New Reliane Project

FINANCIAL PERFORMANCE ANALYSIS OF
RELIANCE RETAIL LIMITED, MUMBAI
PROJECT REPORT
Submitted to Mahatma Gandhi University in partial fulfillment
of the requirements for the award of the Degree of
MASTER OF BUSINESS ADMINISTRATION
Submitted by
JOJIS P JOSEPH
Reg. No: 190031000660
Under the guidance of
Prof. Dr. VP Vijayamohan Faculty

Guide
Accredited by NAAC with ‘A’ Grade

DEPARTMENT OF MANAGEMENT STUDIES
MAR ATHANASIOS COLLEGE FOR ADVANCED STUDIES
THIRUVALLA
2021
MAR ATHANASIOS COLLEGE
FOR ADVANCED STUDIES
TIRUVALLA
Ph: 0469 2730323 Fax: 0469 2730317
macfast@macfast.org
www.macfast.org
CERTIFICATE
This is to certify that the project report entitled “FINANCIAL PERFORMANCE OF

RELIANCE RETAIL Ltd. Mumbai.” is a bonafide report of the project work undertaken by
JOJIS P JOSEPH
, fourth semester MBA student of our college during
8 weeks
a period of
s s
commencing from April
1 to 31May,2021.
Prof.Dr. VP Vijayamohan Dr. Sudeep B. Chandramana

Faculty Guide Head, Dept. of management Studies
Rev. Dr. Cherian J.Kottayil

Principal University Examiner
DECLARATION
I hereby declare that this project report entitled “FINANCIAL
PERFORMANCE ANALYSIS OF RELIANCE RETAIL LIMITED, MUMBAI”
is a bonafide report of the study undertaken by me, under the guidance of Prof.
Dr. VP Vijayamohan, Department of Management Studies, MACFAST,
Tiruvalla.
I also declare that this project report has not been submitted to any other
University or Institute for the award of any degree or diploma.
Place : Tiruvalla
Date : 31-05-2021 Jojis P Joseph
ACKNOWLEDGEMENT
With immense pleasure, I would like to present this project report of Reliance Retail Ltd,
which would not have been possible without the goodwill and support of the people around. I
express my sincere gratitude to Prof. Dr. VP Vijayamohan, who provided his valuable
suggestions and precious time in accomplishing my project report. Under his guidance, I had
successfully completed this project on time. I also extend my sincere appreciation to all the
Faculties of
Management at Macfast to shape my understanding towards the project. As a student of “Mar
Athanasios college of Advanced Studies”, Tiruvalla. I would like to extend my sincere
gratitude and thanks to our principal ‘Fr. Cherian J Kottayil’ for providing me an opportunity
to undergo Project at Reliance Retail Limited. It was because of their immense help and
support that this project has been duly completed.
Lastly, I would like to thank the almighty and my parents, teachers for their moral support
and my friends with whom I shared my day-to-day experience and received lots of
suggestions that improved my quality of work.
JOJIS P JOSEPH
LIST OF TABLES
Table No. Title Page No.

5.1 Comparative Balance Sheet of Reliance Retail Limited 60
(RRL) for the year 2015 & 2016
5.6 Common –size Balance Sheet of Reliance Retail 65
Limited (RRL) for the year 2015 & 2016
5.11 Table calculating trend analysis for Net Profit 70
5.12 Table showing the trend for Estimated Profit from 71
2020-21 to 2024-25
5.13 Table calculating trend analysis for Net Sales 72
5.14 Table showing the trend for Estimated Sales from 73
2020-21 to 2024-25
5.15 Table Showing Current Ratio for the 5 years 74
(2016 – 2020)
5.16 Table Showing Quick Ratio for the 5 years 75
(2016-2020)
5.17 Table Showing Cash/absolute ratio for the 5 years 76
(2016-2020)
5.18 Table showing Debt-Equity Equity ratio for the years 77
(2015-16 to 2019-20)
5.19 Table showing Proprietary ratio for the years 78
(2015-16 to 2019-20)
5.20 Table showing Solvency ratio for the years 79
(2015-16 to 2019-20)
5.21 Table showing Fixed Asset ratio for the years 80
(2015-16 to 2019-20)
5.22 Table showing Interest Coverage ratio for the years 81
(2015-16 to 2019-20)
5.23 Table showing Fixed Assets ratio for the years 82
(2015-16 to 2019-20)
5.24 Table showing Gross profit ratio for the years 83
(2015-16 to 2019-20)
5.25 Table showing Operating ratio for the years 84
(2015-16 to 2019-20)
5.26 Table showing Operating Profit Margin for the years 85
(2015-16 to 2019-20)
5.27 Table showing PAT Margin for the years (2015-16 86
to 2019-20)
5.28 Table showing Return on Equity for the years 86
(2015-16 to 2019-20)
5.29 Table showing Return on Investment for the years 87
(2015-16 to 2019-2020)
5.30 Table showing Capital Turnover ratio for the years 88
(2015-16 to 2019-20)
5.31 Table showing Inventory Turnover ratio for the years 89
(2015-16 to 2019-20)
5.32 Table showing Fixed asset turnover ratio for 90
the years (2015-16 to 2019-20)
5.33 Table showing Working Capital turnover ratio for 91
the years (2015-16 to 2019-20)
5.34 Table showing Trade Receivables turnover ratio for 92
the years (2015-16 to 2019-20)
5.35 Table calculating Net Profit Margin 93
5.36 Table calculating Total asset turnover 94
5.37 Table calculating Leverage factor 94
5.38 Table calculating Du-pont analysis 94
5.39 ROE comparison 95
5.40 Calculating Correlation analysis –sales and profit 96
LIST OF GRAPHS
Graph. No. Title Page No.

5.1 Graph showing estimated profit for the years 71
2020-21 to 2024-25
5.2 Graph showing estimated net sales for the period of next five 73
years (2020-21 to 2024-25)
5.3 Graph Showing Current Ratio analysis (2015-16 to 2019-20) 74
5.4 Graph showing Quick/ Liquidity Ratio for the 5 years 75
(2015-16 to 2019-2020)
5.5 Graph showing Cash/ Absolute Ratio (2015-16 76
to 2019-2020)
5.6 Graph showing Debt-Equity ratio for the years 77
(2015-16 to 2019-20)
5.7 Graph showing Proprietary ratio for the years 78
(2015-16 to 2019-20)
5.8 Graph showing Solvency ratio for the years 79
(2015-16 to 2019-20)
5.9 Graph showing Fixed Asset ratio for the years 80
(2015-16 to 2019-20)
5.10 Graph showing Interest Coverage ratio for the years 81
(2015-16 to 2019-20)
5.11 Graph showing Fixed assets to Net worth ratio for the years 82
(2015-16 to 2019-20)
5.12 Graph showing Gross profit ratio for the years 83
(2015-16 to 2019-20)
5.13 Graph showing Operating ratio for the years 84
(2015-16 to 2019-20)
5.14 Graph showing Operating Profit Margin for the years 85
(2015-16 to 2019-20)
5.15 Graph showing PAT Margin for the years (2015-16 86
to 2019-20)
5.16 Graph showing Return on Equity for the years 87
(2015-16 to 2019-20)
5.17 Graph showing Return on Investment for the years 88
(2015-16 to 2019-20)
5.18 Graph showing Capital turnover ratio for the years 89
(2015-16 to 2019-20)
5.19 Graph showing Inventory turnover ratio 90
for the years (2015-16 to 2019-20)
5.20 Graph showing Fixed Asset turnover ratio for 91
the years (2015-16 to 2019-20)
5.21 Graph showing Working Capital turnover ratio for 92
the years (2015-16 to 2019-20)
5.22 Trade Receivables turnover ratio 93
5.23 Du-pont analysis 95
5.24 Correlation analysis 97
ABBREVIATIONS
FDI: Foreign Direct Investment

ROI: Return on Investment
RoE: Return on Equity
PAT: Profit After Tax
PBIT: Profit before Interest & Tax
EBITDA: Earning before Interest Tax Depreciation & Amortisation
CAGR : Compounded Annual Growth Rate
FMCG: Fast Moving Consumer Goods
FY: Indian Financial Year (April to March)
IT: Information Technology
MoU: Memorandum of Understanding
MT: Million Tonnes
MTPA: Million Tonnes Per Annum
RIL: Reliance Industries Limited
RRL: Reliance Retail Limited
SEZ: Special Economic Zone
US$: US Dollar
GMV: Gross Merchandise Value
CONTENTS
Page No.
ACKNOWLEDGEMENT (i)
LIST OF TABLES (ii-iii)
LIST OF FIGURES (iv)
ABBREVIATIONS (v)
Sl.No. CHAPTERS Page no.

1. CHAPTER I – INTRODUCTION 12
1.1 Background of the Study 3
1.2 Statement of the Problem 4
1.3 Relevance & Scope of the Study 4
1.4 Objectives of the Study
2. CHAPTER II – INDUSTRY PROFILE 56
2.1 Business Process of the Industry 17
2.2 Market Demand & Supply – Contribution to GDP – Revenue Generation 28
2.3 Level and Type of Competition – Firms Operating in the Industry 33 35
2.4 Pricing Strategies in the Industry 37
2.5 Prospects and Challenges of the Industry
2.6 Key Drivers of the Industry
CHAPTER III – REVIEW OF LITERATURE 42
3. 3.1 Brief Theoretical Construct related to the Problem 43
3.2 An Overview of Earlier Studies 53
3.3 Uniqueness of Research Study 55
4. CHAPTER IV – METHODOLOGY OF THE STUDY 56
4.1 Research Approach and design 57
4.2 Sources of Data 57
4.3 Data Analysis Tools 57
4.4 Report Structure 57
4.5 Limitations of the Study 57
5.
CHAPTER V DATA ANALYSIS, INTERPRETATION AND INFERENCE 58
6. CHAPTER VI FINDINGS OF THE STUDY

98
7. CHAPTER VII CONCLUSION
102
ANNEXURE
BIBLIOGRAPHY
1
CHAPTER I
INTRODUCTION
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The concept of financial performance analysis is the process of identifying financial strength
of the company with the help of its Profit and loss account, and Balance sheet. Reliance
Retail is an Indian retail company, a subsidiary of Reliance Industries Limited. Founded in
2006, it is the largest retailer in India in terms of revenue. Its retail outlets offer foods,
groceries, apparel, footwear, toys, home improvement products, electronic goods, and farm
implements and inputs. Apart from physical outlets, the company also sells products on its e-
commerce channels.
The financial performance analysis of the company is done for the period of five years,
starting from the financial year 2015-2016 to 2019-2020. The objective of this study to
evaluate the financial position of the company, analyse financial changes and identify future
result by using ratio and trend analysis, to know whether the business is making profit or not,
is maintaining liquidity position, and to know the growth of the company.
The ratios used in this project are in terms of solvency, liquidity, turnover, and profitability
ratios. The trend analysis has done for the indicators such as Sales and Expenses. The
company performance was good during the period 2016, 2017, 2018 and 2019 but in 2020,
the company performance was not affected, due to lockdown happened cause of Covid-19
Pandemic across countries and affected the exports of the company.
1.1 BACKGROUND OF THE STUDY
Analysis of financial performance of a company is the process of determining the significant

operating and financial characteristics of a firm from the accounting data. It is the treatment
of the information contained in the financial statements to afford a full diagnosis of the
profitability and financial position of the firm. It helps executives to evaluate past
performance, present financial position, liquidating situation, profitability of the firm and to
make forecast for the future earnings.
Financial performance analysis is the process of identifying the financial strengths and
weaknesses of the firm by properly establishing the relationship between the items of balance
sheet and profit and loss account. There are many tools to find financial performance of the
company, one of the most useful tools is ratio and trend analysis.
The analysis of financial statements consists of a study of relationships and trends to

determine whether or not the financial position of the concern and its operating efficiency
have been satisfactory. Here, In the process of this analysis various tools or methods are used
which
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include: (1) Comparative Statements, (2) Common-size Statements, (3) Trend Ratios (trend
percentages), (4) Ratio Analysis (5) Correlation and (6) Du-pont Analysis.
The financial performance analysis is done to find the firm’s current position with that of
market situation. Although performance measurement systems can play a key role in
communicating, evaluating, and rewarding the achievement of strategic objectives. One of
the primary criticisms of performance measurement systems is that they are generally limited
to financial indicators, thereby focusing the organization on past performance and
encouraging a short-term view of strategic objectives.
Financial performance analysis involves using financial data to assess a company’s

performance and make recommendations about how it can improve going forward. The study
helps to assess the earning capacity / profitability, solvency, financial strength, operating
efficiency and to analyze the trends of Reliance Retail Industries by comparing the ratios for
the same over a period of five years.
This study helps to evaluate the relationship between component parts of a financial
statement to obtain a better understanding of a firm’s position and performance. This study
aims to present complex data contained in the financial statement in simple and
understandable form to provide investors (current and potential), creditors and management
to evaluate the past, current and project conditions and performance of the firm and use to
compare the strengths and weaknesses in various firms by using secondary data.
1.2 STATEMENT OF THE PROBLEM

