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May 3, 2024

ADIA and KKR Inject $1.5 Billion into Reliance Retail Warehousing Assets

Abu Dhabi Investment Authority (ADIA) and investment management company KKR have made a significant investment in Reliance Retail Ventures Limited (RRVL) warehousing assets, marking a transaction valued at Rs 12,864 crore ($1.5 billion), as reported by The Economic Times (ET).

This recent injection of funds is separate from RRVL’s infrastructure investment trust (InvIT) established last year, which was designed to hold approximately half of its retail warehousing assets.

In March, RRVL transferred 11-12 million sq ft of warehousing assets to Reliance Logistics and Warehouse Holdings (RLWH), a company established in December 2022. KKR and ADIA jointly invested $1.5 billion in this entity, although the transaction has not been officially announced yet.

According to the report, the acquisition was financed through a combination of senior debt amounting to Rs 7,075 crore, equity-like instruments such as subordinated non-convertible debentures (NCDs) totaling Rs 5,275 crore, and the remaining portion through equity infusion. Reliance Projects and Property Management Services Ltd (RPPMSL), a wholly-owned subsidiary of Reliance Industries Ltd (RIL), will manage the operations and maintenance of the assets. Notably, KKR and ADIA are investors in both RRVL and Jio Platforms, which oversees RIL’s digital and telecom ventures.

Last October, RRVL transferred warehousing assets valued at Rs 5,150 crore to an InvIT named Intelligent Supply Chain Infrastructure Trust. These warehouses are held within a special purpose vehicle (SPV) named Intelligent Supply Chain Infrastructure Management Pvt. Ltd (ISCIMPL). However, the Securities and Exchange Board of India (Sebi) only permitted RRVL to transfer warehouses exceeding 100,000 sq ft in area to the InvIT. Assets of smaller size were required to be transferred to RLWH, which is not an InvIT, the report said.

In a strategy similar to the InvIT arrangement, the company, backed by KKR and ADIA, will establish long-term lease agreements with RRVL and its subsidiary Reliance Retail Ltd (RRL) to ensure cash flow stability for at least 20 years. However, this duration could potentially be extended further, as reported.

Sources cited by the ET indicate that the investment from KKR and ADIA may potentially increase to $2 billion in the future, underscoring the confidence and potential for growth in Reliance Retail’s warehousing assets.

This significant investment reflects the growing interest of global investors in India’s warehousing and logistics sector, driven by the country’s rapid economic expansion and the increasing importance of efficient supply chain infrastructure. With the backing of major players like ADIA and KKR, Reliance Retail is poised to further strengthen its position in the market and capitalize on emerging opportunities in the retail landscape.

Jhumpa Lahiri

Jhumpa Lahiri

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