Textile to telecom conglomerate Reliance Industries is quietly scripting a new success story, this time, in its retail segment. The retail venture has been profitable for the past few years. However, industry experts believe, synergies with the telecom business will help further catapult it.
Industry experts point out the retail business’s profitability so for was a result of RIL’s efficient management of operations. However, with the advantage that RJio brings to RIL’s offerings in retail, RIL may find itself in a sweet position to make the most of a good portfolio of retail formats and synergies arising out of the telecom business.
“The retail business has quietly turned into a cash cow for RIL, at Rs 6 billion as earnings before interest, taxation, depreciation and amortisation well above our estimates,” analysts with Bank of Baroda wrote in a results review note for the firm’s December quarter results. Industry experts like Arvind Singhal from Technopak Advisors see the telecom business as further strengthening RIL’s retail success story, which was already going strong on the back of operational efficiency.
“Two things are working for RIL retail — one is the RIL DNA in terms of efficiency in terms of management of operations and a good portfolio of formats. They are much better positioned than many of the other retailers because of Reliance Jio, they can now ride the wave of online and offline more efficiently with access to Jio’s subscriber base,” said Arvind Singhal, chairman and managing director for Technopak Advisors. Jio as of December 2017 had a subscriber base of 160.1 million.
This is evident in the significant rise seen in the retail segment’s revenue for the December quarter which rose to Rs 187.98 billion from Rs 86.88 billion in the corresponding quarter a year back. The telecom venture, amongst other sub-segments, has helped the revenue build up immensely.
Analysts with Jefferies noted in their result review report, retail is stronger than expected margins with topline growth in were driven by digital & telecom recharges. “Core retail revenue also includes a contribution from telecom recharges; Reliance Retail is the sole distributor of recharges. Phone sales also reflected in Retail revenues,” the analysts wrote in the 22nd January report.