Reliance Retail's Rally Towards Rs 8.38 Lakh Crore IPO in 2025

Reliance Retail Ventures Ltd (RRVL), under the leadership of Mukesh Ambani, is gearing up for a monumental Rs 8.38 lakh crore IPO scheduled for 2025. As this colossal IPO looms on the horizon, the remarkable journey and strategic maneuvers of Reliance Retail have become a focal point for investors and market observers.

RRVL is in discussions regarding a comprehensive strategy that involves an additional divestment ranging between $250-300 million this year. This comes in addition to the recent dilution in favor of the Qatar Investment Authority (QIA) and the US-based private equity fund Kohlberg Kravis Roberts (KKR). According to sources familiar with the discussions, this will be succeeded by a third stake sale offer to investors next year, at an increased valuation, preceding an anticipated initial public offering (IPO) in 2025.

In August of this year, RRVL divested 0.99% in favor of the Qatar Investment Authority, amounting to $0.99 billion (Rs 8,278 crore), resulting in a nearly doubled company valuation from Rs 4.21 trillion to Rs 8.27 trillion post-deal. Additionally, RRVL secured a deal with KKR, wherein the existing investor invested an additional Rs 2,069.50 crore, increasing its stake from 1.17% to 1.42%.

Qatar Investment Authority (QIA)
Kohlberg Kravis Roberts (KKR)
Abu Dhabi Investment Authority (ADIA)
Noteworthy Financial Performance

Qatar Investment Authority (QIA)

In a headline-making move, the Qatar Investment Authority (QIA) acquired a 1% stake in Reliance Retail for an astounding Rs 8,278 crore. This substantial investment is expected to significantly enhance the growth potential of Reliance Retail. The QIA, established in 2005, serves as the sovereign wealth fund of the State of Qatar, managing surplus funds from the country's substantial oil and gas reserves. With a diversified portfolio spanning various sectors, QIA is a key player in global investments.

Kohlberg Kravis Roberts (KKR)

Kohlberg Kravis Roberts (KKR) further demonstrated its commitment to Reliance Retail by increasing its stake from 1.17% to 1.42%, injecting an additional Rs 2,070 crore. KKR, a globally renowned investment firm founded in 1976, is recognized for its expertise in private equity and alternative asset management across diverse sectors such as technology, healthcare, energy, and retail.

KKR’s $250M Investment Boosts Reliance’s Valuation to $100B

KKR to invest $250 million in Reliance Retail, increasing Reliance’s valuation to $100 billion. It translates into an additional equity stake of 0.25% in Reliance Retail on a fully diluted basis.

StartupTalkySayantan Mondal

Abu Dhabi Investment Authority (ADIA)

Abu Dhabi Investment Authority (ADIA) secured a 0.6% stake in Reliance Retail through an investment of Rs 4,966 crore, signaling its interest in the Indian retail sector and expressing confidence in Reliance Retail's strategic positioning. Established in 1976, the Abu Dhabi Investment Authority is a formidable sovereign wealth fund owned by the Emirate of Abu Dhabi in the United Arab Emirates. Known for its extensive and diversified global investments, ADIA holds stakes in various asset classes.

According to analysts at Motilal Oswal, Reliance Retail Ventures Limited (RRVL) is anticipated to experience substantial growth. We project an annual increase of approximately 25% in earnings and 34% in profits, resulting in total revenue reaching around INR 4.1 trillion and profits reaching around INR 320 billion by the year 2025.

An insider familiar with the developments stated, "Reliance Retail has extended participation offers to all their key investors in this round as well. The ongoing discussion pertains to further divestment in 2024, at an elevated valuation before gearing up for an IPO." Sources indicated that considering upcoming elections in India and the US next year, the prevailing sentiment is to abstain from major financial moves in 2024 and instead pursue an IPO in the subsequent year.

RRVL also counts other global investors among its stakeholders, including sovereign funds such as Saudi Arabia’s Public Investment Fund, Mubadala, and GIC Singapore, along with TPG, Silverlake, and General Atlantic. These investors, who injected funds in 2020, have witnessed a substantial increase in valuations in 2023.

The funds divested in Reliance Retail constitute 11.31% of the stake, attracting investments amounting to Rs 57,562 crore. In FY23, Reliance Retail reported annual revenues exceeding Rs 2.6 trillion, marking a 30% increase, and generated profits of Rs 9,181 crore. The company currently holds a position among the top 10 retailers globally and ranks within the top four in the country.

With a footfall of 780 million in FY23 and a customer base nearing 250 million, Reliance Retail reaches 30% of the addressable population in the country. Consequently, it stands among the 10 most visited retailers worldwide. While digital and new commerce businesses contributed Rs 50,000 crore to revenues in FY23, constituting a fifth of total sales, the company has invested over $10 billion in the last two years for expansive growth. This is evident in the opening of 55 stores in the first quarter of FY24, bringing the total store count to 18,446, spanning 70.6 million square feet.

Noteworthy Financial Performance

The formidable financial performance of Reliance Retail becomes evident when examining the first quarter results of the fiscal year 2024. During this period, the company disclosed an impressive revenue of Rs 62,159 crore, coupled with a net profit of Rs 2,448 crore. These figures underscore Reliance Retail's remarkable growth trajectory and profitability, solidifying its position among the top 10 retailers worldwide and ranking within the top four companies in India in terms of equity value.

"I have the conviction that as India progresses from a $2500 per-capita economy to a $10,000 per capita economy, Reliance Retail will emerge as our swiftest-growing business in terms of revenues and EBITDA," affirmed Mukesh Ambani, the chairman of Reliance Industries Limited (RIL), during the company's 46th annual general meeting (AGM) held in August.

In addition to its flagship Reliance Retail, RRVL boasts other subsidiaries and joint ventures, including Reliance Brands and Marks & Spencer, overseeing the remaining facets of apparel and additional retail operations.

Investors That Make Reliance Retail The Largest Retailer In India

Reliance retail has raised 24,847crore by selling 5.6% stake to private equity and sovereign funds. It has 11,784 stores with a turnover of 1,62,936 crore.

StartupTalkyPV Vyshnavi