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Reliance Industries Announce Retail Plans to Rival Wal Mart's
By RAJESH MAHAPATRA
AP Business Writer
June 28, 2006
New Delhi: India's top business conglomerate Reliance Industries Ltd.
unveiled an ambitious plan to venture into retail trade, investing
billions of dollars and hiring thousands of staff to create a network
of giant Wal Mart-style retail stores.
Reliance Industries -- known for its ability to plan and execute big
projects -- will set up a new company with a capital base of 100 billion
rupees (US$2.2 billion; euro1.75 billion) to foray into retail trade,
Chairman Mukesh Ambani told an annual shareholders' meeting Tuesday
in Bombay.
The announcement comes at a time when global retailers like U.S.-based
Wal-Mart Stores Inc. and Germany's Metro AG have been lobbying the
Indian government to open its retail industry to foreign investment.
But opposition from communist coalition partners and domestic businesses
has forced the government to move slowly.
India's booming retail market, estimated at about US$200 billion (euro160
billion), is currently dominated by more than 12 million mom-and-pop
shops. Large air-conditioned stores remain a rarity.
Rising middle class incomes and an increase in demand for branded
products are driving the growth of retail business in India. Nevertheless,
organized retailing -- selling through company-owned network stores
-- currently totals about US$8 billion (euro6.4 billion), or less
than 5 percent of trade in the country.
Reliance Retail Ltd. plans to span a spectrum of markets -- from food
to footwear, ovens to home computers, and international luxury goods,
Ambani said.
The company already has 2,000 employees working on its retail plans,
but that number will soon swell to 10,000, and eventually 500,000
over the next few years, he said.
Ambani did not say when he expects the first stores to open.
Analysts said it was unlikely that global retail giants like Wal Mart
would be deterred from trying to enter the Indian market because of
Reliance's plans.
"There will still be enough room for more players," said Nagarajan
Narasimham, an analyst at credit rating agency Crisil Ltd.
But companies like Wal Mart may have to change their expansion strategies
when India opens its retail sector to foreign companies, Narasimham
said. Instead of building their own network, global retailers may
have to buy out Indian companies that are already in the trade, he
said.
While the government delays opening the sector, some Indian companies
have been buying up land available for commercial development nationwide.
Foreign retailers may therefore find it easier to invest in existing
businesses than try to find the space to build their own, Narasimham
said.
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