Though financial statements are relevant and useful for the concern, still they do not present a
final picture of the concern. The analysis is based on annual reports of the company’s five
financial year. Because of the flexibility of accounting principles, certain liabilities are not
provided for that and to that extent the data taken will give a misleading picture. Sometimes it
may fail to disclose the present value as figures given in the Balance sheet are on a historical
basis.
While preparing it, the replacement cost of the asset is totally ignored. Also financial
statement does not disclose information relating to changes in the management, loss of
markets etc. which have a vital bearing on the earnings of the company. The financial
statements as such are not sufficient for decision making. They can be made useful for
managerial decision only after analysing the data by using different tools and techniques.
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1.3 RELEVANCE & SCOPE OF THE STUDY
The study covers almost the entire area of financial operations covered by “Reliance Retail
Limited” the study has been conducted with the help of data obtained from audited financial
records. The audited financial records are the company annual reports pertaining to past 5
years from 2015-2016 to 2019-2020 and the audited financial records are obtained from the
company’s annual report.
The financial statements become meaningless unless they are analysed and interpreted. This
study focuses on proper analysis and interpretation of the results, so that it become valuable
and useful for taking managerial decisions. The researcher tries to measure the performance
of the organization with the help of ratios and trend analysis.
This research study is conducted in a way that it provides proper interpretation on the basis of
analysis done on the financial statements. Proper interpretation leads to proper conclusion and
judgement and there by taking effective decisions. The study may provide assistance to
investors (current and potential), creditors and management to evaluate the past, current and
project conditions regarding performance of the Reliance Retail Limited.
1.4 OBJECTIVES OF THE STUDY
The objectives of the study include:-
 To evaluate the financial performance of Reliance Retail Ltd in terms of solvency,

profitability, turnover ratios for the years from 2015-2016 to 2019-2020.
 To identify any consistent results or trends by using trend analysis.
 To analyze the financial changes over a period of five years.
 To estimate the trend in sales & profit of the firm.
 To suggest effective measures in the existing system of the company.
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CHAPTER II
INDUSTRY PROFILE
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2.1 BUSINESS PROCESS OF THE INDUSTRY
2.1.1 Indian Retail Industry
India ranks among the best countries to invest in Retail space. Factors that make India so
attractive include the second largest population in the world, a middle class of 600 million
people, increasing urbanisation, rising household incomes, connected rural consumers and
increasing consumer spending.
• India ranked No. 2 in Global Retail Development Index (GRDI) in 2019.
• Retail is India's largest industry, currently accounting for over 10% of the country's
GDP and 8% of total employment.
Recent policy changes allow 100% FDI under the automatic route for single-brand retail
trading.
Indian retail industry has emerged as one of the most dynamic and fast-paced industries due
to the entry of several new players. It accounts for over 10% of the country’s gross domestic
product (GDP) and around 8% of the employment. India is the world’s fifth-largest global
destination in the retail space.
India is expected to become the world’s fastest growing E-commerce market, driven by
robust investment in the sector and rapid increase in the number of internet users. Various
agencies have high expectations about growth of India’s E-commerce market.
Indian retailing is a rapidly growing industry, amounting to nearly 10% of the overall GDP. It
has a potential market of nearly a trillion dollars. The point really is on the share of
unorganized sector in Indian retailing, nearly 90% of the market. Nevertheless, the trend is
shifting more towards the ‘Organized Retail’ and ‘E-commerce’. The modern retailing is
expected to grow at a CAGR of 20% and the traditional retailing at 10% per annum in the
coming years. The e- commerce is set to grow at an even faster rate. Therefore, the potential
for players like Reliance Retail, which spreads its wings through most of the consumer space,
is huge. Furthermore, with the organized sector expanding into rural areas, the opportunities
are huge. With the changing aspirations and preferences, consumers are moving towards the
modern retail shops, in turn prioritizing quality.
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2.1.2 Evolution of Retail in India
2.1.3 Retail formats in India
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Figure 2.1: Indian retail snapshot
The retail sector in India has seen organised players grabbing a larger pie. Favourable
structural macro trends—improving consumer sentiment, rising disposable incomes,
urbanisation and lower penetration of organised retail—are likely to fuel this boom.
Moreover, the recent pathbreaking reforms—demonetisation and GST—have catalysed
development of organised retail. Besides, after an unsettling period of cut-throat competition,
offline and online players seem to have come to terms with reality and are toying with the
omni-channel platform in their quest for success.
Given the potential in organised retail, we are seeing wars intensify between organised players
– offline as well as online. In grocery retail, players such as Reliance Retail, Future Retail,
Avenue Supermarts, Big Basket, Flipkart and Amazon are fighting tooth and nail to gain
customer mindshare. Likewise, in apparel retailing, players such as Reliance Retail, Future
Lifestyle, ABFRL, Arvind, Trent, V-Mart and foreign players are vying for top spots.
2.1.4 Reliance Retail - Operating Model

Reliance Retail is India’s largest and most successful retailer. In just 14 years of launch,
Reliance Retail has accomplished a feat which no other retailer has achieved. Reliance Retail
touches every aspect of its consumers’ life from morning to evening, food to fashion, items of
necessities to luxuries of life, cities to towns, online to offline and much more, enabling the
ease of living for every Indian. Reliance Retail is not only India’s foremost retailer, but it has
emerged as the fastest growing retailer in the world and features among the top 100 retailers
globally.
Reliance Retail has adopted multi-channel strategy and has integrated “offline-online” models
to truly differentiate the customer experience. Reliance Retail also became the first organised
retail chain in India to support UPI-based payments.
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Reliance Retail has established its business across five key consumption baskets of:
 Consumer Electronics,
 Fashion & Lifestyle,
 Grocery,
 Petro Retail and
 Connectivity with deep business moats.
The dimensions of the business span across 11,784 physical retail stores across 7,000+ towns
and cities, direct to consumer, Digital commerce channels and B2B channels serving millions
of Indian consumers across underserved markets. The adjacent table sets out the spread of
Reliance Retail’s business. Fig 2.2: spread of Reliance Retail’s business.
Retail - Reliance Retail continues to grow in scale, driven by new store expansion across the
geography, improving store throughput and favourable product mix. Operating leverage is
resulting in release of strong operating cash flows to continue making requisite investments
for securing future readiness and delivering profitable growth. The business continues to
improve customer experience across all store concepts and focuses on providing unmatched
value proposition, which has resulted in robust growth in footfalls and operating metrics.
Roll-out of the Digital Commerce initiative will open up further growth opportunities for the
organised retail business, leveraging the best of our consumer and digital platforms. Reliance
Retail and WhatsApp have entered into a commercial partnership agreement to further
accelerate Reliance
Retail’s Digital Commerce business on the JioMart platform using WhatsApp and to support
small businesses on WhatsApp. Reliance Retail has the largest customer franchise for over
125 million registered customers who cherish all its unique store concepts.
Organised Retail revenues grew by 24.8% y-o-y to ` 1,62,936 crore. Segment EBITDA for FY
2019-20 grew by 55.7% y-o-y to ` 9,654 crore. EBITDA margins improved 130 bps to 6.6%
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boostingoperatingprofitability.
RelianceRetailfurtherconsolidated
its leadershippositionand
is India’slargest,most profitable and
fastest growing
retailer.
e leveraging
Reliance Retail’s operating model is based on customer centricity, whil common
centers of excellence in technology, business processes and supply chain. In an endeavor to
servecustomersacrossgeographies,
segmentsandconsumption
occasions,RelianceRetailhas
built and refined multiple store concepts with a focus to serve diverse needs of its customers.
Reliance Retail has consistently endeavoured to provide best store experience, unmatched
value propositionand seamlessanytime,anywhereshoppingexperience,throughomni-
channel initiatives. This strategy has resulted in strong operating performance,
-based
broad
growthand leadership across consumption baskets.
Fig2.3:RelianceRetailOperatingModel
 Buying:VendorEcosystemComprehensive
networkof vendorsfromfarmersto large
enterprises
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 Channel Ecosystem:Comprehensivenetwork of vendors from farmers to large
enterprises
 Moving:Efficientandseamlesssupply:
• Directdeliveryto storesfromchainnetwork,fleetof vehiclesandlogistic partners
• Directdeliveryto storesfromsuppliersin selectcases
 Selling:Providing anytime, anywhere, shopping experience through stores,
-com,e
connected kiosks and catalogue sales; after sales service through resQ and dedicated
customercare
 Data Analytics:Serving individuals, kiranas, hotels, restaurants, caterers and B2B

customers; engagement through loyalty programme, enriching shopping experience
throughconsumer insights
 Design & Develop Solutions:

Combination of inhouse and externalgndesi
support for
productdevelopment
In the current retail landscape where competition is intensifying unabated, Reliance Retail is
honingits uniqueplanof connecting
“Onlineandofflinethrough “O2O
model.
Fig2.4:currentdistributionmodel
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In the currentmodel:-
Customerplacesan orderthroughoneof theonlinemarketplace

platforms.
In caseof an onlineorder,themarketplace

runscostof procurement
fromOEM,storagecost
at warehouse, packagingand assortment cost
and logistics cost.
Thecost of delivery
to customer
constitutes 10
–15% of revenue.
 For marketplaces, which anyway make slim margins

– partially owing to nature of the
business and partially due to heavy discounting
– such costs take a toll on their overa
ll
profitability.
 Considering increasing usage of smartphones and deepening internet penetration, it is a

foregone conclusion that usage of the online platform as the shopping platform is likely to
increase hereon. This, in turn, implies achieving ility
profitab
for existing online marketplaces
willnot be easy.
 That said, it may change if irrational discounting ebbs or marketplaces start focusing on
privatelabels(andattainhugesuccess)or theunderlyingbusinessmodelundergoesa change.
Envisaged distribution model under Reliance Retail Most offline retailers are talking about
omni-channel. Some have launched their own version -of
channel.
omni But omni
-channel or
the O2O model being rolled out by Reliance Retail is something that
ve we
willbelie
be a big
disruptor.How?Here’s thelowdown.
Fig2.5:RelianceRetailO2Omodel
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In the model that Reliance Retail plans to adopt…
• Reliance Retail will create its own ecosystem of carrying out the business. To illustrate,
here explain how its grocery retail ecosystem might work.
• Prior to the rollout, Reliance Retail will onboard millions of mom-and-pop (kirana)
stores onto its platform. Currently 85–88% of its overall FMCG business is being handled by
this neighbourhood kirana stores. For its grocery business, Reliance Retail will essentially
leverage this network of existing stores.
• Such kirana stores may be called “Affiliated Stores”. Such stores will have a JIO
pointof-sale (POS) terminal, which will maintain everything – order procurement, order
delivery status, inventory management, receivables, payables, etc. In other words, realtime
information about the statistics per store will be available.
• This platform will mean Reliance will have the strongest offline presence in India and
that too with limited capital employed.
• In this backdrop, when a customer places an order through online/app platform,

depending on the type, size and urgency of order, the same will be routed to either Reliance
affiliated kirana stores or its warehouse
2.1.5 Business process- Strategies adopted by retail industries

