| Reliance Retail Ventures Limited | ||||
| 'CRISIL AAA/Stable' assigned to Non Convertible Debentures; rated amount enhanced for Commercial Paper | ||||
| Rating Action | ||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||
| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has assigned its 'CRISIL AAA/Stable' rating to the Rs. 15000 crore non convertible debentures (NCD) of Reliance Retail Ventures Limited (RRVL) and has reaffirmed its ratings on the bank facilities and commercial paper at 'CRISIL AAA/Stable/CRISIL A1+'.
RRVL is the parent entity of Reliance Retail Limited (RRL; ‘CRISIL AAA/Stable/CRISIL A1+’). Apart from RRL, it holds other retail ventures such as the Shri Kannan Departmental Stores, Genesis group and Reliance Brands which operates retail formats under exclusive partnerships with some of the most revered global fashion and lifestyle brands. In its standalone capacity, RRVL provides supply chain management services for retail businesses. The CP programme at RRVL is used mainly for meeting the working capital requirements of the company and its subsidiaries.
The ratings continue to reflect RRVL’s healthy business risk profile, supported by strong market position, and robust financial risk profile owing to strong accruals with a healthy and stable capital structure. The ratings also reflect its strategic importance to its ultimate parent, Reliance Industries Ltd (RIL; ‘CRISIL AAA/Stable/CRISIL A1+’). These strengths are however partially offset by accruals being susceptible to competition in the retail sector and the exposure to risks related to sizeable expansions plans. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of RRVL and its subsidiaries including RRL. RRL and RRVL have a common management, fungible cash flows, and operational synergies. CRISIL Ratings has also applied its parent notch-up framework to factor in the intensity of support available to RRVL from RIL. The support is expected to continue, given RRVL's strategic importance to the parent, and strong linkages with it.
Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths:
RRVL continues to consolidate its position as India’s largest retailer by revenue, scale and profits. The company’s strong market position is reflected in its leadership position across several consumption baskets and has been supported by consistent revenue and profit growth. The company has been expanding its footprint by adding stores, expanding reach of its digital and new commerce platforms and enhancing product and service offerings. It is widely spread in tier-2 and tier-3 cities, with a network of 15,196 stores, as on March 31, 2022.
RRVL has successfully been able to ramp up JioMart, India’s largest hyperlocal platform operating across over 250 cities. Through its New Commerce initiative, RRVL is linking producers with small merchants and consumers to create a win-win partnership model. The New Commerce merchant partner footprint has been expanded to more than 100 cities for grocery and 3,500+ cities for Fashion & Lifestyle, leveraging its investments in sourcing, product design and development, supply chain and technology.
Revenues at a consolidated level have grown at a healthy CAGR of 45% between fiscals 2016 to fiscal 2022, driven by growth across all its consumption baskets – grocery, fashion, consumer electronics, pharma and connectivity. In fiscal 2021, the petro-retail business has been transferred to a separate JV owned collectively by RIL and BP Plc. Over the last few years, there has been a strong increase in revenue across consumption baskets, with the stores launched over the last few years gaining a foothold in their respective catchment areas.
The consolidated gross revenue during quarter ended March 31, 2022 stood at Rs 58,017 crore, a growth of 23% year-on-year. During the period, EBIDTA from operations grew by 16% year-on-year driven by strong revenue recovery, operating leverage and favorable revenue mix contributed by growth in Fashion and Lifestyle, Consumer Electronics and Grocery businesses.
With its integrated value chain, RRVL has been able to continually improve its operating profitability, that allowed efficient product procurement and delivery. Moreover, the company also use completely integrated farm to fork model in groceries, a fibre to wardrobe model in fashion and lifestyle, and a design to install/after sales service strategy in consumer electronics to ensure superior product quality and stronger customer value proposition.
RRVL has a strong financial risk profile, contributed by its healthy accruals and has reflected by its comfortable debt protection indicators. RRVL at a consolidated level continues to have a strong liquidity position with cash & equivalents of over Rs 18,000 crore as of March 31, 2022. Moreover, liquidity is further driven by significant unutilized fund-based bank facilities and access to capital markets as an RIL group entity.
