Reliance to set up NBFC for retail

In a bid to provide a back-up for its ambitious $5.6 billion retail rollout, Reliance Industries (RIL) is in the process of setting up a non-banking finance company (NBFC) for retail finance. The company is in the process of going through the necessary formalities for securing an NBFC license, sources said.

Reliance’s retail finance plan is significant also because rival Ambani faction, the Anil Dhirubhai Ambani Group (ADAG) is a major player in financial services, with a major presence in the NBFC, asset management and insurance space. However, RIL sources said the retail finance NBFC was “intrinsic” to the group’s massive retail plan. An RIL spokesperson declined to comment on the NBFC plan. How ADAG will react to the RIL retail finance plan is not yet clear.

The structuring of the NBFC is still being kept under wraps. The retail finance plan is being spearheaded by KL Muralidhara, who joined Reliance Retail after quitting as American Express India country head. According to the broad contours of the Reliance retail finance plan, the NBFC will get into a range of activities like consumer finance and funding for farmers, who are seen as a major part of the Reliance Retail “farm to fork” initiative. This apart, sources said the gameplan is also to get into travel-related services and loyalty cards as part of the retail support plan.

While Reliance Retail’s 1500 stores would be the front-end, the company also plans to set up large “distribution centres” at the district levels, over 100-acre type areas. “These distribution centres would be the backbone of the back-end,” sources said, and it was here that the NBFC would play a key role for farmers too.

For instance, these distribution centres would be equipped with cold storages, weather kiosks and “farm malls”, where farmers would be able to buy tractors, motorcycles and seeds. The availability of farm credit at such points is therefore seen as vital to the overall retail rollout plan.

On the urban malls side, consumer finance would be a major area of activity for the NBFC. The plan is to give customers the option of availing Reliance’s retail finance for purchasing electronic equipment, telecom equipment and the entire range of consumer products, which will be available at the Reliance Retail outlets.

Source : The Financial Express