• Strong distribution and logistic network:
It is imperative for a retailer to have a strong distribution and logistic network to succeed in
this sector. Players follow a distribution network that suits them the best. For example,
Shoppers Stop follows a “hub and spoke” model for its distribution network to increase
efficiency and productivity. In November 2020, Mahindra Logistics Ltd. developed a ‘Built-
to-Suit’ warehousing capacity in Tamil Nadu. This workspace will cater to two key customers
in e-commerce and auto-engineering industries..
• Expansion:
• In March 2021, Realme announced to expand retail footprint in India with flagship
stores; it is planning to launch its first flagship store (over a 10,000 sq. ft. area) in Gujarat.
• On March 25, 2021, Xiaomi introduced a new initiative ‘Develop with Mi’ (GWM).
GWM plans to have 30,000 touchpoints in a year and 6,000+ retail stores in the next two
years.
• In March 2021, ASICS expanded its retail concept in India with a new store in
Bengaluru.
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In March 2021, Vivo announced plan to open ~100 exclusive retail stores across India in 2021;
 aims to cross the 650-store mark in India by 2021.
 In February 2019, Future Consumer partnered with T Choithram & Sons to start offering
products in the Middle East.
 Huawei signed a partnership with Micromax to expand its retail presence in India.
 The dimensions of the business span across 12,711 physical retail stores (1,456 stores
opened during the year) across 7,000+ towns and cities, direct to consumer, Digital
commerce channels and B2B channels serving millions of Indian consumers across
underserved markets.
 Omni-channel retailing:
Retailers are exploring multiple channels to maximise sales. Omni-channel retailing is
being adopted by many retailers in India. Shoppers Stop is making efforts to be an omni-
channel retailer. Ezone has launched an online platform, which has led to increase in
sales. Omni-channel retailing is being adopted by companies like Reliance Retail
Ventures, Aditya Birla Fashion and Retail Limited and, OnePlus.
 Lowering prices:
Certain retailers adopt ‘first price right’ approach. Retailers do not offer discounts under
this strategy, they directly compete on the selling price by offering best price without any
markdowns.
 Offering discounts:
Most retailers have advanced off-season sales from 15 days to a month with discounts of
20-70 per cent on certain products. Also, higher discounts and other value-added services
are offered to members.
 Offering value added services:

Companies offer innovative value-added services like customer loyalty programmes and
happy hours on shopping deals. Offers for senior citizens, contests for students and lottery
gains are now very common.
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 Leveraging partnership:
To keep customers on shop floors for a longer time and increase conversions, retailers are
now pitching to partner with manufacturers, service providers, and financial companies to
create a buzz around certain product categories.
In March 2021, Unicorn, a premium Apple reseller, announced plan to launch 4-6 new flagship
stores in India by FY22.
In February 2021, Reckitt Benckiser, a consumer health and hygiene company, in

partnership with Grofers, an online grocery retailers, launched the ‘Deliver Safe
Programme’. The programme includes processes and protocols to meet the highest
standards of cleaning and disinfection.
In February 2021, Panasonic India joined forces with Fortune Marketing Pvt. Ltd. to
expand its presence in the Indian market. Fortune Marketing Pvt. Ltd. will be responsible
for distributing Panasonic’s wide enterprise range, comprising commercial android
signage display, 4K UHD commercial high brightness displays, multi-touch interactive
professional displays and professional video wall range of products.
 Strong supply chain:
Critical components of supply chain planning applications help retailers to maintain profit
margins. Innovative solutions like performance management, frequent sales operation
management, demand planning, inventory planning, production planning and lean
systems can help retailers to get advantage over competitors.
In March 2021, Mi India launched a Rs. 100-crore (US$ 13.62 million) support plan over the
next two years for its retail partners.
 Joint Venture (JV):

To diversify the product offerings and tab the growing luxury retail segment, retailers are
forming JV with foreign luxury brands. Reliance Brands Ltd entered a JV with Bally, a
Swiss luxury brand, to exclusively market its products in India.
In May 2019, Warburg Pincus and Runwal Group entered into a JV to form US$ 1 billion retail
mall platform.
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 Changing the perception:
Retailers are providing more assortments for private level brands to compete with other
supplier brands. New product development, aggressive retail mix and everyday low
pricing strategy might help to get edge over supplier brands.
 Hyper personalisation:
Indian retailers use hyper-personalisation models based on behavioral data, brands performance,
demographic preference and pin codes as marketing strategy to boosts sales.
 Cash-on-delivery:
• Online retail segment offers cash-on-delivery and manufacturers’ warranty to boost E- retailing in
consumer durables sector.
• Cash-on-delivery is the preferred payment option with over 30 per cent buyers opting for
it in India.
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quality testing to final product rollout. Many of these own brands have grown in size and
scale to compete with national and international brands.
• Innovation: Reliance Retail has been swift in embracing latest technology across its stores
and supporting infrastructure. Reliance Retail has built nimble yet scalable operations to
enhance customer experience in the evolving digital era. Reliance Retail is gradually
rolling out its innovative omni-commerce initiatives with multichannel sales approach that
provides its customers with an integrated shopping experience.
• Productivity and Efficiency: Reliance Retail operates on a highly process based approach
so that the customers gets seamless experience every time they shop. Its highly trained
people and robust processes ensure consistent execution resulting in superior productivity.
Reliance Retail has been one of the key catalysts in the growth of modern retail in India.
With its pan India presence, Reliance Retail has attained a leadership position in the
industry that is capable of delivering unmatched customer experience at a scale
comparable to none. Reliance
Retail has once again delivered strong revenues and profits for the year. The performance is a
reflection of strong business fundamentals and focused execution by a highly trained and
capable team. Reliance Retail continues to deliver its promise of trust to all its customers,
suppliers and employees.
2.2 MARKET DEMAND & SUPPLY – CONTRIBUTION TO GDP – REVENUE

GENERATION
2.2.1 Global Economy Overview
The global economy grew at 2.4% in CY 2019, slowing from 3% in CY 2018 amid global
trade war, tariff related uncertainties, and Brexit. Chinese growth moderated but held up at
6.1% despite escalation of trade tensions with the United States (US). Amidst trade tensions
and Brexit related uncertainty, EU growth also weakened to 1.1%. However, with talks of
trade resolution in second half of 2019, Europe started to see some recovery in growth.
Brexit, which was a key uncertainty for Europe over the last two years, also saw resolution
towards end 2019. The US economy remained relatively strong growing at 2.3%.
Global trade environment remained challenging due to heightened trade tensions. However,
negotiations between the US and China since mid-October resulted in Phase One agreement.
Partial roll-back of some US tariffs in exchange for Chinese commitments to make additional
purchases of US products mark a deescalation of trade tensions.
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The 21-day India lockdown (effective 25-Mar-2020 onwards) courtesy the COVID-19
outbreak will impact RRVL’s operations too (especially ex-grocery segments). F&L revenue
takes a haircut of 5% each in FY21/22. The COVID-19 Impact is expected to fasten the
inventory liquidation process by the value fashion tail (already dealing with burgeoning
working capital) once the lock-down is lifted.
Global growth outlook has changed since the outbreak of COVID-19. There has been
coordinated global monetary policy easing and fiscal support from governments. These policy
support measures would act as cushions offsetting weakness in growth to some extent.
However, global economic activity is likely to contract in 2020 and global growth
environment will remain challenging in the short term.
2.2.2 Indian Economy Overview
The Indian economy grew by 4.2% in FY 2019-20 still remaining one of the fastest growing
major economies in the world. Industrial activity remained healthy in the beginning of the
year, but saw some weakness later. Auto sales suffered due to weak credit conditions, demand
softness, and change in regulatory norms. However, services credit averaged at a healthy 10%
y-o-y growth even as credit growth deteriorated. Despite weak trade environment amid
increasing protectionism, services exports remained resilient at about 8%. On the rural side,
with food prices firming up, demand saw some recovery with three-wheeler sales returning to
positive growth in December quarter (+8% y-o-y), but reversed the recovery in 4Q.
With continued policy initiatives, India further continued its climb in the Ease of Doing
Business rankings, climbing up 14 places to reach the 63rd rank. India is the only major
country to have moved up by 67 places in just 4 years. FY 2019-20 also saw corporate tax cut
being announced, further easing business environment. Government also announced
significant rebates for new manufacturing units to attract global supply chains. Outbreak of
COVID-19 would make growth environment challenging in first half of FY 2020-21 but
liquidity measures announced by the government should help provide support.
2.2.3 Retail Market Overview:-
Indian retail is one of the fastest growing markets in the world due to economic growth.
 Retail market in India is projected to grow from an estimated US$ 672 billion in 2017 to
US$ 1,200 billion in 2021F.
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Fig 2.8: Retail market in India
The year 2016-17, marked several momentous economic policy decisions. The passage of the
constitutional amendment for implementation of the Goods and Services Tax (GST), and the
demonetisation of highest denomination notes were the two key measures taken during the
year. GST is anticipated to have positive impact on almost all aspects of business operations
in the country. The reform is expected to benefit GDP growth rate as well as simplify taxation
structure in the country among other benefits.
With income levels improving, Indian Retail landscape has witnessed numerous changes over
the last decade – consumer demand is shifting, shopping preferences are evolving and high
degree of technology adoption is taking place which are pushing up the Indian Retail sector
into a new growth orbit. By 2020, Indian retail market is projected to reach US$1.3 trillion
from US$672 billion in 2016 growing at a CAGR of 17%.
Organised retail is estimated at US$ 60 billion (~9% of the total retail market) as of 2016 and
is projected to reach US$180 billion (contributing 14% of the total retail market) by 2020
growing at a CAGR of 25%. In contrast to retailers in advanced economies who are facing
growth challenges with saturated home markets and tough macro-economic conditions,
Indian retail scenario remains positive with retailers registering healthy growth across
categories and formats. Sustained economic growth, rising income levels, growing
aspirations, increased awareness and technology adaptation continues to drive consumption in
India.
2.2.4 Contribution to GDP
The retail sector in India is emerging as one of the largest sectors in the economy. It
contributes 10 per cent to GDP and 8 per cent to employment. India continues to be one of
the fastest growing major economies globally with GDP growth rate over the years.
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Fig2.9:Incomegrowthto drivedemandforRetailIndustry
 Multipledriversareleadingto stronggrowthin Indianretailthrougha consumption

