Meghna Maiti, Financial Chronicle
Mumbai, 7 June 2012
Even at a time when the economy has put in its worst performance in nine years, Mukesh Ambani, chairman of Reliance Industries, continues to be overtly optimistic about the conglomerate’s retail business.
Ambani expects Reliance Retail to increase its revenues by around five-six times to Rs 40,000-50,000 crore in the next three-four years. At present, unlisted Reliance Retail has a turnover of approximately Rs 7,600 crore.
“We are investing aggressively in this business (Reliance Retail) to consolidate and strengthen our leadership position in this sector. With scale, supply chain integration and continuous learning, we expect this business to be profitable within three to four years and achieve a satisfactory return on capital,” Ambani told Reliance Industries’ shareholders at its annual general meeting (AGM) in Mumbai.
“Reliance Retail will be one of our important growth engines in the next few years and will have amongst the highest growth rates and earnings potential,” added Ambani.
To achieve this feat, the company aims to treble its customer base from about 30 lakh people visiting its retail stores every week now to over one crore in the next three-four years. This over three-fold expansion in customer base would thus power the growth in sales.
Devangshu Dutta, chief executive of Third Eyesight, a specialist consulting firm for the retail sector, said the plans of India’s richest individual reiterates the promises and prospects of India’s retail story. “A long-term growth story is unfolding in India, which would support the growth strategies of any retail company,” said Dutta. “The total size of India’s consumption market is around $550 billion. Whereas GDP growth has shrunk to 5.3 per cent, retail spending has only increased. Considering the situation, Reliance Retail’s promises do not look daunting,” said Arvind K Singhal, chairman at Technopak Advisors.
“Our consumer businesses are going to provide a second dimension to our growth strategy. We will build on our position as the leading retailer in India. The execution of this business plan will benefit the India’s kisans and consumers and create new value for our stakeholders,” said Ambani.
RIL claims the retail business, which is still losing money, has grown strongly in the past five years and now spans across 1,300 stores and has a leadership position in three verticals. Reliance Retail has provided new employment for 50,000 people, including 25,000 people directly by Reliance. “We have built a sustainable growth model for our retail business,” said Ambani.
Reliance has used an expat management team and has partnered with experts around the globe to cement its position in India’s nascent organised retail market. "We have strengthened our portfolio of global brands through partnerships…We will continue to invest in partnerships with consumers, brands and producers. Consumer businesses will form a significant part our business in less than a decade," said Ambani.
Reliance Retail, through its newest format Reliance Markets, is partnering with kirana stores and small retailers to supply them products at low prices. "We aim to be a supplier of choice for kiranas and small retailers. We will grow in retail in partnerships with small retailers," he added. It claims to have tripled the number of its digital stores and expanded product offerings.
“We engage with 70 lakh farmers and procure fresh produce and milk from them. In apparel retailing we have established the largest chain of stores in the country,” said Ambani in his AGM speech.