Press Release Reliance Retail Limited - careratings.com

1 Press Release Reliance Retail Limited April 26, 2018. Ratings Amount 1. Facilities Rating Rating Action (Rs. crore). CARE A1+. Commercial Paper Reaffirmed (enhanced from 3000) [A One Plus]. Details of instruments in Annexure-1. Other Rating Facilities/Instruments Amount Rated ( ) Ratings Fixed Deposit Program 200 CARE AAA (FD); Stable (Jewellery Purchase Scheme). Detailed Rationale& Key Rating Drivers The reaffirmation of the rating assigned to the commercial paper issue of Reliance Retail Limited (RRL) factors in the RRL's financially strong and resourceful parentage Reliance Industries Ltd (RIL, rated CARE AAA; Stable/A1+), which is the ultimate holding company having majority shareholding in RRL as well as the significance of the Retail business within the Reliance Group's future growth plans, comfortable capital structure, robust growth both in revenue and profitability of RRL.

2 The rating also reflects the consistent financial and strategic support extended by RIL to RRL in the past, which is also expected to continue in the coming years for its growth in operations. The rating is further supported by RRL's strategic partnerships/ventures with leading global brands and improvement in operational performance over the last couple of years. Any significant changes in the ownership of RRL ( decline in RIL's equity holding from the current level) as well as change in group's strategy that could impact RRL's growth plans or undermine its strategic importance are the key rating sensitivities. The rating is also sensitive to any major impact on the profitability and capital structure of the company on account of aggressive expansion plans.

3 Detailed description of the key rating drivers Key Rating Strengths Financially strong and resourceful promoter group: The rating of RRL derives comfort from the resourcefulness, financial strength and flexibility of the ultimate promoter, Reliance Industries Ltd. (RIL). RIL is the flagship company of Reliance (Mukesh D. Ambani) group and is India's largest private sector enterprise on key financial parameters with businesses across the energy and materials value chain, along with a significant and growing presence in Retail and telecom sectors. Importance of the Retail arm in the overall group strategy: RIL has been making large investments in consumer focusing businesses viz.

4 Telecom and retailing, which are treated as one of the key business segments for the Reliance Group. The group has also extended the common corporate brand Reliance to RRL. Hence, RIL's expansion plans for growing its consolidated sales, operations and market presence is expected to translate into significant growth for RRL. Any significant change in the ownership of RRL (from the current holding of RIL) or any change in the future strategy of RIL. that would undermine the significance of RRL and its operations is a key rating sensitivity. Substantial growth in scale of operations; stable operating margins: RRL posted income from operations of , crore (a y-o-y growth of 44%) in FY17.

5 Retail business exhibited substantial growth in its scale of operations in the last couple of years. The growth in Retail business is primarily due to addition of new stores as well as increase in sales of existing stores. RRL achieved PBILDT of crore in FY17 as compared to crore in FY16. The PAT margin was stable at The company has a comfortable capital structure with an improved overall gearing of as on March 31, 2017 as compared to as on March 31, 2016. 1. Complete definition of the ratings assigned are available at and other CARE publications 1 CARE Ratings Limited Press Release Key Rating Weaknesses Intense competition in the Retail sector: There are many major players in organized Retail sector in India having presence in major catchment areas in almost all key cities of India.

6 RRL faces close competition from these players. Furthermore, due to lower penetration of organized Retail , these large retailers including RRL face considerable competition from the unorganized segment. Any change in business environment due to increasing competition may impact RRL's growth plans in medium terms. Analytical approach: Standalone Applicable Criteria CARE's methodology for Organised Retail companies Criteria on assigning Outlook to Credit Ratings CARE's Policy on Default Recognition Criteria for Short Term Instruments Financial ratios Non-Financial Sector Rating Methodology: Factoring Linkages in Ratings About the Company Reliance Retail Ltd.

7 (RRL) is a part of the Retail venture of the Reliance Industries Limited , (RIL, rated CARE AAA;. Stable/CARE A1+). RIL is the ultimate holding company of RRL with around equity stake (through Reliance Retail Ventures Ltd; RRVL). Over the last few years, Reliance group has built an end-to-end Retail value chain, starting from the originating point farmers, to the end consumers. The company has built both back-end and front end Retail infrastructure, including warehousing facilities, logistic infrastructure, IT infrastructure and food and supply chain. The Retail business sectors include value formats, digital, fashion and lifestyle, jewellery and brands.

8 Brief Financials (Rs. crore) FY16 (A) FY17 (A). Total operating income PBILDT PAT Overall gearing (times) Interest coverage (times) A: Audited Status of non-cooperation with previous CRA: Not applicable Any other information: Not applicable Rating History for last three years: Please refer Annexure-2. Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity. This classification is available at Investors/market intermediaries/regulators or others are welcome to write to for any clarifications. Analyst Contact: Name: Ms Sharmila Jain Tel: 022 6754 3638. Email: **For detailed Rationale Report and subscription information, please contact us at 2 CARE Ratings Limited Press Release About CARE Ratings: CARE Ratings commenced operations in April 1993 and over two decades, it has established itself as one of the leading credit rating agencies in India.

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