How much will the RIL Powerhouse upset the retail cart?

How much will the RIL Powerhouse upset the retail cart?
With the telcos still smarting from the 'Jio-jacking', the recent M&A deal with Future Group has stakeholders worrying about Reliance’s potential monopolistic hold in other markets too.

The Mukesh Ambani-led Reliance Industries Ltd. shares reached new highs, becoming the only Indian company to hold a double-digit lakh crore value in rupees, at Rs. 14 lakh crore. Just last week, an Rs. 7,500-crore investment from the private equity firm Silver Lake was announced for its retail arm, along with the acquisition of Future Group for Rs. 24,713 crore a couple of weeks earlier.

Due to the scale of this merger & acquisition, the Future Group deal is to receive the Competition Commission of India’s (CCI) clearance after it ascertains that the move will not have an adverse impact on competition in the retail sector. There is also the issue of deciding whether online markets are also to be assessed, or would it be considered separately.

The potential dominance of Reliance in the retail sector could be as impactful as the Jio mobile experiment in 2016. Thanks to the entry of Jio, the Indian telecom market underwent a bloodbath leaving only three private survivors- Reliance Jio, Airtel, and Vodafone Idea, who make up 89.6 per cent of the market as of March 2020, with Jio in the lead.


With the acquisition of Future Group and many of its subsidiaries, Reliance now has over 53 million sq. ft of retail space and 18 million sq. ft of warehousing space. This is bigger than what Tesco, the world's third-largest retailer in its home market, has. The overall retail market in India is estimated at $825 billion, of which organised retail accounts for only $100 billion, or just about 12 per cent of the market.

DMart, which follows more of a cluster approach, has 216 large format stores. Future Retail, on the other hand, has around 290 large formats (Big Bazaar) stores, while Reliance Retail has 797 grocery stores, including the large format and smaller cash-and-carry stores.

The retail buyout has come at a time when an e-commerce giant such as Amazon has pledged to invest $5.5 billion in the country, and Walmart's acquisition of Flipkart in 2018 for $16 billion. Amazon's India story is also dynamic, having started its own Amazon pantry service and online pharmacy in Bengaluru recently. With sentiment rising for local products and companies (Aatmanirbhar), Reliance is seen as the champion, but there are also oligarchic tendencies in the Indian market.

"The market should not be concentrated in a few hands. Such a scenario always leads to monopoly and consequently, unfair domination by the large player(s). We vehemently oppose deep discounting and predatory pricing. It will severely impact the small retailers," said Praveen Khandelwal, Secretary-General of the Confederation of All India Traders (CAIT) to the Business Standard.

The dominance of one company in a sector is endemic to the Indian economy. An analysis by Capitaline, a market data analysis firm, of 2,035 listed companies in 298 industries shows that nearly 33 per cent of all industry groups have a single company that controls more than 50 per cent of the net sales. But with Reliance’s tentacles growing across more than one sector, it is worth analysing its intent through the prism of its telecom stint.

Along with strengthening its space in the retail sector, Reliance also looks to be working towards boosting its presence in the realm of data and 5G. This overarching presence might raise apprehensions of a monopolistic hold on various markets. Reliance has been growing in the 5G space as well, boasting of “100% home-grown technologies and solutions". However, this could interfere with Amazon’s partnership with Future Retail Ltd. for online marketing of the latter's products.


When Jio was launched, it hoped to have 100 million subscribers in the shortest period, backed by an investment of Rs.1,50,000 crore. Competitor said that Reliance was using predatory pricing, leading to most telecom operators slashing prices by large margins to stay afloat.

Cellular Operators Association of India (COAI) wrote to the Department of Telecommunications (DoT) that the existing licence agreements did not allow an operator to conduct prelaunch trials at the scale Jio was operating at.    When Airtel, Vodafone, and Idea filed objections against Jio's predatory pricing, both TRAI and CCI ruled in favour of Jio, stating that it was a new player and not a dominant firm, so its tariffs could not be deemed as anti-competitive.


As part of the Reliance-Future deal, Kishore Biyani, owner of Future Group, agreed to a non-compete clause of 15 years (to not operate in any retail segment except where Reliance Retail currently doesn’t have a presence). The CCI generally accepts non-compete clauses that restrict the seller for 3 to 4 years, or sometimes up to 8 to 10 years, in sectors such as infrastructure. This 15-year period could then be a point of contention.

At a time when the markets are at an all-time low due to the pandemic, a deal this big could be a tipping point for traders. While the JioMart manages to connect local kirana shops, the larger retailers could be seen cutting costs to attract consumers.


  • Currently, India accounts for more than 12% of deals in the Asia Pacific in 2020, largely through Reliance investment deals. With an increasing number of internet users, India is a prime fishing ground for e-commerce to content-streaming to messaging and digital payments. This bodes well for the economy at large, but its trickle-down effect is debatable.
  • India’s billion-plus consumer market is open to U.S. tech firms. With Mr. Ambani highlighting “data colonisation” by global corporations, Reliance could step in here, but it would take a colossal effort to overcome Facebook and Google’s hold in this area. A draft data-security law is in the works, which requires data centres for all companies to be physically located within India. This also mentions an e-commerce policy that requires the storage of customer data in the country and restrictions on the transfer and storage of information.
  • The consolidation of market power by dominant firms shows that companies are in a position to dictate terms, as could be seen in the telecom sector. However, when it comes to the internet economy, Facebook and Google together have a claim to up to 68 per cent of India’s digital ad market revenues. Amazon and Flipkart clinched 90 per cent of e-commerce orders during the 2019 festival season. With Reliance jumping into the fray in a big way, fireworks could well be expected.