US private equity firm KKR & Co will invest Rs 5,550 crore to buy a 1.28% stake in Reliance Industries Ltd's retail arm as the Mukesh Ambani-run conglomerate extends a fundraising spree that has already netted more than USD 20 billion. "KKR will invest Rs 5,550 crore into Reliance Retail Ventures Ltd (RRVL), a subsidiary of Reliance Industries Ltd," the Indian firm said in a statement, adding that the investment will be on fully diluted basis.
The investment values Reliance Retail, which runs grocery stores and fashion chains, at a pre-money equity value of Rs 4.21 lakh crore. This is the second investment by KKR in Reliance Industries (RIL) units. It had previously picked up a 2.32% stake in the digital arm, Jio Platforms for Rs 11,367 crore. For Reliance Retail, KKR is the second investor. US private equity firm Silver Lake Partners had earlier this month agreed to buy 1.75% stake in the venture for Rs 7,500 crore.
Reliance Retail Limited, a subsidiary of RRVL, operates India's largest, fastest-growing and most profitable retail business spanning supermarkets, consumer electronics chain stores, cash and carry wholesale business, fast-fashion outlets, and online grocery store JioMart. It operates almost 12,000 stores in nearly 7,000 towns. The investment will add fire to Ambani's battle for dominance in the retail market that is also being eyed by Jeff Bezos' Amazon.com and Walmart Inc's Flipkart.
In May, Reliance launched an online grocery delivery service JioMart. It has tied up with WhatsApp to connect customers with local kirana stores. Late last month, Reliance acquired the retail and logistics businesses of Future Group for Rs 24,713 crore to boost its retail vertical.
Founded in 1976, KKR has USD 222 billion in assets under management as of June 30, 2020. It currently has about USD 5.1 billion in private equity investments across more than 15 Indian companies, including Jio Platforms, JB Chemicals, Max Healthcare, Eurokids International and Ramky Enviro Engineers.
Mukesh Ambani, Chairman and Managing Director of RIL, said, "KKR has a proven track record of being a valuable partner to industry-leading franchises and has been committed to India for many years. We look forward to working with KKR's global platform, industry knowledge and operational expertise across our digital services and retail businesses."
Henry Kravis, co-founder and co-CEO of KKR, said, RRVL is empowering merchants of all sizes and fundamentally changing the retail experience for Indian consumers. "Reliance Retail's new commerce platform is filling an important need for both consumers and small businesses as more Indian consumers move to shopping online and the company offers tools for Kiranas to be a critical part of the value chain. We are thrilled to support Reliance Retail in its mission to become India’s leading omnichannel retailer and ultimately to build a more inclusive Indian retail economy," he said.
Also read: After Jio Platforms, Silver Lake Picks 1.75% Stake in Reliance Retail for Rs 7,500 Crore
KKR is making its investment from its Asia private equity funds. The transaction is subject to regulatory and other customary approvals, the statement said. Morgan Stanley acted as financial advisor to Reliance Retail and Cyril Amarchand Mangaldas and Davis Polk & Wardwell acted as legal counsels. Deloitte Touche Tohmatsu India LLP acted as financial advisor to KKR. Shardul Amarchand Mangaldas & Co. and Simpson Thacher & Bartlett LLP acted as legal counsel to KKR.
After monetising Jio Platforms -- which houses the firm's telecom arm and digital ventures, richest Indian Mukesh Ambani is roping in investors in the retail business. All the 13 investors, who had poured in a combined Rs 1.52 lakh crore in Jio Platforms, have been offered a chance to explore investing in the retail unit. Besides Silver Lake and KKR, the other investors in Jio Platforms include Facebook, Google, private equity groups Vista and General Atlantic and Abu Dhabi's sovereign wealth fund Mubadala. With this, Jio Platforms and Reliance Retail account for over Rs 9 lakh crore of RIL valuation.
At the Reliance Industries' recent annual general meeting, Ambani had stated that it had been approached by strategic/financial investors for a stake in Reliance Retail.
Commenting on the transaction, Morgan Stanley said the KKR deal was "in line with the last transaction valuation announced with Silver Lake and compares to our retail base case valuation of USD 45 billion." With industry consolidation picking up pace in telecom, retail, and global refining, Morgan Stanley expects RIL to emerge stronger post-COVID-19 and margins to surprise as pricing power rises.
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