boom.
 Significant growth in discretionary income and changing lifestyles are among the major
growthdrivers ofIndianretail.
 Easy availability of credit and use of ‘plastic money’ have contributed to a strong and
growingconsumerculturein India.
 Acceptance an
d usage of -Eretailers by consumers are increasing due to convenience and
securedfinancial transactions.
 Expansion in the size of the upper middle class and advertisement has led to greater
spendingon luxuryproductsand high brand consciousness.
 In FY20, GDP at current prices was US$ 2,891.87 billion and GDP per capita at current
priceswasUS$ 2,156.50.
 India’s real gross domestic product (GDP) at current prices stood at Rs. 195.86 lakh crore
(US$ 2.71 trillion) in FY21, as per the second advance
tes estima
(SAE) for 2020
-21. And,
the per capita income at current prices was estimated at Rs. 127,768 (US$ 1,765.43) in
FY21.
The total market size of Indian retail industry stood at US$ 950 billion in 2018 and is forecast
to reachUS$1,200billionby2021andUS$1,750billionby2026.AsperForresterResearch,
in 2020, India's retail sector was estimated at US$ 883 billion, with grocery retail accounting
forUS$ 608 billion. The
market is projectedreach
to ~US$ 1.3 trillion2024.
by
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Fig 2.10: Market size over the past years
India will become a favourable market for fashion retailers on the back of a large young adult
consumer base, increasing disposable income and relaxed FDI norms. Revenue of India’s
offline retailers, also known as brick and mortar (B&M) retailers, was expected to increase by
Rs 10,000-12,000 crore (US$ 1.39-2.77 billion)^ in FY20.
According to the Ground Zero Series findings of the consulting firm RedSeer, the retail sector
is expected to recover ~80% of pre-Covid revenue (amounting to US$ 780 billion) by end-
2020.
Business activity among micro-retailers is reaching near normal levels, as they are adopting
digital business tools to drive efficiency and growth. The micro-retail players are increasingly
taking up digital book-keeping solutions, as it makes this task simpler and there is a demand
coming from small towns and hinterlands. Experiential retail draws the concentration to a
customer driven approach where the client can interact with products or brands rather than
being a passive participant.
Many fintech companies are competing for their presence in local stores. In May 2020, Paytm
announced a US$ 1 billion loyalty programme and launched online ledger services for kirana
stores in India. Other fintech companies such as PayNearby, Phonepe, BharatPe and Mswipe
introduced different services for small shop owners, enabling better digital payments and
delivery options at these stores. For example, Amazon partnered with local stores to provide a
platform for many small shops and merchants on its Amazon marketplace. While, Walmart
has its own network of 28 ‘best-priced’ stores serving local stores across the country. In
March 2021, Big Bazaar announced expansion into the instant home delivery service, aiming
to offer
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sale period of September 29-October 4, 2019, Indian E-tailers achieved US$ 3 billion of gross
merchandise value (GMV).
Online retail rose to a record high during the festive season in October-November 2020,
with smartphone sales contributing 53% to the total sales.
The Government plans to allow 100 per cent FDI in E-commerce under the arrangement
that the products sold must be manufactured in India to gain from the liberalised regime.
India ranked 73 in the United Nations Conference on Trade and Development's Business-
to- Consumer (B2C) E-commerce Index 2019.
Online retailers now deliver to 15,000-20,000 pin codes out of nearly 100,000 pin codes in
the country.
In 2020, the most common payment methods online were digital wallets (40%), followed
by credit cards (15%) and debit cards (15%). Online penetration of retail is expected to reach
10.7% by 2024 versus 4.7% in 2019.
In April 2020, Amazon India announced to invest Rs.10 crore (US$ 1.3 billion) to
strengthen its pilot ‘Local Shop on Amazon’ programme, which added >5,000 local shops and
retailers on the platform from >100 cities.
By 2024, India's e-commerce industry is expected to increase by 84% to US$ 111 billion,
driven by mobile shopping, which is projected to grow at 21% annually over the next four
years.
2.2.5 Revenue Generation

Revenue generated from online retail is projected to grow to reach US$ 60 billion by 2020.
Fig 2.13: Revenue from online retail in India
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2016 was a challenging year for many e-commerce players who witnessed course correction
both in terms of the market approach and valuations. With lower funding, falling valuations
and pressure from investors, the e-commerce space is now seen shifting its focus from
achieving higher Gross Merchandise Value (GMV) to achieving profitability and
sustainability.
Fig 2.14: Reliance Retail – Revenue and EBITDA evolution over past decade
Business Overview:-
Reliance Retail has been one of the key catalysts in the growth of modern retail in India. With
its pan India presence, Reliance Retail has attained a leadership position in the industry that is
capable of delivering unmatched customer experience at a scale comparable to none. Reliance
Retail has once again delivered strong revenues and profits for the year. The performance is a
reflection of strong business fundamentals and focused execution by a highly trained and
capable team. Reliance Retail continues to deliver its promise of trust to all its customers,
suppliers and employees.
Reliance Retail is India’s largest and most successful retailer. In just 14 years of launch,
Reliance Retail has accomplished a feat which no other retailer has achieved. Reliance Retail
touches every aspect of its consumers’ life from morning to evening, food to fashion, items of
necessities to luxuries of life, cities to towns, online to offline and much more, enabling the
ease of living for every Indian. Reliance Retail is not only India’s foremost retailer, but it has
emerged as the fastest growing retailer in the world and features among the top 100 retailers
globally.
Reliance Retail has adopted multi-channel strategy and has integrated “offline-online” models
to truly differentiate the customer experience. Reliance Retail also became the first organised
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2.3 LEVEL & TYPE OF COMPETITION – FIRMS OPERATING IN THE INDUSTRY
The retail industry is comprised of the process where retailers sell their final products and
services to the end consumers. Indian Retail Industry comprised of two levels :- Organised
and Unorganised Sector. Most of the revenues come from organised sector. In the developed
economies, organized retail is in the range of 75-80 per cent of total retail, whereas in
developing economies, the unorganized sector dominates the retail business.
Organized retailing refers to trading activities undertaken by licensed retailers, that is, those
who are registered for sales tax, income tax, etc. Organised retailing was absent in most rural
and small towns of India in 2010. Supermarkets and similar organised retail accounted for
just 4% of the market. Most Indian shopping happens in open markets or numerous small
grocery and retail shops. These include the corporate backed hypermarkets and retail chains,
departmental store, discount stores, drug stores, factory outlets, and also the privately owned
large retail businesses.
The organized retail stores are characterized by professionally managed stores or large chain
of stores, providing goods and services that appeal to customers, in an ambience that is
encouraging for shopping and agreeable to customers. For example: Vishal Mega Mart, Big
Bazaar, Wills Lifestyle, Shoppers Stop, Reliance Trends, Spencers, Reebok, Nike, Catmos,
Lilliput, McDonald‟s, Pizza Hut, Barista, Cafe Coffee Day, Koutons, Cotton County, Peter
England, Titan, Raymonds, Sony, Samsung, Next, LG, Apollo Pharmacy, etc.
2.3.1 Competitive landscape in Indian retail sector – Firms Operating in the Industry
1. Departmental stores
 Pantaloon has 342 stores in >155 towns

 Westside operates 158 stores across 82 cities
 Shoppers Stop has 90 stores & Lifestyle operates across 77 stores in India
 Reliance Retails operates 670 fashion concept stores across 350 cities in India
2. Hypermarkets
 Big Bazar, Spencer Easy day and Reliance are some major players present in the
market
 Aditya Birla Retail (More Hypermarket) - 20 stores
 Trend has 10 stores under retail chain Star
 Big Bazaar operates 295 stores Spencer Hyper has 37 stores across the country
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Competitive Rivalry:
• Entry of foreign players in the market & e-retailers have intensified competition
• Customers’ low switching cost increases competition
• The Indian retail sector is highly fragmented, which increases competition
Threat of New Entrants:
• Entry as a retailer is quite simple. However, players need to establish strong

distribution channels & achieve economies of scale to compete.
Substitute Products:
• Threat of substitute products is low. However, customers may purchase products from
a local store instead of purchasing from a retailer.
Bargaining power of Suppliers:
• Retailers have low switching costs, which make the supplier power low. Larger
retailers can easily switch to different suppliers.
Bargaining power of Customers:
• The consumers are price sensitive & have information about the product & its price
• Low switching cost gives customers high bargaining power
2.3.4 PESTEL Analysis of Retail Industry
The retail industry comprises of shops, stores, shopping streets and malls, and e-commerce
stores; where buyers visit such stores either by going there physically or online. The aim is to
complete the transaction, and it could be about anything like; food, clothing, electronic
equipment, grocery etc.
Political Factors affecting Retail Industry
• Government Regulation & Political Influence
The government and the politicians work in collaboration to devise rules and regulations, the
citizens, businesses and the retail industry has to obey them. Such laws can seriously impact
the profit and revenue stream of businesses. If the government raises sales taxes, then it
would increase the prices of the product and services. Consequently, people would become
picky in their choices, which means a drop in total sales. Fewer sales mean less profit.
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If the political environment of the country changes like protests, roadblocks or bans, then it
would disrupt the supply chain of products and services. Therefore, businesses cannot run
their operations smoothly, if there’s a conflict in local politics.
 Economic Factors
Wise governments and economies appreciate business activities; they create a favorable
environment for businesses to grow. They encourage customers to spend their money, instead
of holding on to it and buying what they need. Such an economic mindset proliferate
economic activities.
On the contrary, when business activities are declining, that means unemployment is higher
and people have fewer resources. It’s a completely different environment of the economy, and
it creates a different mindset of the people. When people don’t have a job and their resources
are limited, then they would go on the saving mode. Few spending means less business
activity.
According to an estimate, the total sale in the retail industry would reach 30 trillion US dollars
by the end of 2023. It means that people would have more extra money; therefore, the increase
in personal spending would cause the total increase in global sales in retail businesses.
The economy of a country creates an environment and mindset and of the people, whether to
spend or not. If the economy is good and people have jobs and sources of income, then they
would be able to spend. Otherwise, they won’t. There’s a limit to price cutting, retailers can’t
go below at a certain limit.
Social factors affecting Retail Industry
Society and social trends develop the shopping habits norms of people, their attitude and
behavior may change and transform because of many factors. Like if they are educated, then
their choices and preferences would be different. In such a case, they would prefer products
and services of certain multinational brands with their logo on it. Rural customers would buy
any food items based on their tastes or whatever is available. Educated buyers would study
the calories and vitamins of food items, and then one would decide based on one’s diet needs.
Demographic social factors like age, gender, race, income level, and education level of
customers affect the business of retailers. Choices and preferences also vary with gender, age,
and other factors. Like, ladies, educated aged people would comfortable products, and young
ones would want adventurous and exciting products.
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E-commerce retail stores offer products and services to the customers based on shopping
patterns and the time that the customer spends online. Whenever a customer visits the store
next time, the software would provide him the information based on the data of previous
searches.
Technological Factors Affecting Retail Industry
Whether it’s an online retail store or a physical shopping mall, technology has influenced
them both equally. It could be in the form of generating sales reports, cash management, or
management of the store’s sales record. Businesses have to adopt hardware and software
technology to keep moving with time.
Ecommerce stores are the ones that benefited from the technology the most. Especially with
the help of the internet, online retailers can advertise their products and services globally
without any restriction of borders. Companies like Amazon and Alibaba are doing, they offer
products and services worldwide. All you need is one good website with the catalog of
products and services that you’re offering, a stable internet connection and a reliable delivery
system.
Walmart and Amazon both are competitive online retail stores. They offer products and
services along with shipment to deliver the product at the doorstep of customers. It doesn’t
mean that there aren’t other online retailers, as a matter of fact; it’s rather easy to establish an
online store and advertise it.
Legal Factors Affecting Retail Industry
A retail store operates within the legal environment of a country; therefore, it has to follow
the prevailing local labor laws, excise and taxation regulation, and other business laws. When
a brand plans to go globally, the rules and regulations become a bit complicated. It’s because
every country has different copyrights, trade and tariff laws.
If a business decides not to follow the local rules and regulations of certain or multiple
countries, then it would result in ban, restrictions, bankruptcy or foreclosure of the business.
Therefore, the business must obey a country’s laws.
Environment Factors Affecting Retail Industry
Some retail offer food and edible items. As we know that such items can’t remain fresh for a
long time in a certain environment, there’s a time limit on them. After that, they’ll be expired
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or contaminated. Therefore, a retailer has to follow local legal and economical factors. For
instance, some countries apply taxes on the sale of soda or fatty food.
The other environmental issue some companies have to face is the expiration dates of
products and removal of the contaminated stock. Companies have multiple suppliers who
provide products with different expiring dates when sales staff put them on the rackets. All
the products get mixed up, what comes first or expire earlier than the other.
If a retail store doesn’t maintain a standard healthy environment within the store, then food
and safety departments would either ban or impose some penalty of a certain amount on the
store.
After carefully studying the political, economical, technological, social, legal and
environmental issues that the retail industry has to face. If they follow the prevailing rules
and regulations of a country, then it’s good. Otherwise, they would end up in a lot of lawsuits
and legal penalties and it would cost a lot to a business.
Effect of COVID-19 on Indian Retail Market
During Lockdown a survey conducted by Retailers Association of India says, In Non-Grocery

