IndiaRetailBiz

Mukesh Ambani owned Reliance Retail, as reported yesterday, has launched its first speciality store for ‘consumer durables’ ‘Reliance Digital’ at Gaziabad in NCR on Tuesday. This is a part of the Rs. 25,000 crore retail initiative of the Group, which is going ahead with the roll out a network of neighbourhood stores, speciality stores, hypermarkets and supermarkets, across the country.

Reliance, as a part of this initiative, has planned to open a total of 150 ‘Digital’ stores across 90 cities of the country, over the next three years, at an outlay of Rs. 1,000 crore.

When fully operational, Reliance Digital stores are expected to garner an annual turnover of between 15,000 and 20,000 crore. Since, most consumer durable products are bought through financing route by consumers, Reliance Group has also decided to offer these products through ‘in-house’ financing arm of the company.

This could, however, result in direct conflict with the financing business of Anil Ambani Group’s ‘Reliance Capital.’

According to terms of split of Reliance businesses between Mukesh and Anil Ambani, the warring brothers had signed a ‘no-compete’ agreement, which among other conditions, bars the two brothers from entering each others’ businesses for a period five years.

While, Anil Dhirubhai Ambani Group (ADAG) may call it as poaching into its legitimate territory, Mukesh Ambani Group would explain it as legitimate component its retail business. It may be interesting to note that a similar tiff between the brothers had earlier occured when Anil Ambani had objected to the setting up of a power generating station by the other Group in the proposed SEZ in Haryana. ADAG Group had termed it as breach of ’scheme of the split’ between the brothers.

The new activity of the Mukesh Ambani Group, therefore, has all the ingradients of brewing an ugly face off between the brothers. Of course, Mukesh Ambani Group would be free to pursue, and even expand financing business, beyond the ambit of even retail business once the five year non-compete period is over.

Ambanis had incidentally split their businesses about a year ago in the first half of 2005.