Qatar sovereign fund in talks for $1 billion stake in Reliance Retail

Qatar’s sovereign wealth fund is in early discussions to buy a minority stake in billionaire Mukesh Ambani’s rapidly expanding retail unit for about USD 1 billion (Rs 8,200 crore), sources said. 

The Qatar Investment Authority is keen on tapping the fast-growing Indian market and has entered into a discussion to buy about 1 per cent stake in Reliance Retail Ventures, sources with knowledge of the matter said.

Talks, sources said, are at a preliminary stage and being led by an executive director on the board of parent Reliance Industries Ltd.

If successful, QIA would follow the footsteps of sovereign wealth funds of other oil-rich Gulf nations which picked up stake in Reliance Retail Ventures in 2020.

While Saudi Arabia’s Public Investment Fund (PIF) invested USD 1.3 billion for a 2.04 per cent stake in Reliance Retail Ventures, Abu Dhabi Investment Authority (ADIA) put in Rs 5,513 crore for a 1.2 per cent stake. The UAE’s Mubadala invested Rs 6,248 crore for a 1.4 per cent stake.

The three were part of an array of global investors who poured in Rs 47,265 crore in a span of two months to buy 10.09 per cent in Reliance Retail. Others include New York-based private equity firm KKR, Silver Lake Partners, General Atlantic, GIC and TPG.

Reliance Industries owns 85 per cent of Reliance Retail Ventures Ltd (RRVL). 

Reliance Retail, the nation’s top retailer that spans luxury fashion to groceries, has been aggressively expanding its business by acquiring companies and getting the franchise rights of leading international brands for the Indian market.

In 2020, RRVL had raised Rs 47,265 crore (around USD 6.4 billion) from global private equity funds for a 10.09 per cent stake, valuing the company at more than Rs 4.2 lakh crore.

Commenting on talks with Qatar’s wealth fund, JP Morgan said the discussions highlight the multiple stake sale optionality that exists across Reliance’s multiple businesses.

“For Reliance to double its value over the next four years (comments in last year’s annual shareholder meeting), this would involve value unlocking from the substantial investments the company has made across segments (retail, Jio) and would make (New Energy),” it said adding it would also require selling stakes/listings of some of these businesses.

Over the years, Reliance has sold strategic stakes in its oil and gas exploration and production (E&P) business, financial stakes in retail, and large stake sales to multiple investors in telecom arm Jio.

For its oil-to-chemical (O2C) business, while Reliance had signed an MoU with Saudi Aramco of Saudi Arabia for a stake sale, the transaction did not progress.

Reliance has not sold any stake in its newer businesses like New Energy. The firm has also built a real estate portfolio.

“Medium-term investment case for Reliance is driven by strong cash flows and ability to invest in growth businesses, and potential value unlocking,” it said.