Mukesh Ambani’s Reliance Retail is worried about slowing sales after brokers valued the company at just $50 billion, which is half of what it was worth when it raised money two years ago, reported Bloomberg. Ambani has admitted to investors that the retail business, which was part of his effort to diversify from energy, grew too fast by expanding into different types of stores and locations.
Reliance Retail looking at job and cost cuts
The report suggests that to fix the situation, Mukesh Ambani, along with his daughter Isha Ambani, is looking at job and cost cuts. This includes slowing down opening of new stores, cutting marketing budgets, merging Reliance Brands Ltd. with the larger retail business, and reviewing global brand partnerships. Also, employees with higher pay scales will be hired only after there is an approval from the chairman’s office.
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Bloomberg said that when contacted, there was no response from Reliance on this.
Citing company filings, the Bloomberg report said that Reliance Retail laid off 38,000 employees in 2024 and also slowed the pace in adding new stores. The company also cut marketing spending on its online platform, Ajio, according to people familiar with the matter, the report said.
Since October, hiring employees who earn over $22,890 a year now requires approval directly from Ambani’s office, the Bloomberg report said. Even adding staff to stores beyond the approved plan needs approval from Reliance Retail’s Managing Director, V Subramaniam. Earlier, these decisions used to be made by lower-level managers.
Is this a way for Reliance to improve valuation amidst challenges?
According to the report, these change are in effort to show the investors that the company is moving forward, especially after several brokerages, including Kotak Institutional Equities and Sanford C. Bernstein, lowered its valuation last year.
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This year, analysts from Ambit Capital Pvt. valued the company at $50 billion, directly dropping from $125 billion. This Reliance is hoping to reach in its planned initial public offering, the Bloomberg report said.
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