Reliance Retail Ltd – the country’s largest retailer by revenue, scale and profit – has already started laying the groundwork for the proposed InvIT of its warehousing assets, having registered a trust, Intelligent Supply Chain Infrastructure Trust, with the Securities and Exchange Board of India (Sebi) at the end of February. This trust will house the warehousing assets that the group plans to monetise, the sources said.
Reliance declined to comment.
Though preliminary in nature and with granular details still being worked out, the petchem-to-personal products conglomerate plans to structure the vehicle as a privately placed or listed InvIT and has begun work with its financial and legal advisors. Under Sebi norms, it will need at least five shareholders.
Apart from registering the trust, Reliance has set up Intelligent Supply Chain Infrastructure Pvt Ltd, which is likely to be involved in the management of the assets to be housed under the InvIT.
Growing capacity
According to the memorandum of association of the company filed with the Registrar of Companies, it has been set up to construct, develop, acquire, provide, manage, carry on the business of storage, warehousing, supply chain, cold chain, logistics infrastructure and facilities.
As of December 31, last year, Reliance Retail had a warehousing portfolio of 33.6 million sq ft, show RIL’s latest financial filings. Reliance Retail added 11.1 million sq ft space in FY22, increasing its warehousing space to 22.7 million sq. ft. In the last three years, the company’s warehousing space has grown threefold. Reliance Retail increased its store count to 17,225 at the end of December 2022, up from 14,412 a year ago, with retail floor space crossing 60 million sq ft, up from 40.6 million sq ft at the end of FY22.
The value of the assets that could be transferred to the InvIT is $2.4-3 billion (Rs 20,000-25,000 crore), said one of the sources. More assets are likely to get added as they become operational.
The group has bought a majority stake in Addverb Technologies that provides warehouse automation solutions and robotic systems for automated material handling. It’s been experimenting with 5G robots used for bagging lines to warehouse storage location logistics, a function that would otherwise require human control, as well as drones. The plan to monetise its warehousing and related logistics assets comes at a time when Reliance Retail has been aggressively growing its warehousing capacity.
The Rs 2,850-crore acquisition of Metro Cash & Carry India Pvt Ltd will help Reliance Retail Ventures Ltd (RRVL) expand its warehouse network for the B2B ecommerce JioMart Kirana as well as its B2C hypermart business, said consultants working with the group.
Reliance Retail had its own cash & carry business, Reliance Market, before the Covid-19 outbreak. But these facilities were shut, converted into warehouses and fulfilment centres for supporting its kirana ecommerce business.
“Warehousing is emerging as the new asset class for InvITs,” said an investment banker. “A lot of capital has gone into building top-class warehousing space for industries such as retail, ecommerce, industrials, pharma etc. More warehousing InvITs are expected to come up, given the huge demand for warehousing space in a growing economy like India.”
Consolidation card
Reliance Retail’s business is spread across grocery, consumer electronics, pharmacy, fashion and lifestyle, with brands such as Reliance Fresh, Reliance Digital, Trends and Ajio.com. It has also announced multiple new forays, such as FMCG, and entry into new verticals like beauty.
“The real value unlocking will happen once the company decides to do a similar InvIT for the store fronts,” said the banker. “They will wait for Nexus Malls to list for a valuation benchmark.”
Blackstone-sponsored Nexus Select Trust REIT, India’s maiden real estate investment trust with retail properties, is set to launch its initial public offering to raise over Rs 4,000 crore in the first week of May, ET reported on April 10.
Reliance Retail Ltd is a step-down subsidiary of RIL. RIL holds 85.06% of the subscribed equity shares of Reliance Retail Ventures Ltd (RRVL) which in turn holds 99.93% of the subscribed equity shares of Reliance Retail Ltd ( RRL) Since its inception in 2006, Reliance Retail (including RRVL) has grown into India’s largest retail conglomerate.
If Reliance’s plans fructify, this will be the fourth such infrastructure trust from the group after its oil pipeline and Jio telecom towers. “The idea is similar to the pipeline and fibre optic cable InvITs,” said an executive. “It will consolidate all warehousing assets in the InvIT with one customer, that is Reliance Retail, a very strong counterparty, which has thousands of stores pan India and millions of customers.”
In 2020, RIL raised Rs 7,558 crore from Abu Dhabi Investment Authority and Saudi Arabia’s Public Investment Fund for a 51% stake in Digital Fibre Infrastructure Trust, which was set up to monetise its fibre optic network assets.
In 2019, Reliance had monetised its gas pipeline network, East West Pipeline, in a Rs 13,000-crore sale to India Infrastructure Trust, an InvIT sponsored by Canadian investor Brookfield. The group also raised Rs 25,215 crore, via its telecom tower InvIT, from Brookfield and other investors in 2019.
An InvIT involves various entities, such as the sponsor, which sets up the trust and transfers the assets to the trust; the trustee, which holds the assets in the trust for the benefit of the shareholders; the investment manager, which decides on acquisitions, divestments and fundraising for the InvIT; and the project manager, which manages the day-to-day operations of the underlying assets.
InvITs have also been set up for other infrastructure assets, such as roads, renewable energy projects and power transmission lines.