Retail and Jio, the two large consumer businesses of RIL are seen to be major growth pillars of RIL, contributing to nearly 43% and ~42% of RIL’s EBIDTA in fiscal 2021 and fiscal 2022, respectively. Moreover, RRL shares several synergies with Reliance Jio Infocomm Limited (RJIL), for which it is the master distributor of telecom services and fiber-to-the-home (FTTH) undertakings. RRL is responsible for serving customers for sales and service through its touch points of ‘Reliance Digital’ and ‘Jio Stores’ and tens of thousands of partner stores across the country.
Weaknesses:
In the near to medium term, the company is expected to continue its sizable capital expenditure (capex). This is aimed at both growing the existing business, as well as new businesses, including its new-commerce initiative. The ability to replicate the success of its existing model in newer markets and business formats will be a key risk factor.
Reliance Retail faces competition from other organized retailers, some of which have stores in catchment areas which overlap with its stores. Furthermore, with organized retail penetration in India being moderate at below 15%, players face intense competition from the unorganized segment, which operates in various addressable markets. However, India's unorganized retail sector is fragmented and plagued by operational inefficiencies. Reliance Retail's New Commerce initiative connects millions of small kiranas and merchants across India with suppliers, manufacturers, and brands. It enables businesses to become more efficient and offer them a compelling value proposition to grow their businesses and earnings & thus benefit all players in the retail value chain. |
Liquidity: Superior RRVL, including RRL, generates strong cash accruals, and have access to fund-based facilities of over Rs 10,000 crore, for which utilization remains low. The company does not have any long-term borrowings. As on March 31, 2022, consolidated liquidity stood at over Rs 18,000 Cr.
RRVL's liquidity is further enhanced by the ample liquidity of its parent, and its ability to access capital markets as an RIL group entity. RIL has an exceptional financial flexibility given its demonstrated ability in accessing the capital markets, its large cash and liquid investment of Rs. 231,490 crore as on March 31, 2022 and significant bank lines which remain moderately utilized. |
Outlook: Stable CRISIL Ratings believes RRVL will continue to benefit from its healthy business risk profile, strong capital structure, and its strategic importance to RIL. |
Rating Sensitivity factors Downward factors:
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About the Issuer RRVL is a subsidiary of RIL; RIL holds 85 percent of the subscribed equity shares of RRVL, which in turn holds 99.93 percent of the subscribed equity shares of RRL. Since its inception in 2006, RRL (including RRVL) has grown into India’s largest retail conglomerate. It has also focused on backward integration and has built an advanced infrastructure supporting business systems, technology platforms and supply chain. As on March 31, 2022, RRVL operates 15,196 stores, spread across the grocery, consumer electronics, fashion & lifestyle, pharma and connectivity consumption baskets. RRVL is the master distributor for the telecom and FTTH services of RJIL. It is responsible for billing and collection and serves as a touch-point for subscribers at its various stores, including ‘Reliance Digital’ and ‘Jio Stores’. |
About the parent, RIL RIL is one of India's largest private sector companies, with diverse interests, including petrochemicals, oil refining, and upstream oil and gas exploration and production. RIL has strong competitiveness in the global oil refining and petrochemicals business, arising from its integrated business model with superior Complexity Index of 21.1 for its Jamnagar site, which makes it amongst the most complex sites in the world. Moreover, it is amongst the top 10 global petrochemical manufacturers and the leading player in India. In the recent past, consumer facing businesses including retail and digital services have become RIL's principal growth drivers. RRL is India's largest retail entity by revenue and profits, while RJIL is India's largest telecom service provider by revenue market share. RIL has recently announced its plans of launching its new clean energy business, for an investment of Rs 75,000 crore to be incurred over the next 3 years. |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
#yet to be placed |
Annexure – List of entities consolidated
*under liquidation |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||
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This Annexure has been updated on 24-May-22 in line with the lender-wise facility details as on 07-Dec-21 received from the rated entity.
Criteria Details
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