KKR to invest Rs 5,550 crore in Reliance Retail for 1.28% stake

New Delhi: Reliance Industries said on Wednesday that private equity firm KKR will invest Rs 5,550 crore in retail arm Reliance Retail Ventures (RRVL).

The company said that KKR's investment translates into a 1.28 percent equity stake in RRVL on a fully diluted basis. 

The Reliance Retail investment is valued at a pre-money equity value of Rs 4.21 lakh crore. The retail valuation given for this deal was the same as that of the Silver Lake deal of Rs 7,500 crore compared to a 1.75 percent stake earlier this month. With these two deals in two weeks, RIL's retail venture raised a total of Rs 13,050 crore. 

This represents KKR's second investment in a Reliance Industries subsidiary, following an investment of Rs 11,367 crore in Jio Platforms announced earlier this year. KKR is making this investment from private equity funds in Asia. The transaction is subject to customary and regulatory approvals. 

"KKR has a proven track record of being an important partner for industry-leading franchises and has been engaged with India for many years. We look forward to working with KKR's global platform, industry knowledge, and operational experience in our services. digital and retail businesses, "said RIL President and CEO Mukesh Ambani. 

The back-to-back Jio deals Ambani struck earlier this year have taken the market by surprise. After Google's investment of Rs 33,737 crore in July, Jio Platforms raised a total of Rs 1,52,056 crore by selling a 32.97 percent stake in the mobile business. This put Reliance Jio's value at Rs 4,61,195 crore.

In the case of retail, penetration of the regulated market in India is expected to increase by 17 percent for fiscal 25 from 11 percent in fiscal 2019. An analyst told Business2Business.com previously than retail, especially brick-and-mortar stores Mortars are not as profitable as Reliance Jio, and they believe the market was assigning less value to the retail business earlier. But, if future retail deals continue to value the retail business at Rs 4 crore in addition, there will likely be a reclassification over the counter, he said after the Silver Lake deal.

Reliance Retail said that, through its new business strategy, it has begun the digital transformation of small and unregulated merchants and is committed to expanding the network to more than 20 million merchants, Reliance said in a statement. 

"We are delighted to deepen our relationship with Reliance Industries through this investment in Reliance Retail Ventures, which is empowering merchants of all sizes and fundamentally changing the retail experience for Indian consumers," said Henry Kravis, Co-Founder, and Co-CEO by KKR. On its mission to become India's leading multi-channel retailer and ultimately build a more inclusive Indian retail economy. "

KKR established its first of eight offices in Asia in 2005 and currently has approximately $ 5.1 billion in private equity investments in 15 Indian companies, including Jio Platforms, JB Chemicals, Max Healthcare, Eurokids International, and Ramky Enviro Engineers.

Morgan Stanley acted as financial advisor to Reliance Retail, Cyril Amarchand Mangaldas, and Davis Polk & Wardwell as legal advisers. Deloitte Touche Tohmatsu India LLP has acted as financial advisor to KKR. Shardul Amarchand Mangaldas & Co. and Simpson Thacher & Bartlett LLP acted as legal counsel to KKR.

It serves nearly 640 million feet in its 12,000 stores nationwide, according to RIL.

Also Read: Know these three risks before investing in corporate FD