Retails 80 to 100 percent of sales is reduced. As 85 percent of retail costs are fixed retailers
are facing immense pressure. Most importantly Retail industry is facing severe liquidity
challenges that can lead to huge unemployment. While the Food-Retailers expect to earn 56
percent of profits when compared to the previous year. The Non-Food Retailers expect to earn
40 percent of previous year profits in the next six months provided pandemic situation
doesn’t worsen. Though, Indian Retail Market Size is showing a growing trend unexpected
onslaught of the pandemic has worsened the situation for retailers.
2.4 PRICING STRATEGIES IN THE INDUSTRY
One of the most important element or variables, and the retailing buying decision is price.
The entire retail organization is dependent on the single factor; it was either make it or break
it. It is also known as the biggest and easiest measurement, which is subject to change.
Rising helps the retail organization to complete its objective. This is also significant for new
market entrant whose primary function is to establish their brand and then enjoy the
increasing profits as and when the brand gets acceptance from the customers. From the
customer’s point of your price is considered as one of the main reason to visit a particular
retail store.
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The pricing strategy in the case of the retail marketing mix should be consistent and consider
the overall positioning of retailers sales, profits, and rate of return on investment.
The lowest price may not necessarily mean the best price. Profit is the difference between cost
and price. This can be very high when an urgent situation is exploited by the salesman.
Cash flow, overall growth, and profitability are sort out by the retailers in order to survive the
retail business. But in this case, pricing cannot be determined in isolation, and operating
expenses and costs are equally important while establishing the retail price. Pricing the
products is either based on the market at the cost of the product.
The profits that are generated are within this and is controlled by the government and
oriented by consumer or competition. Before one can determine the price, it needs a certain
consideration such as the position of the market the position of the product in the market the
perception of the customer various stages of a product life cycle through which the product is
passing along with the competitive strategy and the overall retail marketing mix.
The calculation of retail price should always be based on the markup and not the cost that is
involved. Competition, organizational objectives, credit terms, discount, cost and profit,
variable and fixed cost, pricing options, positioning strategies, pricing policies, etc. are the
components of pricing strategies.
Reliance Retail Pricing Strategy:
Below is the pricing strategy in Reliance Retail marketing strategy:
Reliance Retail stores offer goods at extremely competitive prices.
At a place like India, where there are about 7 million retail stores, pricing plays a big factor of
differentiation. With setting up big and attractive supermarkets, the number of people coming
inside wish to buy in bulk. Reliance offers them a price which is generally lower than general
stationery stores. This strategy is mostly applied in FMCG sector. This is possible from
getting the products directly from suppliers in bulk and their connection with the farms.
However, in the clothing sector and in footwear, Reliance Retail offer mid-range to premium
pricing, this is because they offer premium quality products from well-known brands. In
jewellery business, they keep pricing similar to their competitors and rely upon their designs
for differentiation. They have the dedicated Card named Reliance cards where they give
discounts on multiple buys.
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2.5 PROSPECTS & CHALLENGES OF THE INDUSTRY
The COVID-19 pandemic has brought the global economy to its knees. Economies around
the world are expected to contract by higher single digits. India being a consumption-driven
economy, the lockdown has hit retail industry the worst affecting wages, employment,
operations, supply chain, sales and finances. It has even driven businesses to permanent
closure. Retail contributes to around 40% of India’s consumption, 10% of national India’s
GDP and employs around 46 Mn people. Therefore, any impact on retail directly puts a dent
in the country’s economy.
E-commerce has been slightly better but even it has faced supply chain shocks due to
lockdown. The pandemic has changed the rules of the game. The ABC of consumer Attitudes,
Behavior and Consumption will change significantly in the coming days. Even before the
consumers exit their lockdown cocoons and head to a store, their priorities would have
changed, and many rules of retailing may need to be refined, or even rewritten. Retail is
nothing if not resilient and retailers are doing everything they can to bounce back. To quote
the great inventor Thomas
Edison, “There is a great value in disaster because we can start all over again”. Reinventing
retail for the new reality is the way forward.
2.5.1 Prospects of the Retail Industry

Robust Demand:
• According to the Retailers Association of India (RAI), the retail industry achieved
93% of pre-COVID sales in February 2021; consumer durables and quick service
restaurants (QSR) increased by 15% and 18% respectively.
• Increasing purchasing power has led to growing demand
Innovation in Financing:
• Collective efforts of financial houses and banks with retailers are enabling consumers
to go for durable products with easy credit.
Policy Support:
• About 51% FDI in multi-brand retail.

• 100% FDI in single-brand retail under the automatic route.
• Goods and Service Tax (GST) was introduced for single unified tax system.
• To provide a level-playing field to stakeholders, the Government is preparing policies
of retail, FMCG and E-commerce within a single policy framework
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Increasing Investment:
• Foreign retailers entering the Indian market.
• Cumulative FDI inflows in the retail sector stood at US$ 3.44 billion between April
2000 and December 2020.
• India’s retail sector attracted US$ 6.2 billion from various private equity and venture
capital funds in 2020
Indian Retail is set to benefit from FDI Policy
• Minimum investment cap is US$ 100 million.

• 30% procurement of manufactured or processed products must be from SMEs.
• Minimum 50% of total FDI must be invested in backend infrastructure (logistics, cold
storage, soil testing labs, seed farming and agro processing units).
• Removes middlemen and provides better price to farmers.
• Development in retail supply chain system.
• 50% jobs in retail outlet could be reserved for rural youth and a certain amount of farm
produce to be procured from poor farmers.
• Products to be sold under the same brand internationally. Sale of multi-brand goods is
not allowed even if produced by the same manufacturer.
• 100% FDI allowed in single-brand retail under the automatic route.
• 100% FDI in retail trading of food products manufactured or produced in India.
• Liberalisation of FDI is expected to give a boost to Ease of Doing Business and Make
in India
• It will keep food and commodity prices under control. It will also cut agricultural
waste as mega retailers would develop backend infrastructure. Consumers will receive
higher quality products at lower prices and with better service.
New Goods and Service Tax (GST) would simplify Tax Structure
SUPPLY CHAIN STRUCTURE
• Goods and Service Tax (GST) as a unified tax regime is expected to lead to re-
evaluation of procurement and distribution arrangements.
• Removal of excise duty on products would result in cash flow improvements
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CASH FLOW
• Tax refunds on goods purchased for resale implies a significant reduction in the
inventory cost of distribution.
• Distributors are also expected to experience cash flow from collection of GST in their
sales, before remitting it to the Government at the end of the tax-filing period.
SYSTEM CHANGES AND TRANSITION MGMT
• Changes need to be made to accounting and IT systems in order to record transactions

in line with GST requirements.
• Appropriate measures need to be taken to ensure smooth transition to the GST regime
through employee training, compliance under GST, customer education and inventory
credit tracking.
PRICING AND PROFITABILITY
• Elimination of tax cascading is expected to lower input costs and improve

profitability.
• Application of tax at all points of supply chain is likely to require adjustments to
profit margins, especially for distributors and retailers.
2.5.2 Challenges of Retail Industry
The growth of retail industry to slow down amid the imposed nationwide lockdown. The
share of organised retail & e-commerce to rise exponentially, which may affect the
unorganised retail sector. Reduction in consumption due to fear of economic slowdown and
subsequent job losses. Complete halt on manufacturing activities due to lockdown restricted
the supply to retail stores.
Financial stress in manufacturing industry lead to reduction in credit period for retail stores.
All this seems to be have a great impact on Retail Industry.
The rural sector is likely to revive faster owning to the government’s focus. The stimulus
packages and the impetus provided in the union budget and the stimulus to combat the effect
of the pandemic is set to create a robust rural economy which is capable to drive demand.
2.6 KEY DRIVERS OF THE INDUSTRY

Large population base and rapidly changing consumer needs are likely to drive the future of
Indian retail industry. While a large portion of the market still remains unorganised, the share
of organised retail is growing rapidly.
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2.6.1 Key Drivers for Global Retail Industry
Growing consumption: USD 6 Tn consumption expenditure by 2030 India to be the 3rd
largest consumer market in the world after USA & China.
Income growth: Rising per Capita Income (Current) – USD 2,014; more than doubled in last
10 years.
Transition from joint to nuclear families: 74% nuclear households by 2025 from 70% in 2016
Nuclear families’ household expenditure is 30% more than joint families.
Rapid urbanization: Urban residents increased from 30.9% in 2010 to 34.9% in 2020 40.1% of
Indians will be urban residents by 2030.
Government initiatives:100% FDI allowed via automatic route in case of single brand retail
whereas 51% FDI is permissible via government route in case of multi-brand retail
Implementation of GST eased the supply chain of retail stores Model Shop & Establishment
Act allows state governments to permit retailers to operate 24X7.
Rise in online spending: Online shoppers are projected to increase from 15% in 2019 to 50%
of the total online population by 2026.
Expansion of the middle & high-income segment: Middle1 & high-income2 households are
likely to incur ~USD 4 Tn of incremental consumption spend by 2030
Young population: Median age of 31 by 2030; remains one of the youngest nations in the
world 90 Mn new households headed by millennials by 2030.
Digitally influenced spending: Estimated to reach USD 550 Bn (30-35% of all retail sales) by
2025 from USD 45-50 Bn (8-10% of all retail sales) in 2016
Generation Z: 370 Mn generation Z^ consumers by 2030 Comfortable with online shopping

and equipped with latest gadgets
Increase in internet penetration: 55% or more by 2025 850 Mn users by 2021; more than the
population of ‘six G7’ countries.
2.6.2 Key Growth Drivers for Retail in India

 Consumer preference
India’s per capita GDP increased to Rs. 143,048 (US$ 1,982.65) in FY19 from Rs. 129,901
(US$ 1,800.43) FY18. Indian consumers are now shifting more towards premium brands
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Fig 2.17: Growth Drivers for Retail in India
Brand consciousness
Factors like young demographic composition, increasing personal disposable income,
preference towards affordable luxury and rising middle class population are developing
 preferences for specific brands
 Consumer finance opportunity
According to India Ratings and Research (Ind-Ra), domestic organised food and grocery
retailers are expected to increase by 10% YoY in FY22, with organised retailers and e-
commerce likely to benefit from the ongoing demand for essentials.
 FDI approval
Department for Promotion of Industry and Internal Trade (DPIIT) approved three foreign
direct investments (FDI), Mountain Trail Food, Kohler India Corporation, and Merlin
Entertainments India in single-brand retail. DPIIT has approved two FDI proposals worth
more than Rs. 400 crore (US$ 62.45 million) within the retail sector.
 Hybrid retail model

In December 2020, Flipkart's independent value-driven platform ‘2GUD’ launched
'2GUD Local’, which is aimed at extending the benefits of ecommerce to traditional retail
businesses.
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 Investment
In September 2020, US private equity firm Silver Lake announced plan to invest Rs.
7,500 crore (US$ 1.00 billion) in Reliance Retail, by Silver Lake in a Reliance Industries
subsidiary after the US$ 1.35 billion investment in Jio Platforms earlier in 2020.
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In November 2020, Saudi Arabia's sovereign Public Investment Fund (PIF) announced
plansto invest in Reliance
Retail Ventures
Ltd. for 2.04%
stake.
In November 2020, FreshToHome, a Bengaluru
-based online fresh fish and meat retailer,
raisedUS$121millionin SeriesC funding,ledbyInvestmentCorporation
of Dubai(ICD).
In December2020, Singapore’ssovereignwealthfund,GICPteLtd.andESRCaymanLtd.
formeda JV to developandpurchaseindustrialandlogisticsassetsworthUS$750million
in India.
2.6.3Opportunities
in Indian Retail
Industry
Fig2.18:Growthvalueproposition
Ample Growth Opportunities in Indian Retail Industry:

