Mukesh Ambani's perseverance pays as Reliance Retail set to ink a first

Mar 21 2014, 11:08 IST
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Mukesh Ambani's Reliance Retail, which at end-December had 1,577 stores, expects to post a profit by the end of fiscal 2014. Mukesh Ambani's Reliance Retail, which at end-December had 1,577 stores, expects to post a profit by the end of fiscal 2014.
SummaryMukesh Ambani's Reliance Retail poised to perform a rare feat in India's notorious retail market.

to its state-of-the-art warehouse. Several senior executives also gave Reuters rare details about the company's operations but all declined to be identified due because of a company policy that prohibits them from speaking to the media.

Since it was established in 2006, Reliance Retail has revamped its supply chain and decentralised decision-making to ensure flexibility. From September, it has opened stores at the rate of almost one a day even as India's economy grows at its weakest pace in a decade.

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Reliance Retail, which at end-December had 1,577 stores, expects to post a profit by the end of fiscal 2014 partly due to stronger sales at its grocery business, the largest contributor to revenue, said one senior company official.

The retailer posted an operating profit of 1.06 billion rupees ($17.3 million) for the three months ended Dec. 2013, its first ever quarterly profit. Revenue grew 38 percent year-on-year in the same period and same-store sales also rose by just over a fifth.

Reliance Retail did not give comparative figures or disclose income numbers, but its quarterly sales and revenue were far ahead of local rivals Future Retail and Trent Ltd , which operate loss-making hypermarkets.

"If Reliance are able to sustain their success it will prove that modern retail as a business can be profitable in India," said Harminder Sahani, managing director of Gurgaon-based retail consultancy Wazir Advisors.

Reliance Retail's quarterly revenue was $641 million, almost twice as much as Future Retail's revenue for the same period and far more than Trent's $45.7 million. Same-store sales at Future Retail, majority owned by Future Group, rose 3.3 percent during the December quarter, while analysts said Tata Group's Trent saw an increase of less than 10 percent for the quarter.

SEIZING THE OPPORTUNITY

Reliance's growth has turned it into a formidable competitor for any global retailer that ventures into India, and regulations that currently favour local companies mean it is likely to keep its edge.

Foreign retailers must partner with a local company, and can own a maximum 51 percent stake in the joint venture. They must also source at least a third of their products locally, conditions which have spooked several global retailers.

"The competitive landscape will change now because Reliance is scaling up quickly, is turning around and will be in a better position to fight pricing wars with foreign chains," said Wazir Advisor's Sahani.

Even with these comparative

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