QIA to invest ₹8,278 crore in RIL’s retail arm for 0.99%

QIA’s investment values RRVL at ₹8.28 trillion or $100 billion, twice its ₹4.21 trillion valuation in 2021.

QIA’s investment will translate into a 0.99% stake in RRVL on a fully diluted basis, RRVL said on Wednesday.

“The company might look slightly overvalued now, but the investors are of the view that the high growth in the segment coupled with the large market that the company is targeting will help it grow into the value in future,” an investment banker said on condition of anonymity.

Earlier this month, equity researcher Bernstein estimated a valuation of $112 billion for RIL’s retail business.

“Some of these investors have taken a long-term view on the sector and the group,” the banker cited above added.

The company has also worked on consolidating its position in the country’s organized retail market with the more recent acquisition of German wholesale retailer Metro Cash and Carry’s India business, for instance.

RRVL’s network of over 18,000 stores in a growing consumer economy has also drawn investor interest.

Between 2020-21, RIL raised ₹47,265 crore by selling a little more than 10% in RRVL to nine global investors, including Abu Dhabi-based sovereign wealth fund Mubadala, private equity firm General Atlantic, Silver Lake Partners, investment firm TPG Capital, The Public Investment Fund, GIC, investment firm KKR, Abu Dhabi Investment Authority, and SLP Co-investors at a pre-money equity value of ₹4.21 trillion. In all, the above investors, including QIA, now hold an 11.7% stake in RRVL.

“The investment by QIA is a strong endorsement of a positive outlook towards the Indian economy and RIL’s retail business model, strategy and execution capabilities,” said Isha Mukesh Ambani, the director of RRVL.

Morgan Stanley acted as financial adviser to RRVL while Cyril Amarchand Mangaldas and Davis Polk & Wardwell acted as legal counsels. Goldman Sachs, was financial adviser to RIL on the process and transaction structuring. AZB and Cleary Gottlieb acted as legal counsel to QIA.

For the year ended 31 March, RRVL reported revenue of ₹2.6 trillion and a profit of ₹9,181 crore. The retail business added over 3,300 new stores during the financial year, taking the store count to 18,040 stores pan-India.

To be sure, RRVL operates stores straddling categories such as electronics, fashion apparel, beauty, grocery, footwear, food, jewellery, toys, e-commerce, as well as luxury and lifestyle. RRVL also serves as the master distributor for Jio connectivity services, which are sold through a network of MyJio and Digital stores. Its e-commerce platforms include Ajio, Netmeds, Milkbasket, and JioMart. It is the largest retailer in India.

“Our stores now cover 65.6 million sq. ft of store area, which is a more than 50% growth of retail space as compared to the previous year. Footfalls increased by 50% from last year to 780 million. The registered customer base also grew to 249 million, establishing RRVL as the preferred shopping venue of Indian citizens across formats,” the company said in its annual report for the last fiscal.

“We are looking forward to RRVL, with its strong vision and impressive growth trajectory, joining our growing and diverse portfolio of investments in India,” said Mansoor Ebrahim Al-Mahmoud, the chief executive of QIA.

QIA has been active in India in the last 12-18 months. It has been sewing up deals across segments such as consumer, edtech, power and technology. According to data from Venture Intelligence, a VC-PE data provider, the top investments by QIA include Swiggy, Bodhi Tree, Dailyhunt, Adani Electricity Mumbai, Byju’s, Builder.ai, and Rebel Foods. It has also backed e-commerce player Flipkart.

Updated: 24 Aug 2023, 12:09 AM IST