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Reliance Retail to hasten expansion in six months

December 11, 2008 09:44 IST

Reliance Retail, part of the petroleum behemoth Reliance Industries, will hasten the pace of its expansion plan in six months on expectation of gains from lower property prices and also as commodity prices stabilize, sources involved with the development said.

The retail arm of the Mukesh Ambani-led group had almost halted its expansion plans as a credit crunch roiled markets across the globe forcing companies to withhold new projects.

The company also froze fresh recruitment.

"We will wait for another six months to book properties in Tier-II and III cities as we expect lease rentals and property prices to fall another 25-30 per cent,'' said company sources, who declined to be identified.

"In bigger cities, we expect consumer demand to regain momentum in another 6-10 months helping us to expand our stores.''

A RIL spokesperson declined to comment.

RIL, nearly 30 months ago, unveiled an ambitious plan to invest Rs 25,000 crore (Rs 250 billion) to expand its stores across the country to take advantage of the boom in the organised retail in the country.

"Initially, the company was planning to open 2,000 stores by 2008 and 5,000 stores by 2010 but the economic downturn and demand slump forced the company to delay its expansion," said sources.

At the launch of its retail business RIL had said it planned to open outlets in 1,500 cities and towns through convenience stores, supermarkets, specialty stores, and hypermarkets to create one million jobs.

Organised retailing accounts for around 5 per cent of the estimated $350-billion Indian retail market and is expected to expand its share to 14-18 per cent by 2015, according to a McKinsey report.

To capture the large organised retail opportunity, many of the Indian companies such as Reliance Industries, Aditya Birla group, Bharti among others have launched their retail operations in the last two years.

Reliance Retail operates 700 stores in over 60 cities and its retail venture includes neighbourhood retail chain Reliance Fresh, consumer durable chain Reliance Digital, wellness format Reliance Wellness, apparel chain Reliance Trends among others and joint venture with foreign retailers such as Marks and Spencer, Apple, Office Depot among others.

The company has started with an equity base of Rs 10,000 crore (Rs 100 billion). In the last financial year, it had posted a loss of Rs 82 lakhs (Rs 8.2 million) on a revenue of Rs 1,486.15 crore (Rs 14.86 billion).

The economic downturn has also made other retailers such as Aditya Birla Retail, Videocon, Subhiksha among others to go slow on their expansion and defer launch of their new formats.

While Videocon is reconsidering its cash and carry venture Bolld, grocery retailer Subhiksha has deferred it plans to launch consumer durable venture by six months.

Reliance Retail has already begun recruiting fresh employees based on need. 

"Though the company has frozen its hiring, we can appoint new staff by proving our need," a company executive said.

Nevin John & Raghavendra Kamath in Mumbai
Source: