Reliance Retail to merge 9 arms into Fresh

Written by Rasul Bailay | Ronojoy Banerjee | Ronojoy Banerjee | New Delhi | Updated: Sep 16 2011, 08:42am hrs
Four years after it spun off several arms into independent units, Reliance Retail is now merging many of them back into one entity Reliance Fresh as part of a restructuring post an economic slowdown that sent the modern retailing sector on a roller-coaster ride.

Reliance Retail has filed petitions for this in the Bombay High Court and before the Maharashtra office of the Registrar of Companies.

Once the restructuring is complete, Reliance Retail will be the holding company while the nine entities, including Reliance Hypermart, Reliance Home Store, Reliance Wellness, Reliance Lifestyle Holdings and Reliance Supply Chain Solutions, will be merged into Reliance Fresh.

Its being done for cost optimisation. Why should we duplicate businesses with common sharing of services a senior Reliance official wondered. Another senior official added that the consolidation was being done to bring about greater tax efficiency.

SP Tulsian, a Mumbai-based market analyst who tracks the parent Reliance Industries (RIL) closely, says it makes sense for Reliance Retail to merge these units as several functions and products overlap in many of these businesses. Further, there are costs involved in managing the separate arms.

When contacted, a Reliance Retail spokesperson said: We do not comment on speculation and continue to grow as per our plans. As a policy, we do not make any forward-looking statements.

Reliance Industries made an ambitious entry into the countrys fledgling retailing business in 2006 by creating Reliance Retail and pledged to invest about $5.5 billion over the years. In 2007, different arms were carved out to unlock value.

However, an economic slowdown in late 2008 prompted Reliance Retail, like every other retailer in the country, to close stores and scale down expansion plans.

The restructuring comes amid a renewed expansion push in the works. According to Reliance Retail officials, the company is planning a major push in formats including wellness, footwear and apparel among others. Earlier this month, the company kick-started wholesale retailing with a large hypermarket in Ahmedabad. An official says the company is planning to open about 15 cash-and-carry stores over the next one year in Punjab, Haryana, Rajasthan and some southern states.

At its last AGM, RIL chairman Mukesh Ambani had said that retail and broadband would be the growth areas of the company.

Reliance Retail had earlier planned to roll out a chain of cash-and-carry stores, but during the economic slowdown, these plans were abandoned and employees in that venture laid off. Currently, Reliance Retail is planning to roll out about 15 cash-and-carry stores in Punjab, Haryana and southern states including Andhra Pradesh, Karnataka and Tamil Nadu.

Now, cash-and-carry is back on Reliance Retail's strategy even as global retailers including Wal-Mart Stores Inc and France's Carrefour SA have entered the business and Britain's Tesco Plc plans to roll out its own wholesale stores in India later this year or early next year.

Foreign retailers are partly entering the business in anticipation of India opening its currently restricted multi-brand retailing for overseas investment and they are ready for the market whenever the regulatory situation changes.