Scale, frugal costing help Reliance Retail's turn-around

After struggling for seven years, Reliance Industries has pulled its retail vertical into black using the company's old strategy of scale and "frugal approach to costs", helping it become the country's largest retail chain, a top official said.

"Scale and frugal approach to costs are the two things which have really worked for us," RIL Group chief financial officer Alok Agarwal said over the weekend, after the retail vertical reported a 34 per cent jump in revenues to Rs 14,496 crore and pre-tax profit of Rs 363 crore.

"Reliance Retail has turned around and is now the country's largest retail chain," RIL Chairman & Managing Director Mukesh Ambani said announcing the March quarter numbers over this weekend.

RIL entered the fledgling retail space in 2006 when interest in the organised retail sector was increasing. A lot of its peers including Aditya Birla Group, Godrejs and Tatas have entered the fray in a big way, but Reliance Retail is the first to report a pre-tax profit.

Reliance Retail struggled in the first few years, but the company steadfastly maintained that it saw good prospects.

"I am confident that our retail business would undertake multi-fold growth in the next few years by delivering over 50 per cent revenue growth in various format sectors year-on-year and is on its way to achieve revenue target of Rs 40,000- 50,000 crore as shared by me in our last AGM," Ambani had said last June.

Reliance Retail has established market leadership in mostly all of the sectors it operates in. The company added 225 stores and 2.7 million operating square feet in the year.

"As of March-end, Reliance Retail operated 1,691 stores across 146 cities, with 11.7 million operating square feet," Ambani said.

For the March quarter, Reliance Retail reported a 19.27 per cent increase in turnover to Rs 3,639 crore.

Agarwal conceded that the migration to a standalone profit delivering unit has been tough but said that an annual growth of 25-30 per cent over the next two years is a "safe assumption".

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