News: Anil Ambani weighs stakes in organised retail

(DNA 16/09/2006) Mumbai - Here’s something to set the cat among the pigeons: Anil Ambani, after all, will invest in the organised retail sector.

Sources in the know say the Reliance-Anil Dhirubhai Ambani Group (R-ADAG) is in the process of finalising a few strategic investments. They believe — and investment bankers concur — that the group may invest in one of leading incumbent retail chains. “As part of private equity business we talk to various entities,” an R-ADAG official said.

The needle points to Kishore Biyani’s Future group.

Pantaloon Retail recently announced to raise Rs 500 crore through sale of 24% stake in its retail formats Home Solutions and Central Mall besides its portal business Future Media and Future Logistics.

In fact, during the recently concluded India Retail Forum conference in Mumbai, there was a whisper that talks between R-ADAG with Pantaloon were already underway.

Folklore from the retail sector has it that Kishore Biyani had made a pitch to Mukesh Ambani for a strategic alliance well before Mukesh himself became seriously interested in taking a plunge.

Since then, the Pantaloon chief, known as a pioneer in the industry, has sounded very cautious about prospective investors. “So far there has been no talk with the R-ADAG group for the sale of stakes in any of the Pantaloon formats,” said Biyani, managing director, Pantaloon Retail, told DNA Money.

R-ADAG’s strategy to buy stakes in the companies instead of building their own infrastructure, seems to have stemmed from the time factor, as another source in the company said.

“Now it will be too late to start building our own infrastructure and establish a full fledged retail operation. The FDI is likely to be allowed and there are so many new players like Bharti and Birla groups coming to the competition.”

Another R-ADAG source said, “There is no infrastructure plan. We will invest through private equity and other options.”

Elder brother Mukesh, on the other hand, plans to invest Rs 25,000 crore to create a pan-India footprint of multi format retail outlets in 1,500 cities. It helps both that the sector has not been thrown open to foreign competition.

“A stake in an existing retail venture will also give Anil a headstart as the business and infrastructure is already in place,” the source said.

“Now it will be too late to start building one’s own infrastructure and establish a full fledged retail operation. FDI is likely to be allowed down the line and there are so many new players like Bharti and Birla joining the bandwagon,” the R-ADAG group source added.

Besides, there is already huge crisis of quality manpower in the country and it would be difficult for the company to build competency in retail operations at this stage. But, the growth rate of retail industry is too lucrative to be ignored and the younger Ambani is not willing to lose the opportunity.