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Billionaire Mukesh Ambani-led Reliance Industries (RIL) has rejigged its fuel retail business to hive off the fuel retail outlets owned by the company and merge them with its organised retail arm as part of its strategy to develop retail offerings at these petrol pumps.
RIL has merged its 361 'company owned-company operated' fuel retail pumps with its organised retail business, which thus far included its digital, fashion and lifestyle businesses. "It is no longer simply a petrol pump. Today, what you can do with fuel retail outlets by virtue of the synergies make it a more consumer facing business, that is why we are clubbing it with retail," said V Srikanth, joint chief financial officer at RIL.
Private sector energy companies like RIL and Essar Oil have started expanding their fuel retail business after the government deregulated diesel prices in October 2014. RIL, which was earlier targeting to restart its 1,500 fuel retail outlets by March 2016, will see these outlets restarting by the end of the current fiscal.
The fuel retail business has seen intense business since the re-entry of private companies, with the latter attracting customers with discounts to acquire part of the market share from the dominant state-run oil marketing companies. The increase in number of pumps has resulted in lower average volume at filling stations and left fuel retailing companies such as Indian Oil Corporation (IOC) and Hindustan Petroleum Corporation (HPCL) struggling to find new dealers. BPCL has said it is looking to develop nonfuel retail business at its outlets to maximise revenue.
"RIL plans to expand its retail presence through these petrol pumps. It will add 'square feet' to its retail business and increase the revenue of petrol pumps too," a source in the know said.
RIL plans to develop the real estate at these fuel retail outlets with stores offering non-fuel consumer products. The company, through its chain Reliance Retail, operates 3,383 stores across 679 cities with an area of over 13 million square feet. The organised retail business, which accounts for less than 10% of the conglomerate's turnover, clocked revenue of Rs 6,666 crore in the quarter ended June.
In the US and Europe, clubbing non-fuel retail stores with petrol pumps is a widely used and lucrative format. In India, this format has not done very well in the past but companies feel it may be a good time to re-launch the format, especially on highways and smaller towns that do not have malls like the cities.
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