Ahead of Reliance Industries' (RIL) 44th Annual General Meeting (AGM), anticipation is high about announcements pertaining to its online grocery delivery service JioMart and the deal with the Future Group. Both are significant, given projections that the retail business is set to be the next growth driver for the oil-to-telecom behemoth.
“The big trigger for retail will be any announcement around the merger with the Future Group,” said Harminder Sahni, founder and managing director of consultant Wazir Advisors.
According to Sahni, the merger of Future Group, coupled with JioMart, will create a killer app that will be a formidable force in India’s e-commerce segment, which has been dominated by Amazon and Walmart-owned Flipkart.
Reliance AGM 2021 LIVE Updates
Reliance Industries introduced its omni-channel platform JioMart, which connects its offline stores to consumers via an app, in May last year. The company, while announcing its fourth-quarter results, said it had integrated about 400 Trend stores with JioMart. JioMart Kirana was active in 33 cities.
Analysts are on the watch for any progress on JioMart.
“The street expects a statement on the operations and expansion plan of JioMart, which has a presence in 200 cities, along with AJIO, its fashion and lifestyle platform, and a road map on the retail ecosystem through value-creating partnerships with producers, brands and merchants to leverage its large customer base,” said Deepak Jasani, head of retail research at HDFC Securities.
Next leg of growth
Retail will be the next growth engine for Reliance, according to a recent report by Goldman Sachs. While FY21 was subdued due to the pandemic, the report projects the company’s retail EBITDA will grow 10x over the next 10 years.
“During the macro downturn, RIL has focused on building strong digital capabilities and we believe the scale-up in the omnichannel offering is driving sizeable market share wins,” Goldman Sachs said in the report.
Last year, Reliance was busy building up its e-commerce portfolio through launches like JioMart as well as through acquisitions of companies including lingerie player Zivame, Urban Ladder and e-pharmacy Netmeds. The company entered into a deal with Facebook to strengthen its e-commerce play by deploying WhatsApp.
According to Sahni, the company is currently tying up loose ends.
“There will be a slow build-up before it goes all guns blazing,” he added.
Goldman Sachs projects a 50 percent market share for Reliance in online grocery by FY25, with a 30 percent market share in overall e-commerce.
Three drivers
According to the report, the three growth drivers for its retail business will be:
1. Omni-channel push with online share gains driven by JioMart while leveraging its large offline store network
2. Expanding presence in Fresh, where Reliance is the largest player but remains under-indexed as a proportion of customer spending through organised retail, and
3. Private labels push beyond just packaged staples.
“We expect significant market share wins for RIL, driven by investment-led scale-up in digital assets complemented by their lower cost structure driven by the large offline presence and rising private label contribution,” the report added.
The e-commerce market today is ruled by Amazon and Flipkart, while BigBasket and Grofers have a majority share of the e-grocery market. The Tatas are scaling up their presence in the segment and recently bought a majority stake in BigBasket and are building a super app.
After Reliance acquired the assets of the Future Group’s retail business, including Big Bazaar, in August 2020, the Future Group has been embroiled in legal battles with Amazon. Reliance has said that the company and its subsidiaries are not a party to the legal dispute between Amazon and Future Group.
Disclaimer: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.
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