-
LARGE NUMBER OF
RETAILOUTLETS
 Indiais the fifthlargestpreferred retail
destination globally.
 The sector is experiencing exponential growth, with retail development taking place not
justin major cities and metros,also
but in tierII and tier IIIcities.
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PRIVATE LABEL OPPORTUNITIES
 The organised Indian retail industry has begun experiencing an increased level of activity
in the private label space.
 The organised retail sector is forecast to witness strong growth in the coming years.
 The share of private label strategy in the US and UK markets is 19% and 39%,
respectively, while its share in India is just 6%. Stores like Shopper Stop and Lifestyle
generates 15 to 25% of their revenue from private label brands.
SOURCING BASE
 India‘s price competitiveness attracts large retail players to use it as a sourcing base.
 Global retailers such as Walmart, GAP, Tesco and JC Penney are increasing their sourcing
from India and are moving from third party buying offices to establishing their own
wholly- owned/wholly managed sourcing and buying offices.
LUXURY RETAILING
 Luxury retailing is gaining importance in India. This includes fragrances, gourmet

retailing, accessories and jewellery among many others.
 Luxury market of India is expected to grow to US$ 30 billion by the end of 2020 from
US$ 23.8 billion in 2017, supported by growing exposure of international brands among
Indian youth and higher purchasing power of the upper class in tier II and III cities,
according to
ASSOCHAM.
Indian retail industry is no doubt one of the largest and fastest growing industries. Like most
developed countries, India’s growth also relies on growth of its retail industry. India is
becoming a dynamic market with many international brands entering India to capitalize on
the growing consumption pattern shown by the country. With right reforms and government
initiatives, India retail industry is surely inching its way towards becoming the next boom
industry. The future of the retail industry looks promising, as more and more Government
policies have come into play, making it favourable to do business.
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CHAPTER-III
REVIEW OF LITERATURE
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3.1 BRIEF THEORETICAL CONSTRUCT RELATED TO THE PROBLEM
The present chapter is an attempt to give the theoretical frame work applied for the present
study. Finance is rightly said to be the life blood of an enterprise. The main activities essential
to the successful administration of finance in any organization consists of financial planning
and control, determinant of business success, focal point of decision making, raising the
needed fund, financial analysis and measure of performance.
Business is mainly concerned with the financial activities. In order to ascertain the financial
status of the business every enterprise prepares certain statements, known as financial
statements. Financial statements are mainly prepared for decision making purposes. But the
information as is provided in the financial statements is not adequately helpful in drawing a
meaningful conclusion. Thus, an effective analysis and interpretation of financial statements
is required.
3.1.1 Financial Performance Analysis
Financial Performance analysis involves using financial data to assess a company’s

performance and make recommendations about how it can improve going forward. It is the
process of identifying the financial strength and weakness of a firm from the available
accounting data and financial statement. The analysis is done by properly establishing the
relationship between the items of balance sheet and profit and loss account the first take of
financial analyst is to determine the information relevant to the decision under consideration
form the total information contained in the financial statement. The second step is to arrange
information in a way to highlight significant relationship. The final step is interpretation and
drawing of inferences and conclusion. Thus financial analysis is the process of selection
relating and evaluation of the accounting data information.
3.1.2 Financial Statement
Financial statements are the summarised statements and reports prepared by business concerns
to disclose their accounting information and to communicate them to the interested parties.
According to John N. Myer, “Financial statements provide a summary of the accounts of a
business enterprise, the Balance Sheet reflecting the assets and liabilities and the income
statement showing results of operations during a certain period”.
Financial statements are mirrors which reflect the financial position and operating strength or
weakness of a concern.
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records. So they can peep behind the two basic financial statements and narrate the
inside story. Such analysis emphasises on the performance appraisal and assessing the
profitability of different activities.
 According to modus operandi:
• Horizontal Analysis: When the financial statements for a number of years are reviewed
and analysed, the analysis is called Horizontal analysis. The preparation of
comparative statements is an example of horizontal analysis. As it is based on data
from year to year, this analysis is also known as Dynamic analysis.
• Vertical Analysis: Vertical analysis is also known as Static Analysis. When ratios are
calculated from the items of income statement or Balance Sheet of one year, it is called
vertical analysis. It is not very useful for long-term planning as it doesnot include the
trend study for future.
 According to objectives of analysis:
• Long-term Analysis: In the long-term, the company must earn a minimum amount
sufficient to maintain a suitable rate of return on the investment to provide for the
necessary growth and development of the company and to meet the cost of capital.
Thus, in the long run analysis the stress is on the stability and earning potentiality of
the concern. In long-term analysis the fixed assets, long term debt structure and the
ownership interest are analysed.
• Short-term Analysis: The short-term analysis of financial statement is mainly
concerned with the working capital analysis. In the short run, a company must have
ample funds readily available to meet its current needs and sufficient borrowing
capacity to meet the contingencies. Hence, in short-term analysis, the current assets
and the current liabilities are analysed and cash position of the concern is determined.
For the purpose, the ratio analysis is most useful tool.
3.1.4 Techniques/ Tools/ Methods of Financial Analysis
The analytical tools used in the present study of financial performance are as follows:-
• Comparative Statements
• Common-size Statements
• Trend Ratios (Trend Percentages)
• Ratio Analysis
• Du-pont Analysis
• Correlation analysis
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 Comparative Statements:-
The preparation of comparative statements are the important devices of horizontal financial
analysis. Financial data becomes more meaningful only when these are compared with
similar data of a previous period or a number of prior periods. When figures of financial
statements of two or more years are placed side-by-side to facilitate comparison, these are
called comparative financial statements. These are prepared in a form that reflects financial
data of two or more periods. Such comparative statements are of great value in forming the
opinion regarding the progress of the enterprise. Comparative Statement show:
(i) Absolute figures of two or more years.

(ii) Change in the absolute figures between the periods (Increase or decrease in
absolute figures)
(iii) Increase or decrease in terms of percentages.
The main aim of preparing financial statements is to present the data of a number of years in
simple and comparable form. When data of a number of years are placed side-by-side,
comparison becomes easier to draw conclusions on the operating result and financial health
of the concern.
Comparative statements are of two types:-
• Comparative Balance Sheet

• Comparative Income Statement
Here in this study, we are doing only Comparative Balance Sheet. It is a statement prepared
from the Balance Sheet figures of two or more years by placing them side-by-side, so as to
facilitate a comparison, in forming an opinion about the progress of the enterprise. It is a
study of the trend of the same items or group of items of two or more Balance sheets of the
same business enterprise on different dates. The Changes in periodic Balance sheet items
reflect the conduct of the business. The changes can be observed by comparing the figures of
items in the Balance sheets at the beginning and at the end of the period.
The Comparative Balance Sheet has two columns to show the data of original Balance
Sheets, a third column to show increase or decrease in absolute figures and a fourth column
for percentage increase or decrease in figures.
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 Common size Statements:
Common size statements are the statements prepared to show the relationship of different
individual items with some common items. Common size elements establish relationship
between:
(i) Various items of the statement of profit and loss account to the total revenue/sales
from operations.
(ii) Various items of assets of Balance Sheet to total of assets. and
(iii) Various items of liabilities to the total of liabilities over a period of time.
Significant conclusion can be drawn by studying the change in such a relationship.
A common size Balance sheet statement in which Balance Sheet items are expressed as
percentage of each asset to total of assets and percentage of each liability to total of liabilities
is called Common Size Balance Sheet. In other words each assets is expressed as percentage
of total assets and each item of equity and liability is expressed as percentage to total of
equity and liabilities
 Trend Ratios (Trend Percentages)
Trend signifies tendency. Therefore review and appraisal of tendency in accounting variables
is simply called as trend analysis. Trend ratios is also an important tool of horizontal financial
analysis. Under this technique of financial analysis, the ratios of different items for various
periods are calculated and then a comparison is made. An analysis of the ratios over the past
few years may well suggest the trend or direction in which the concern is going upward or
downward. The method of trend percentages is a useful analytical device for the management
since by substituting percentages for large amounts, the brevity and readability are achieved.
Procedure for calculation of trends:
(i) One year is taken as the base year. Usually, the first year is taken as the base year.
(ii) The figures of base year are taken as 100.
(iii) Trend percentages are calculated in relation to the base year.
If a figure in a year is less than the base year figure, the trend percentage will be less than 100
and if the figure is more than the base year figure the trend percentage will be more than 100.
Trend percentage
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 Ratio Analysis:
Ratio analysis is the analysis of financial statements with the help of ratios. It includes
comparison and interpretation of ratios and their use of future projections. Ratio analysis
may be defined as “The process of computing, determining and presenting the
relationships of items and groups of items of financial statements with the help of ratios
and interpreting the results there from”.
Accounting ratios are important tools for measuring the efficiency of an enterprise. They
help the financial management in evaluating the financial position and performance of a
concern. The analysis of accounting ratios helps to measure the health of a firm. The
accounting ratios used in this study include:-
 LIQUIDITY RATIOS/ SHORT TERM LIQUIDITY RATIOS
Liquidity is the ability of a firm to meet its current liabilities as they fall due. These ratios
are used to assess the short-term financial position of the concern. Liquidity ratios
include:-
 Current Ratio: Current ratio is the ratio of current assets to current liabilities. It is the
most common ratio for measuring liquidity. It is calculated by dividing current assets
by current liabilities.
Current Ratio
 Quick Ratio: Quick Ratio establishes the relationship between quick or liquid assets
and liabilities. An asset is liquid if it can be converted into cash immediately or
reasonably soon without a loss of value. This ratio is also known as ‘Acid Test Ratio’
or ‘Liquidity Ratio’.
Quick Ratio
 Cash Ratio or Absolute Ratio: Cash is the most liquid asset. When the relationship
between cash and current liabilities is calculated it is called Cash Ratio or Absolute
Liquid Ratio. In the computation of Cash Ratio Marketable Securities, Trade
Investments are included.
Cash or Absolute Ratio

 LEVERAGE RATIOS OR LONG TERM FINANCIAL RATIOS
These ratios measure the long term solvency position of the firm. The following are the
important leverage ratios:
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 Debt-equity (D/E) Ratio (Ratio of long term debt to shareholders’ fund): The debt-
equity ratio is the ratio showing the relationship between long term debts and
shareholders fund. This ratio indicates the relative proportion of long-term debt and
equity in financing the assets of a firm. The ratio is computed by dividing the long
term debts of the firm by shareholders’ fund or net worth.
Debt- equity Ratio OR

 Proprietary Ratio: Proprietary ratio is the ratio of shareholders’ fund to total assets.
This ratio show the proportion of total assets financed by the owners. It is calculated
by dividing shareholders’ funds by the total assets.
Proprietary Ratio
 Solvency ratio: Solvency Ratio is the ratio of total outside liabilities (both non-current
and current liabilities) to the total assets of a concern.
Solvency Ratio
 Fixed Asset Ratio: Fixed Asset Ratio of fixed assets after depreciation to total long
term funds. Here, the total long fund means shareholder’s fund (including preference
share capital) and long term fund.
Fixed Asset Ratio
 Interest Coverage Ratio (Debt Service Ratio): This ratio expresses the relationship
between Earning Before Interest and Tax (EBIT) and fixed Interest charges. Fixed
interest charges include interest on debentures and bonds and other long term
borrowings.
Interest Coverage Ratio

 Fixed Assets to Net worth: This ratio shows the relationship between fixed assets and
shareholders fund. The purpose of this ratio is to find out the proportion of the owners
fund invested in fixed assets.
Fixed Assets to Net worth

