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Finally, Reliance retail turns around

Saturday, 19 April 2014 - 8:20am IST | Place: Mumbai | Agency: dna

After seven years of losses and over $1 billion investment, Reliance Retail has finally turned profitable.

The retail arm of Reliance Industries Ltd registered operating profit, or earnings before depreciation, interest and taxes (PBDIT), of Rs 363 crore while total revenues grew 34% to Rs 14,496 crore in the last fiscal.
"Retail business has turned around and is now India's largest retail chain," said RIL chairman Mukesh Ambani said in a statement.

Alok Agarwal, CFO of RIL, said, "Retail Ebitda is around 2-2.5% of the revenue at present, and we expect this number to grow ahead. We saw 34% revenue growth in retail revenue this year and we expect it to grow at 25-30% compound annual growth rate (CAGR). Food, digital and apparel are the three formats that are doing exceptionally well. Scale and frugal approach to cost have worked for us."

The company added 225 stores and 2.7 million square feet last fiscal, taking the total count to 1,691 stores across 146 cities and 11.7 million of square feet.

Driven by customer response, service and value proposition across formats, Reliance Retail said the business recorded a like-for-like growth of up to 23% across various formats during the year. Revenues grew 19% to Rs 3,639 crore in the fourth quarter year on year.

Arvind Singhal, chairman, Technopak, a consultancy, said, "A combination of formats have worked wonders for the company. Reliance has demonstrated the success of modern retail in India despite all operational challenges and economic slowdown."

In grocery retail, its value formats gained a 1% market share last fiscal while the digital business crossed the 250 stores mark. Focusing on mobility and communication products, the company introduced a compact size new format 'Digital Express Mini' in the fourth quarter, which it plans to take across the country.

Also, its cash-and-carry business, Reliance Market, has become the largest operator in this segment within two years of launch.

It operates 32 stores, followed by Wal-Mart India with 20 stores, Metro with 16 and Carrefour with five.

While Walmart is planning to add 50 wholesale stores in India in the next five years, industry experts said the US retailer will have to work really hard to outdo Reliance Retail's cash and carry business footprint.
While the company management didn't share much details, the Reliance Market stores typically occupy 50,000 to 83,000 to 100,000 square feet. The stores are spread over 15 cities with a registered base of 1.2 million members.

The company recently introduced the format in the Mumbai market with a store in Thane. In February, the company launched two new wholesale stores in Ludhiana taking the store count in Punjab to four.
Its Ahmedabad store, launched in September 2011, is first and the biggest outlet in India. Catering to Kirana stores, traders, hotels, restaurants and catering businesses among others, the store has 21,000 food and non food products.

—(With inputs from Dhwani Pandya)

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