It was always on the cards.
Reliance Industries' subsidiary Reliance Retail Ventures Limited (RRVL) has announced today that Silver Lake will invest Rs 7,500 crore ($1.02 billion) into it. This marks the second billion dollar investment by Silver Lake in a Reliance Industries subsidiary after the $1.35 billion investment in Jio Platforms announced earlier this year.
This investment values RRVL at an equity value of Rs 4.21 lakh crore. Silver Lake’s investment will translate into a 1.75% equity stake in RRVL on a fully diluted basis, Reliance said in a statement.
Reliance Retail is the country's largest and fastest growing retail business serving close to 640 million footfalls across its 12,000 stores nationwide.
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Reliance's two-pronged strategy
This investment comes on the back of Reliance Retail picking a stake in Kishore Biyani-led Future Group.
This deal is important as Reliance Retail is expanding its retail business to combat the challenge of Amazon and Walmart-owned Flipkart.
Reliance's strategy is two pronged. While it is strengthening Reliance Retail's brick and mortar shops, which, in turn, will then lend an important arm to JioMart, Reliance's recently launched e-commerce platform.
Reliance Retail is in line to get a few more big-ticket investments, and is planning a Jio Platforms like strategy which has managed to lure major tech companies like Facebook and Google to put money on it.
It may be recalled that addressing shareholders at Reliance Industries' 43rd annual general meeting recently, Mukesh Ambani had said "Reliance Retail has received strong interest from strategic and financial investors."
Why is Silver Lake investing in Reliance Retail?
Reliance Retail, through its new commerce strategy, has started a digitalization of small and unorganised merchants. It says it 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.
Since tech is set to play a big role in Reliance Retail's plan, Silver Lake, which understands both technology and Reliance, is back for investment.
As Egon Durban, Co-CEO and Managing Partner of Silver Lake, said, “We are pleased to deepen our relationship with Reliance with this investment. Mukesh Ambani and his team at Reliance have created an outstanding world leader in retail and technology."
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, he added.
For his part, Mukesh Ambani, Chairman and Managing Director, Reliance Industries, said, “I am delighted to extend our relationship with Silver Lake to our transformational efforts of building an inclusive partnership with millions of small merchants . We believe technology will be key to bringing the much-needed transformation in this sector so that various constituents of the retail ecosystem can collaborate to build inclusive growth platforms.”
Going forward, it is said, investors in Jio Platforms will be given the opportunity to invest in Reliance Retail, too.
