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Abu Dhabi Investment Authority (ADIA) and KKR invested USD 1.5 billion in Reliance Retail Ventures Ltd's warehousing assets, facilitated through Reliance Logistics and Warehouse Holdings (RLWH). This transaction, undisclosed officially, involved senior debt, NCDs, and equity infusion. Operations and maintenance will be managed by Reliance Projects & Property Management Services Ltd (RPPMSL). The deal aims to ensure cash flow stability for 20+ years, with potential future investment reaching USD 2 billion. Reliance's warehousing strategy aligns with its expansion plans for retail, emphasising an asset-light balance sheet. Previous successful capital solutions include telecom assets monetization with institutional investments.
Abu Dhabi Investment Authority (ADIA) and KKR have jointly invested USD 1.5 billion in Reliance Retail Ventures Ltd's warehousing assets, as disclosed by informed sources. This investment is separate from the infrastructure investment trust (InvIT) established by Reliance Retail Ventures Ltd (RRVL) last year to house half of its retail warehousing assets. In March, RRVL transferred approximately 11-12 million square feet of warehousing assets to Reliance Logistics and Warehouse Holdings (RLWH), a company incorporated in December 2022. ADIA and KKR equally split the USD 1.5 billion investment in RLWH. The transaction has not yet been formally announced. Advertisement
The funding for the purchase consisted of senior debt of INR 7,075 crore, subordinated non-convertible debentures (NCDs) worth INR 5,275 crore, and the remaining portion through equity infusion, according to sources. Reliance Projects & Property Management Services Ltd (RPPMSL), a wholly-owned subsidiary of Reliance Industries Ltd (RIL), will handle the operations and maintenance (O&M) of the assets.
Both KKR and ADIA are investors in RRVL and Jio Platforms, the digital and telecom businesses of RIL. However, they declined to comment on this specific investment, as did RIL when approached for clarification.
Last year, RRVL transferred warehousing assets valued at INR 5,150 crore to an InvIT called Intelligent Supply Chain Infrastructure Trust. Smaller assets had to be transferred to RLWH, a non-InvIT entity, due to regulatory constraints imposed by the Securities and Exchange Board of India (Sebi).
Similar to the InvIT structure, the ADIA and KKR-backed RLWH will enter into long-term lease agreements with RRVL and its subsidiary Reliance Retail Ltd (RRL), ensuring cash flow stability for at least 20 years. There are possibilities for extending these agreements beyond the initial term, potentially increasing the investment to USD 2 billion in the future, according to sources.
Intelligent Supply Chain Infrastructure Management Pvt. Ltd (ISCIMPL), an SPV, holds larger warehouse assets under a 30-year warehouse use agreement (WUA) with RRVL. While ISCIMPL primarily serves as an anchor tenant, it aims to attract new customers to maximise revenue and cash flows over time.
Reliance Retail Ltd (RRL) encompasses core retail businesses such as Reliance Digital and Jio Mart, along with approximately 19,000 brick-and-mortar stores covering a total area of 79.1 million square feet as of FY24. RRVL, fully owned by RIL, also operates international partnerships and a fast-moving consumer goods business, making it India's largest retail conglomerate by revenue, scale, and profits.
RIL's focus on enhancing supply chain infrastructure is evident from its addition of 12.6 million square feet of warehouse space during FY23. This strategic move aligns with RRVL's growth and expansion plans, supporting its increasing retail presence both offline and online.
The sale and leaseback arrangements reflect RRVL's strategy to maintain an asset-light balance sheet, similar to previous initiatives in telecom infrastructure. RIL has historically leveraged infrastructure funds to unlock value in its assets, as demonstrated by investments in Digital Fibre Infrastructure Trust and Jio's telecom towers.
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