Reliance acquires Adani Retail

Industry:    April, 2016

Reliance acquires Adani Retail

Is this the Wal-Mart effect? Reliance Retail is making its first acquisition by buying out Gujarat-based Adani Retail lock, stock and barrel for Rs 100-110 crore. It seems the Mukesh Ambani-controlled company pipped other retailers like Subhiksha, Trinethra and, some say, even the Tatas to clinch the deal.

While the Reliance spokesperson declined comment, Adani Group chairman Gautam Adani was unavailable for comment. A senior Adani group official however said, “at this point of time, I can only say that it’s a rumour and not confirmed news.’’

Sources confirming the news said the buy-out will give Reliance access to 54 retail locations (neighbourhood stores, supermarkets and hypermarkets) across nine cities in Gujarat in one shot, besides its infrastructure and sourcing facilities.

As commercial real estate prices shoot up across India, the acquisition will help the company control costs substantially because 60% of Adani’s retail outlets are company-owned. The deal also works well for Adani as it will now focus on its core competencies like shipping and exports.

With the Bhart-Wal-Mart alliance breathing down its neck, the buy-out will help Reliance roll out its retail plans much faster. Sources said that even though Reliance and Adani were in talks for a while, the negotiations were expedited in the last seven days following the Bharti-Wal-Mart announcement.

The total retail space under construction add up to 150-m sq ft which will be ready for possession by 2010. Despite this, the retail sector is likely to face an acute shortage in terms of available space. Reliance alone will consume almost 100-m sq ft in this period, said real estate experts.

At present, Adani Retail operates a total of 54 supermarkets and hypermarkets and is likely to launch another outlet in Bharuch this week. The Rs 16,000-crore Adani group forayed into retail by acquiring a leading supermarket store V Ravjis in 2000.

While in the first two years, the company did not expand into other cities, it moved faster in the last four years with presence in Ahmedabad, Vadodara, Jamnagar, Surat, Rajkot, Anand, Nadiad, Mundra, Gandhinagar and Navsari. Adani’s neighbourhood stores are typically 1,500-3000 sq ft and sells food & grocery.

The supermarkets, around 3,500-4,000 sq ft each, sell plastic items, crockery, cosmetics, imported products and the hypermarkets, around 8,000-25,000 sq ft, have dedicated sections for grocery, fast food, fresh fruits and vegetables and apparel among others.