 PROFITABILITY RATIOS
Profitability is an indication of the efficiency with which the operations of the business are
carried on. The following are the important profitability ratios.
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I General Profitability Ratio
 Gross Profit Ratio: The gross profit is the ratio of gross profit to revenue from
operations. It expresses the relationship between gross profit and sales.
Gross Profit Ratio
 Net Profit Ratio/ Net profit Margin Ratio: The net profit is the ratio of net profit to
revenue from operations .It measures the profit per rupee of sales. It is determined by
dividing the net profit after tax by the net revenue for the period.
Net Profit Ratio

 Operating Ratio: Operating ratio is the proportion of operational cost of a business to
its revenue from operations. It is an important ratio used to ascertain the general
profitability of the concern. It is calculated by dividing the total operating cost by
revenue from operations.
Operating Ratio =
II Overall Profitability Ratios

 Return on Shareholders’ fund: It relates the profit available for the shareholders on
their total investment. It is also known as ‘Profit on Net Worth’ ratio.
Return on Shareholders’ fund =

 Return on Equity Share Capital: This ratio indicates the return on the equity share
capital. Owners are more interested with this ratio since it indicates the success of the
company in generating earnings on their behalf. It is calculated as follows:
Return on E.S.C
 Return on Capital Employed (Yield on capital): This ratio is also known as Return on
Investment (ROI). It indicates the return on capital employed in the business and it
can be used to show the efficiency of the business as a whole.
ROI/ ROCE
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 Earning Per Share (EPS): This ratio helps in the assessment of the profitability of a
firm from the standpoint of equity shareholders. This measures the profit available to
the equity shareholders per share. It is calculated as:
EPS =
 Return on Total Assets: Profitability can be measured in terms of relationship between
net profit and total assets. It measures the profitability of investment.
Return on Total Assets

 Capital Turnover Ratio: It is the relationship between revenue from operations and
capital employed. This ratio is calculated to measure the efficiency or effectiveness
with which a firm utilises its capital.
Capital Turnover Ratio

 TURNOVER RATIOS (ACTIVITY RATIOS)
The activity ratios are those ratios which measure the level of activities and operating
efficiency of a business concern. These ratios are also known as ‘efficiency ratios’ These
ratios indicate the speed with which assets are being converted into revenue. Activity ratios
measure how efficiently the assets are employed by the firm.
 Inventory Turnover Ratio (Stock turnover ratio or Stock velocity): Inventory turnover
ratio is the ratio which helps to measure whether the investment is efficiently used or
not. It measures the speed at which the inventory is converted into revenue from
operations(sales). The ratio is calculated as follows:
Inventory Turnover Ratio

 Fixed assets turnover ratio: This ratio indicates the extent to which the investments in
fixed assets contribute towards sales.
Fixed Assets Turnover Ratio

 Working capital turnover ratio: This ratio reflects the turnover of the firms net working
capital in the course of the year. It’s a good measure of over trading and under-trading.
Working capital Ratio

 Trade Receivables Turnover Ratio (Debtors Turnover Ratio/ Debtor’s velocity: This
ratio is calculated to establish the relationship between average trade receivables and
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net credit revenue from operations within a period. It shows the credit collection power
and policy of the firm. It is calculated as:
Trade Receivables Turnover Ratio
 Trade Payables Turnover Ratios (Creditors Turnover Ratio/ Creditors’ velocity): It

indicates the number of times the trade payables turnover in a year. It signifies the
credit period enjoyed by the firm in paying off its creditors.
Trade Payables Turnover Ratio
Thus analysis of accounting ratios help anyone to easily grasp the relationship between
various items in financial statements.
 Du-pont analysis:
DuPont Analysis is a tool for a detailed assessment of the company’s profitability. DuPont Analysis is
a tool that may help us to avoid misleading conclusions regarding a company’s profitability. The
standard ratios of the company are compared to present ratios and changes in performance are judged.
DuPont analysis is a useful technique used to decompose

the different drivers of return on equity (ROE). The decomposition of ROE allows investors
to
focus on the key metrics of financial performance individually to identify strengths and
weaknesses. The equation for the basic DuPont model is as follows:
ROE = Net profit margin × Total Asset Turnover × Equity Multiplier/ Leverage Factor
OR
ROE
It gives a broader view of the Return on Equity of the company. It highlights the company’s
strengths and pinpoints the area where there is a scope for improvement. Say if the
shareholders are dissatisfied with lower ROE, the company with the help of DuPont Analysis
formula can assess whether the lower ROE is due to low-profit margin, low asset turnover or
poor leverage.
Once the management of the company has found the weak area, it may take steps to correct it.
The lower ROE may not always be a concern for the company as it may also happen due to
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normal business operations. For instance, the ROE may come down due to accelerated
depreciation in the initial years.
 Correlation Analysis:
The study is to find out the relationship between two performance measures. The data
extracted from annual report and accounts of the company. The correlation are engaged to
examine the relationship between the variables.
1.5 Analysis and Interpretation of Financial Statements
The financial statements become meaningless unless they are analysed and interpreted. On
proper analysis and interpretation of the results, they become valuable and useful. Managerial
decisions often depend on the results of analysis of financial statements and their
interpretation.
Analysis of financial statement is a process of evaluating the relationship between component
parts of a financial statement to obtain a better understanding of a firm’s position and
performance.
Interpretation refers to drawing inferences or conclusion on the basis of analysis conducted

on financial statements. Proper interpretation leads to proper conclusion and judgement and
taking effective measures for improvements.
3.2 AN OVERVIEW OF EARLIER STUDIES
A number of research studies have been carried out on different aspects of financial
performance analysis by the researchers, economists and academicians in India and abroad.
Different authors have analysed performance in different perspectives. A review of these
analyses is important in order to develop an approach that can be employed in the context of
the study. Therefore, the present chapter reviews the studies related with different aspects of
financial performance analysis.
Kallu Rao (1993) has made a study of inter-company financial analysis of tea industry-
retrospect and prospect. An attempt has been made in this study to analyse the important
variables of tea industry and projected future trends regarding sales and profit for the next 10
year periods, with a view to help the policy makers to take appropriate decisions. Various
financial ratios have been calculated for analyzing the financial health of the industry.
Pai, Vadivel and Kamala (1995) studied the diversified companies and financial performance:
A study. An effort was made to study the relationship between diversified firms and their
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financial performance. Seven large firms having different products-both related and
otherwise- in their portfolio and operating in diverse industries were analyzed. A set of
performance measures / ratios was employed to determine the level of financial performance.
The results reveal that the diversified firms studied have been healthy financial performance.
In RBI study (1995) an attempt was made to study the financial performance of private
corporate business sector during the period 1994-95. Of the 1030 companies covered in this
study, 925 are non-financial companies and 105 are financial companies. The results of the
non-financial and financial companies are also analyzed size-wise apart from the analysis of
the consolidated results for the entire sector. The good corporate performance during 1994-95
reflected in major profitability ratios registering distinct improvement in the year under
review as compared to the previous year.
Sardeesh Babu (1999)12 in her study “A Study on Financial Performance of Fertilizers and
Chemicals Travancore Limited”. The cost on various overheads can be brought down by
carefully scrutinizing each item and applying cost cutting techniques. The profitability of the
company can be improved by reducing the expenses that do not contribute any productive
use. The current assets can be managed efficiently by examining the material holding and
stock holding procedure and pattern. If the company increase its turnover and reduces its cost,
the profit will increase leading to an increases in the growth rate of sales, profit before tax
and profit after tax
Joanne Loundes (2001) in the study „The Financial performance of Australian Government
Trading Enterprises Pre-and Post-Reform‟ revealed that during the 1990's there were several
measures introduced to improve the efficiency and financial performance of government
trading enterprises in Australia. The purpose of this study was to discover whether there had
been any change in the financial performance of government trading enterprises operating in
electricity, gas, water, railways and ports industries as a result of these changes.
Debasish Sur and Kaushik Chakraborty (2006) in his study financial performance of Indian
Pharmaceutical industry. The comparative analysis the financial performance of Indian
Pharmaceutical industry for the period 1993 to 2002 by selecting six notable companies of
the industry. The comparison has been made from almost all points of view regarding
financial performance using relevant statistical tools.
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Zafar S.M.Tariq & Khalid S.M (2012) The study explored that ratios are calculated from
financial statements which are prepared as desired policies adopted on depreciation and stock
valuation by the management. Ratio is simple comparison of numerator and a denominator
that cannot produce complete and authentic picture of business. Results are manipulated and
also may not highlight other factors which affect performance of firm by promoters.
Ray Sabapriya (2012) Studied the sample of automobile companies to evaluate the
performance of industry through indicators namely sales, production and export trend etc for
period of 2003-04 to 2009-10. The study finds that automobile industry has been passing
through disruptive phases by over debt burden, under utilization of assets and liquidity
instability. The researcher suggested to improving the labour productivity, labour flexibility
and capital efficiency for success of industry in future
Jothi, K. & Geethalakshmi, A. (2016) This study tries to evaluate the profitability & financial
position of selected companies of Indian automobile industry using statistical tools like, ratio
analysis, mean, standard deviation, correlation.
3.3 UNIQUENESS OF RESEARCH STUDY
Many of the previous studies are focused on the performance evaluation of selected
industries. The above kinds of literature clearly state that many studies have been done on
profitability, financial performance, and liquidity analysis of various industries.
• The present study was conducted to evaluate the financial performance analysis of
Reliance Retail Limited, for the period of 5years ranging from 2015 to 2020. It helps
to explore the strength and weakness of the company.
• The central focus of the study was to conduct an evaluative study of the financial state
of the firm by using ratio investigation, comparative financial statements, and trend
analysis by taking into accounts the past years of the company’s financial statements.
• Examination and explanation of financial statements show that, shows a critical view
on the overall financial efficiency of RRL and Covid-19 impact on its financial
performance.
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CHAPTER IV
METHODOLOGY OF THE STUDY
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4.1 RESEARCH APPROACH AND DESIGN
The research design applicable for the present study is of analytical. Analytical data based on
the collection of secondary data published by Reliance Retail limited (RRL). As the use of
facts information are already available and analyses these to make a critical evaluation of the
material.
4.2 SOURCES OF ONLINE DATA
Sources of online data in this study are:

• Company website  Online journals
• Online magazines
• Online articles like blogs.
4.3 DATA ANALYSIS TOOLS
The data analysis tools used in the study include:

• Statistical analysis include : Correlation and Regression
• Figures and Charts
• Financial analysis tools (Ratio analysis, Trend analysis, Du-pont analysis etc.)
4.4 REPORT STRUCTURE
The report is presented in five chapters as given below;

 Chapter 1 Introduction.
 Chapter 2 Profile of Retail industry in India  Chapter 3 Review of Literature.
 Chapter 4 Methodology of the Study.
 Chapter 5 Data Analysis, Interpretation, Inference.
 Chapter 6 Findings of the Study
 Chapter 7 Conclusions
4.5 LIMITATIONS OF THE STUDY
 As the study was mainly based on secondary information, the inherent limitations of
the secondary data might have affected the findings of the study.
 Accuracy of the result depends the accuracy of secondary data.
 The study has been carried out for the period of five years and it is not sufficient
enough to analyze the entire aspect of the company.
 The result of the study cannot be generalized for other organization and we cannot
predict future financial position of the company based on the study
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CHAPTER V
DATA ANALYSIS, INTERPRETATION & INFERENCE
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The purpose of any study is to the decision by interpreting the information, so as to draw
conclusions relevant for decision. The purpose of this study is to help decision by providing a
historical record for managerial decisions.
Analysis of data is a process of inspecting, cleaning, transforming, and modeling data with
the goal of highlighting useful information, suggesting conclusions, and supporting decision
making. The objectives of the data analysis:
• Validity and reliability

