The retail arm of Reliance Industries will soon be rolling out its e-commerce business. Reliance Retail will borrow an amount of Rs. 4,500 crores for the same. The money will be obtained by term loans and debentures. The company has taken this step to sustain the on growing competition.
Loan taken by Reliance Retail
Reliance Retail filed board resolutions, last week, with the Registrar of Companies. In this, it said that the company will obtain Rs. 2,500 crores from term loans issued from State Bank of India. The remaining Rs. 2,000 crores will be acquired from convertible debentures. The money is said to come in many tranches.
A spokesperson of the company informed, “Reliance Retail is growing rapidly and these are enabling provisions to fund a growing and profitable business.” The company will make use of its money in varied business operations. Apart from the online venture, it will also be used for setting up physical stores.
Business of Reliance Retail
In Financial Year (FY) 2013-2014, Reliance Retail emerged as the largest retailer of India. In FY 2014-2015, its revenue increased by 21% to become Rs. 17,640 crores. The profit excluding tax was Rs. 193 crores.
In its recent annual report, Reliance Industries said that it wants to enhance the customer experience by offering products both online and offline. This will provide them with abundance choice and convenience. It further said in its report that, “The opportunity is to integrate an ‘offline-online’ model, which can truly differentiate the customer experience.”
Experts said that the combined venture of Reliance Retail will help the company save a lot of money and widen their customer reach. They also predicted that Reliance Retail will succeed in its e-commerce business because of its large financial backing and present logistics infrastructure. The e-commerce venture of the retailer is part of Chairman Mukesh Ambani’s bigger plan of integrating Reliance Jio Infocomm’s telecom and 4G services with web and digital commerce. He had announced of this plan in the company’s annual general meeting conducted in 2014.
Reliance Retail closed down around 100 of its supermarkets in FY 2013–2014, so that it could largely focus on its online venture. However, its wholesale business, Reliance Market is still a key business focus. This is because it has been established with an aim to empower and assist farmers and small grocery stores.
The e-commerce business in India has seen a boom in the recent years. The e-commerce business will further be boosted by increase in internet access, cheaper smartphones, streamlined logistics framework and payment developments from online retailers like cash on delivery and mobile wallets. The e-commerce business is expected to grow four times in the next four years to reach around $70 billion, which is approximately Rs. 4.34 lakh crores.
Future Group and the Aditya Birla Group are other companies that are making plans to launch their online ventures. To maintain a stable position in the aggressive competition, Reliance Retail will also set up a website to sell food and grocery products.
The retail arm of RIL, Reliance Retail will take loan worth Rs. 4,500 crores for its upcoming e-commerce business.