PE firm Silver Lake to invest $1 bn in Reliance Retail for 1.75% stake

About a fortnight after Reliance Retail announced the acquisition of Kishore Biyani-led Future Group’s retail and wholesale businesses, Menlo Park, California headquartered private equity (PE) firm Silver Lake has picked up a 1.75% stake in the Mukesh Ambani-led retail major. Mumbai headquartered Reliance Retail is currently on an aggressive expansion spree to build out an omnichannel play for its businesses.

Silver Lake will invest Rs 7,500 crore ($1.02 billion) to pick up the stake, marking its second significant bet on a Reliance Industries (RIL) owned business. In May this year, the PE firm, which focuses globally on investments in the technology sector, had committed $1.3 billion to RIL’s digital services unit Jio Platforms across two rounds.

 The investment from Silver Lake values Reliance Retail at $57 billion (Rs 4 trillion) pre-money.

“Reliance Retail, through its new commerce strategy, has started a transformational digitalisation of small and unorganised merchants, and is committed to expanding the network to over 20 million of these merchants, helping them benefit from the use of technology tools and efficient supply chain infrastructure to deliver a superior value proposition to their own customers,” RIL said in a statement.

RIL has made significant acquisitions in a handful of digital businesses over the years. It is a majority owner in fashion ecommerce platform Fynd, education startup Embibe, and epharmacy Netmeds. In the long term, it is expected that the oil-to-telecom conglomerate will bring all of its consumer internet offerings under the Reliance Retail umbrella to create an omnichannel retail world to take on the mighty Amazon and Walmart-owned Flipkart.

Reliance’s ecommerce venture JioMart, a joint venture between Jio Platforms and Reliance Retail, is poised for strong growth as it beefs up its supply chain, warehousing and logistic capabilities, and physical presence across the country. In May, the firm launched JioMart across 200 towns to supply fresh produce, staples, grocery, personal care, home care and baby care products through an app.

On August 29, Reliance Retail announced the acquisition of Future Group’s retail and wholesale, and the logistics and warehousing businesses for a lump sum of $3.38 billion. As per the contract, the retail and wholesale unit will be transferred to newly incorporated Reliance Retail and Fashion Lifestyle, a wholly-owned subsidiary of Reliance Retail Ventures, while the logistics and warehousing unit will be transferred to Reliance Retail Ventures.

Reliance Retail, the largest retail chain in the country, runs about 12,000 stores nationwide.

“The success of JioMart in such a short time span, especially while India, along with the rest of the world, battles the Covid-19 pandemic, is truly unprecedented, and the most exciting growth phase has just begun. Reliance’s New Commerce strategy could become the disruptor of this decade,” Egon Durban, co-CEO and managing partner of Silver Lake, said.

Jio Platforms, which includes the company’s telecom and digital services businesses, has over 388 million subscribers. It has so far raised nearly $21 billion (Rs 1,52,056 crore) from a clutch of strategic and financial investors, including Facebook, Google, Vista Equity Partners, General Atlantic, KKR Mubadala Investment Company, Abu Dhabi Investment Authority, L Catterton, TPG Capital, Intel Capital and Qualcomm.

A wholly-owned subsidiary of RIL, Jio Platforms owns proprietary telecom technology 4G LTE, and several apps such as JioSaavan, JioTV and JioPay.