ADAI and KKR Invest Rs. 12,864 Crore in Reliance Retail Warehousing Assets

The Abu Dhabi Investment Authority (ADIA) and global investment management firm KKR have made a significant investment in the warehousing assets of Reliance Retail Ventures Limited (RRVL), a subsidiary of Reliance Industries Limited (RIL). According to a report in The Economic Times, the transaction is valued at Rs 12,864 crore, or approximately $1.5 billion.

This investment is distinct from the infrastructure investment trust (InvIT) established by RRVL last year, which was designed to house about half of its retail warehousing assets. In March, RRVL transferred between 11 and 12 million square feet of warehousing assets to Reliance Logistics and Warehouse Holdings (RLWH), a company created in December 2022. KKR and ADIA invested equally in this new entity, but the deal has not been publicly announced yet.

The transaction was financed through a combination of sources. Senior debt accounted for Rs 7,075 crore, while equity-like instruments, specifically subordinated non-convertible debentures (NCDs), totaled Rs 5,275 crore. The remaining balance was covered through equity infusion. Reliance Projects and Property Management Services Ltd (RPPMSL), a fully owned subsidiary of RIL, will be responsible for the operations and maintenance of these assets.

KKR and ADIA are not new to investing in Reliance's ventures. They have previously invested in both RRVL and Jio Platforms, the digital and telecommunications arm of RIL. The new arrangement is expected to further bolster the operational stability of RRVL's warehousing infrastructure, providing long-term lease agreements with RRVL and its subsidiary Reliance Retail Ltd (RRL) to ensure steady cash flow for at least 20 years, with the potential for further extensions.

In October last year, RRVL transferred warehousing assets valued at Rs 5,150 crore to an InvIT named Intelligent Supply Chain Infrastructure Trust. This arrangement was made through a special purpose vehicle (SPV) known as Intelligent Supply Chain Infrastructure Management Pvt. Ltd (ISCIMPL). However, the Securities and Exchange Board of India (SEBI) allowed RRVL to transfer only warehouses exceeding 100,000 square feet to the InvIT. Smaller assets were required to be transferred to RLWH, which is not part of the InvIT structure.

Sources cited by The Economic Times suggest that the investment from KKR and ADIA could potentially increase to $2 billion in the future, indicating a strong commitment to the growth and development of Reliance Retail's warehousing infrastructure.

BS