Reliance Retail Ventures Ltd, which raised $1 billion from Silver Lake Partners on Wednesday, is set to draw additional investments worth $5 billion from KKR & Co., Mubadala Investment Co. and Abu Dhabi Investment Authority (ADIA), two people directly aware of the negotiations said.
California-based private equity fund Silver Lake, an investor in Reliance Industries Ltd’s Jio Platforms unit, picked up 1.75% stake in Reliance Retail Ventures for ₹7,500 crore, valuing the company at Rs 4.21 trillion or $57 billion.
“The discussions with KKR, Mubadala and ADIA are in an advanced stage, and more existing investors may follow suit as Reliance continues to talk to external investors,” said one of the two people cited above.
KKR, Mubadala and ADIA are slated to invest around $1 billion each, the people cited above said on condition of anonymity.
The fresh round of investments in the retail business will give parent Reliance Industries more firepower to take on strong rivals such as Amazon and Walmart-owned Flipkart for supremacy in the Indian organized retail space, where Reliance Retail is aiming to corner a significant market share through an omnichannel approach, analysts said.
Some of them, however, said the valuation assigned by Silver Lake to Reliance Retail Ventures is at a significant discount to what they had estimated.
“A $57 billion value is slightly underwhelming versus what markets are pricing in right now,” said JP Morgan in a note to investors on Wednesday, adding that this is 7% lower than its implied Reliance Retail value, which the investment bank had pegged at $65 billion.
Mint had reported on 5 September that Reliance Industries had offered investors in Jio Platforms the option to also invest in its retail unit.
“Mubadala has held conversations for investing in Reliance Retail. Jio Platforms’ investors have been offered the opportunity to invest in the retail business at an attractive valuation, which they are considering. They could look at a similar ticket size as their Jio Platforms investment or smaller; those details have not been finalized,” said the first person cited above. Mubadala invested $1.2 billion in Jio Platforms in June.
Emails sent to Mubadala, ADIA and KKR did not elicit a response till press time.
Last month, Reliance Retail Ventures agreed to acquire Future Group’s retail, wholesale, logistics and warehousing businesses for ₹24,713 crore.
“There is room for RIL to extract operating efficiencies and improve profitability with lower capital costs. Integration of the supply chain/logistics business could also bolster RIL’s retail backend and perhaps also its new commerce plans,” said Citi Research in a report dated 9 September. With an eye on the rapidly growing e-commerce segment, Reliance Industries launched its online food and grocery business in 200 cities through JioMart in May.
Reliance Retail Ventures operates India’s largest retail business with 12,000 stores nationwide. It is the holding company for Reliance Retail Ltd and Reliance Brands. The latter operates joint ventures with international brands.