Will a probable Reliance Retail IPO unlock value for RIL’s shareholders?

The markets are factoring in the value from the retail division of Reliance Industries in the latter’s price.

A recent Goldman Sachs report has hinted at the possibility of Reliance Retail going public in the foreseeable future. This calls for a closer look at the Mukesh Ambani-led retail giant, especially at a time when D-Street is getting increasingly bullish about this fast growing sector.

About Reliance Retail

Reliance Retail (RR), a part of Reliance Industries, is India’s biggest retailer by revenue and network. The company has 7,573 retail stores (with a retail area of 17.7 million square feet) and 495 company owned company operated (COCO) petro retail outlets across more than 4,400 cities throughout the country.

What could work in Reliance Retail’s favour?

Supply chain tie-ups: Given the breadth of its presence, RR has been successful in sourcing products cheaply and has ensured last-mile connectivity through distribution partners across geographies.

Brands: Keeping product differentiation and appeal in mind, RR has a basket of private label brands in its kitty:

Since its own brands have better margins, the company can afford to increase marketing and promotional spends for the same to drive revenue growth.

Diverse product range: RR’s key product verticals include fuel retailing (Reliance petrol pumps), food items, apparel, lifestyle accessories, electronic goods, jewellery and footwear. Varied price points within each category, coupled with periodic schemes/discounts, have helped mitigate segmental risks and boosted revenue growth over the years.

Aggressive expansion: To accelerate sales growth, RR is focusing on a healthy blend of outlet additions and same-store sales growth. Grocery and fashion outlets attract high footfalls, but consumer electronics have a higher ticket size per transaction. To capitalise on the boom in e-commerce, the company is investing more in its online portals too.

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