery service which was launched in May, aims to digitise mom and-pop stores, called kiranas, with customers.
