Reliance Retail trades near-term gains for long-term digital access

Kolkata: India's largest retailer Reliance Retail Ventures reported 14% year-on-year (y-o-y) decline in net profit at ₹2,806 crore in the fiscal first quarter as increasing investments in its e-commerce business offset margins. Revenue from operations grew 8.2% y-o-y at ₹79,745 crore, with some impact on the growth due to demerger of the fast-moving consumer goods business last December.

Reliance Consumer Products (RCPL), which houses the group's FMCG business, more than doubled gross revenue to ₹8,600 crore during the quarter ended June. RCPL didn't disclose Ebitda or profit numbers for the period.

Speaking on an analyst call, the company's management said daily essentials under the Independence brand generated sales of ₹3,200 crore last quarter, while beverages led by Campa contributed ₹2,900 crore.


On retail, Reliance said grocery, fashion and consumer electronics businesses posted double-digit underlying growth, but operating margins remained under pressure for the third straight quarter as the rising share of e-commerce sales and investments in digital infrastructure increased fixed costs.

Reliance Retail executive director Isha M. Ambani said the company delivered resilient performance during the quarter, with growth across the key consumption baskets.

"Our continued investment in digital commerce underscores the transformative power of our digital platforms," she said.

Reliance Retail's gross revenue rose 7.4% to ₹90,408 crore. Excluding the demerged FMCG business, gross revenue grew by 11.6%. Ebitda margin remained unchanged sequentially at 7.9%, compared with 8.7% in the year-ago quarter.

The management said retail margins are likely to remain under pressure over the next few quarters as the company continues to invest in expanding its e-commerce business, particularly quick commerce.

"Our three-year objective in retail is to double operating Ebitda through growth and better economics," Dinesh Taluja, chief financial officer, Reliance Retail told analysts. "We are building the foundation of our e-commerce business and are focused on quality, not just volumes. As the business matures, returns on capital, and Ebitda will improve. If a market does not perform, we will pull back."

The company opened 252 stores during the quarter, taking its network to 20,169 stores spanning 78.4 million sq ft.