Monday, November 16, 2009

Reliance Retail awash in red

RELIANCE Retail is yet to see profit in any of its formats. The company has reported total losses in excess of Rs 450 crore in 2008-09 alone. Mukesh Ambani had launched the retail business in 2006, which now operates under 15 formats.

Data obtained from RIL shows that till March 2009, Reliance Fresh had run up the highest negative reserves of Rs 276.77 crore. The other formats such as Reliance Hypermart (negative reserves of Rs 54.32 crore), Retail Concepts & Services (-Rs 38.37 crore) and Reliance Vantage Retail (-Rs 21.23 crore) have also run up negative reserves.

Reliance Dairy Foods (with negative reserves of Rs 7.63 crore), Reliance Digital Retail (-Rs 15.49 crore), Reliance Footprint (-Rs 10.47 crore), Reliance Trends (-Rs 3.1 crore), Reliance Gems and Jewels (-Rs 5.73 crore) and Reliance Home Store (-Rs 4.54 crore) are among the other formats that have reported accumulated losses.

RIL’s unabridged annual report confirms the consolidated negative reserves and the total loss. The company did not respond to an email seeking comment, possibly because of the silent period ahead of its annual general body meeting.

A part of Reliance Industries, India’s most valuable company, Reliance Retail now runs as many as 900 stores across 14 states in India, spanning the supermarket, convenience store and mini hypermart formats, in addition to specialised units which sell everything from eyewear to jewellery. The business, which encompasses partnerships with firms such as Marks and Spencer, Office Depot and Hamleys, now counts five million customers as members of its business-wide loyalty programme.

Reliance Retail has now struck a strategy to partner with global majors for specialised retail formats, catering to distinct sets of shoppers.

While the retail major has outlined a plan to enhance value for its customers through customised offers, private labels and ‘value-for-money merchandise,’ its shareholders are seeing a rising portion of Rs 4,051 crore invested as equity capital in Reliance Retail erode by way of losses accumulated at each of its subsidiaries.

These firms, which run formats such as the food and grocery specialty store, electronics specialty store, foot wear specialty store and apparel specialty store, have all made losses in the fiscal year 2008-09 (see table alongside). Even support businesses such as Strategic Manpower Solutions have totted up negative reserves of Rs 10.24 crore while Reliance Trade Services Centre has accumulated Rs 21.23 crore in losses. Companies engaged in the supply chain aspects of the retail business too have not been spared.

Reliance Agri Products Distribution had negative reserves of Rs 7.83 crore while Reliance Food Processing Solutions had negative reserves of Rs 37.34 crore and Reliance Supply Chain Solutions Rs 12.9 crore. Firms such as Reliance Loyalty & Analytics, which supports the Reliance One customer relationship management programme, had negative reserves of Rs 6.44 crore till March.

The rising losses in the retail business are learnt to have led to the billionaire Ambani downsizing the ambition for this business, which was expected to bring about a paradigm shift to his oil and petrochemicals commodity venture. However industry experts point out that even other large business families such as the Kumar Mangalam Birla-controlled Aditya Birla Retail too are losing money as they try to get their business model, scale and efficiencies right.


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