The Abu Dhabi Investment Authority (ADIA) is reportedly considering stumping up US$600 million more capital for Reliance Retail Ventures Ltd (RRVL), an arm of Indian billionaire Mukesh Ambani’s massive Reliance conglomerate which is positioning itself as the vanguard of retail growth in the Indian economy.

While RRVL is still a fraction of the size of the US$1.7 trillion Alibaba empire in China, sovereign wealth funds are growing in confidence about its potential to not only grow in lockstep with India’s rapidly growing e-commerce sector – but to come to dominate Indian consumer life. Singaporean state-owned investors GIC and Temasek as well as Malaysia’s Khazanah reaped a multi-billion windfall from Alibaba’s IPO on the NYSE in 2014. Middle Eastern sovereign investors are eager to repeat the success by investing in the growth stages of Reliance’s various arms, particularly retail.

ADIA bought a 1.2% stake in Reliance in October 2020, but the new investment would be at a valuation nearly 60% higher than the original transaction. The move comes after the Qatar Investment Authority agreed to buy a 1% stake for US$1 billion in August. At that valuation, ADIA would raise its stake to 1.8%. Saudi's Public Investment Fund, UAE's Mubadala and Singapore's GIC have also secured stakes in RRVL when Reliance raised US$5.7 billion by selling a 10.1% stake to a range of institutional investors.

Retail has risen to become the most important focus of the Ambani empire, eclipsing its traditional holdings in refining, petrochemicals and upstream energy resources, although the sector still only represents a third of Reliance’s profits. RRVL’s business covers consumer goods stores and links neighborhood stores for online deliveries of groceries, clothing, and electronic goods through its JioMart platform.

RRVL has now secured a 15% share of the organized retail market with more than 18,500 stores, which also serve as outlets for its other venture, Jio, the country’s largest telecom subscriber with over 421 million subscribers. Reliance’s net income from retail for FY2023 was 5.5 times that of its nearest rival Dmart – a figure that is fuelling sovereign investor interest in the brand, which covers the e-commerce platform Jiomart.

The increase in capital from ADIA and QIA will boost Ambani’s strategy of disrupting the market for fast-moving consumer goods, electronics and fashion, where it is developing a leadership position. The investments are sound bets, if brokerage firm Bernstein is to believe. It predicts that RRVL is poised to steam past Amazon and Walmart-backed Flipkart in the race for the country’s US$150 billion e-commerce market due to the coupling of its retail network and smart phone network, with a digital ecosystem that is supported by Ambani’s close relationship with Prime Minister Narendra Modi.

E-commerce still accounts for less than 10% of India’s overall retail, but is growing fast with RRVL leading the charge. Bernstein values RRVL’s e-commerce business at more than US$36.4 billion, ahead of Flipkart’s US$33 billion valuation.

The conglomerate has expanded through acquisitions of e-commerce-focused retail companies and through its partnership with Meta’s WhatsApp Business. The e-commerce venture with WhatsApp enables it to extend its shopping reach through the instant messaging platform, which is hugely popular among Indians with more than 500 million users every month.

Ambani has managed to attract a total of US$12.5 billion from sovereign investors for the different parts of Reliance Group. Aside from RRVL, RIL gained support from ADIAMubadala and PIF for its mobile phone business, which together bought a 5.4% stake in its telecoms’ unit Jio. Like RRVL, Jio is seeking to disrupt the market by aggressively under-cutting established rivals with a low-cost new fiber-to-the-home broadband service plus additional offers. Sovereign investment in telecoms infrastructure is supporting Jio’s relentless growth.

ADIA and PIF invested US$506 million each to take a 51% stake in the Digital Fibre Infrastructure Trust (InvIT), and Canadian public pension fund BCI and GIC teamed up with Brookfield to acquire a telecoms tower company from RIL for US$3.4 billion. With Jio the portfolio’s anchor tenant under a 30-year Master Services Agreement, the partners are looking to increase the number of towers by 30% to match the telecom operator’s growing subscriber base. 

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