• Testing there hypotheses of the investigation
Data analysis can offer the following benefits:
• Structuring the findings from survey research or other means of data collection.
• Break a macro picture into a micro one
• Acquiring meaningful insights from the dataset
• Basing critical decisions from the findings
• Ruling out human bias through proper statistical treatment
Data Interpretation can be defined as "the application of statistical procedures to analyze

specific observed or assumed facts from a particular study". Data interpretation is something
that is pretty common in education circles. Data interpretation is used as a means to
understand a student's grasp of the subject
It is very important to understand how to interpret data in order to do well in these tests. It is
especially important in case of students planning to study finance and mathematics. An
interpretation question will usually contain a chart or a graph. It will also contain some data
or even sets of data which the student has to analyze and come to a conclusion.
 Financial Analysis
 COMPARATIVE BALANCE SHEET ANALYSIS FOR THE PERIOD OF 5
YEARS (2015-16 to 2019- 20)
Since, this study analyse comparative statement for the period of 5 years. At first 2015 is
compared with 2016 and then 2016 with 2017 and 2017 with 2018 and 2018 with 2019
and 2019 with 2020.
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Table 5.1: Comparative Balance Sheet of Reliance Retail Limited (RRL) for the year 2015
& 2016
As at March As at March Absolute Change Percentage change

2016 (in crore) 2015 (in crore) (Increase/Decrease) (Increase/Decrease)
A B A–B=C C/B ×100
EQUITY AND LIABILITIES
Shareholders’ funds
Share capital 4,989.54 4,989.54 - -
Reserves and surplus 505.36 198.82 306.54 154.18
Total 5494.9 5188.36 306.54 5.91
Non-current liabilities
Long-term borrowings 76.03 3.37 72.66 2156.08
Other long-term liabilities - 75.00 (75.00) -
Long-term provisions 14.62 11.95 (2.67) 22.34
Total 90.65 90.32 0.33 0.37
Current liabilities
Short-term borrowings 1,086.89 1,670.16 (583.27) (34.92)
Trade payables
Micro and Small 7.32 4.51 2.81 62.31
Enterprises
Other 2,761.08 1,194.91 1566.17 131.07
Other current liabilities 484.68 416.22 68.46 16.45
Short-term provisions 1.88 1.09 0.79 72.48
Total 4341.85 3286.89 1054.96 32.10
TOTAL 9927.40 8565.57 1361.84 15.90
ASSETS
Non-current Assets
Fixed Assets
Tangible assets 2,026.87 2,053.83 (26.96) (1.31)
Intangible assets 2.62 0.36 2.26 627.78
Capital work-in-progress 483.90 423.16 60.74 14.35
Intangible Assets under 48.87 - 48.87 -
Development
Total 2,562.26 2,477.35 84.91 3.43
Non-current investments 484.81 470.10 14.71 3.13
Deferred tax assets (net) 445.58 563.33 (117.75) (20.90)
Long-term loans and advances 491.83 448.62 43.21 9.63
Total 3,984.48 3959.40 25.08 0.63
Current assets
Inventories 5,251.22 3,881.73 1369.49 35.28
Trade receivables 217.93 210.81 7.12 3.38
Cash and bank balances 47.60 150.52 (102.92) (68.38)
Short-term loans and advances 426.09 363.03 63.06 17.37
Other current assets 0.08 0.08 - -
Total 5942.92 4606.17 1336.75 29.02
TOTAL 9927.40 8565.57 1361.84 15.90
Interpretation:
Shareholder’s fund shows an increase of 5%. Whereas, fixed assets shows an increase of
105
4%, which might have been financed through long-term borrowings. It is a good sign of
investment of long-term fund. Cash and bank equivalence have decreased by 68.38%.
This indicates a negative cash position of the company. It further hints towards the fact
that company might find it challenging to meet its short term obligations.
106
& 2017
A B A–B=C C/B ×100
Equity 4,989.54
Equity Share capital 4,989.54 0.00 -
Other Equity 1,830.03 1,134.51 695.52 38.01
Total 6,819.57 6124.05 695.52 10.20
Long-term Borrowings 0.22 1.03 (0.81) (368.18)
Long-term Provisions 19.85 14.62 5.23 26.35
Total 20.07 15.65 4.42 22.02
Current liabilities
Short-term borrowings 27.48 1,086.89 (1,059.41) (3855.20)
Trade payables
3,926.86 2,711.25 1,215.61 30.96
Others 287.67 119.32 168.35 58.52
Total 4,832.78 4,343.54 489.24 10.12
TOTAL 11,672.42 10.483.24 1.189.18 10.19
ASSETS
Non-current Assets
Property. Plant and Equipment 2,245.88 2,026.87 219.01 10.81
Capital work-in-progress 434.18 483.90 (49.72) (10.27)
Intangible Assets under 290.65 48.87 241.78 494.74
Development
Total 2980.76 2562.26 418.50 16.33
Financial Assets Investments 486.28 484.81 1.47 0.30
Loans 53.39 31.57 21.82 69.12
Deferred tax assets (net) 851.85 1,001.42 (149.57) (14.94)
Other Non- Current Assets 146.30 236.60 (90.30) (38.17)
4,518.58 4,316.66 201.92 4.68
Total
Current assets
Inventories 5,096.68 5,249.57 (152.89) (2.91)
Investments 340.00 - -
Cash and Cash equivalents 252.33 47.60 204.73 430.11
Other financial Assets 232.33 264.11 (31.78) (12.03)
Other current assets 502.43 384.37 118.06 30.72
Total 7,153.84 6,166.58 987.26 16.01
TOTAL 11672.42 10,483.24 1,189.18 11.34
Interpretation:
 Long term borrowings have decreased. The owner’s equity has improved by 10%. This
indicates that the company need not depend on the external lenders thus showing a great
financial strength.
107
108
 Current assets show an increase of 16%. Whereas, current liabilities show an increase of only
10.12%. It means that the liquidity position of the concern shows an improvement.
& 2018
A B A–B=C C/B ×100
Equity 4,989.54
Equity Share capital 4,989.54 0.00 0.00
Other Equity 4,076.92 1,830.03 2,246.89 122.78
Total 9,066.46 6,819.57 2,246.89 32.95
Long-term Borrowings - 0.22 - -
Total 21.46 20.07 1.39 6.93
Current liabilities
Short-term borrowings 3,447.80 27.48 3,420.32 12446.58
Trade payables 8,231.87 3,926.68 4,305.19 109.64
Others 2,811.94 287.67 2,524.27 877.49
Other current liabilities 1.43 5.87 (4.44) (75.64)
Short-term provisions 503.14 585.08 (81.94) (14.00)
Total 14,996.49 4,832.78 10,163.71 210.31
TOTAL 24,084.41 11,672.42 12,411.99 106.34
ASSETS
Non-current Assets
Capital work-in-progress 2,007.78 434.18 1,573.60 362.43
Intangible Assets under 2,138.58 290.65 1,847.93 635.79
Development
Total 7,305.31 2,980.76 4,324.55 145.08
Loans 462.47 53.39 409.08 766.21
Deferred tax assets (net) 620.38 851.85 (231.47) (27.17)
Other Non- Current Assets 209.39 146.30 63.09 43.12
Total 9,131.96 4,518.58 4,613.38 102.10
Current assets
Inventories 10,465.28 5,096.68 5,368.60 105.34
Investments - 340.00 - -
Trade receivables 2,215.72 730.09 1,485.63 203.49
Cash and Cash equivalents 156.12 252.31 (96.19) (38.12)
Other financial Assets 267.12 232.33 34.79 14.97
Other current assets 1,848.12 502.43 1,345.69 267.84
Total 14,952.45 7,153.84 7,798.61 109.01
TOTAL 24,084.41 11,672.42 12,411.99 106.34
Interpretation: Current liabilities have increased by 210% whereas, the current assets show an
increase of 109% only. Though the percentage increase of current asset is low, the ratios of
current assets to current liabilities of both periods are satisfactory.
109
110
& 2019
A B A–B=C C/B ×100
Equity 4,989.54 4,989.54
Equity Share capital 0 -
Other Equity 7,597.87 4,076.92 3,520.95 86.36
Total 12,587.41 9,066.46 3,520.95 38.83
Deferred Tax Liabilities (net) 22.85 - - -
Total 49.53 21.46 28.07 130.80
Current liabilities
Short-term borrowings 12,800.56 3,447.80 9,352.76 271.27
Trade payables due to :
Micro and small Enterprise 13.03 24.77 (11.74) (47.40)
Other than MSE 4,109.07 8,207.10 (4,098.03) (49.93)
Other financial liabilities 4,142.12 2,811.94 1,330.18 47.30
Total 21,740.61 14,996.49 6,744.12 44.97
TOTAL 34,377.55 24,084.41 10,293.14 42.74
ASSETS
Non-current Assets
Property. Plant and Equipment 6,067.50 3,100.61 2,966.89 95.69
Capital work-in-progress 2,533.09 2,007.78 525.31 26.16
Intangible assets 1,091.03 58.34 1,032.69 1,770.12
Intangible Assets under 1,788.99 2,138.58 (349.59) (16.35)
Development
Total 11,480.61 7,305.31 4,175.30 57.15
Financial Assets 573.24 534.41 38.83 7.27
Investments
Loans 1,122.14 462.47 659.67 142.64
Deferred tax assets (net) - 620.38 - -
Other Non- Current Assets 145.29 209.39 (64.10) (30.61)
Total 13,321.28 9,131.96 4,189.32 45.88
Current assets
Inventories 11,291.83 10,465.28 826.55 7.90
Investments 3,002.89 - - -
Trade receivables 4,330.17 2,215.72 2,114.45 95.43
Other current assets 1,720.39 1,848.12 (127.73) (6.91)
Total 21,056.27 14,952.45 6,103.82 40.82
TOTAL 34,377.55 24,084.41 10,293.14 42.74
Interpretation:
 Property, Plant and machinery increased by 95%. This was on account of the huge addition
made to the plant and machinery by the company in the given accounting periods.
 Such additional machinery leads to an incredible improvement in the revenue of the company
during the year.
111
112
Table 5.5: Comparative Balance Sheet of Reliance Retail Limited (RRL) for the year
2019 & 2020
As at March As at March Absolute Change Percentage
2020 (in crore) 2019 (in crore) (Increase/Decrease) change
(Increase/Decr
ease)
A B A–B=C C/B ×100
Equity 4,990.40 4,989.54
Equity Share capital 0.86 0.02
Other Equity 13,124.78 7,597.87 5,526.91 72.74
Total 18,115.18 12,587.41 5,527.77 43.92
Deferred Tax Liabilities (net) 38.10 22.85 15.25 66.74
Total 946.30 49.53 896.77 1810.56
Current liabilities
Short-term borrowings 4,665.74 12,800.56 (8,134.82) (63.55)
Micro and small Enterprise 33.97 13.03 20.94 160.71
Other than MSE 5,642.87 4,109.07 1,533.80 37.33
Other financial liabilities 5,109.43 4,142.12 967.31 23.35
Other current liabilities 1,049.33 673.84 375.49 55.72
Total 16,504.43 21,740.61 (5,236.18) (24.08)
TOTAL 35,565.91 34,377.55 1,188.36 3.46
ASSETS
Non-current Assets
Property. Plant and Equipment 7,185.34 6,067.50 1,117.84 18.42
Capital work-in-progress 6,068.34 2,533.09 3,535.25 139.56
Intangible assets 981.80 1,091.03 (109.23) (10.01)
Intangible Assets under 2,752.74 1,788.99 963.75 53.87
Development
Total 16,988.22 11,480.61 5,507.61 47.97
Financial Assets 578.24 573.24 5 0.87
Investments
Loans 2,436.10 1,122.14 1,313.96 117.09
Deferred tax assets (net) - - - -
Total 20,225.47 13,321.28 6,904.19 51.83
Current assets
Inventories 9,348.16 11,291.83 (1,943.67) (17.21)
Investments - 3,002.89 - -
Trade receivables 2489.10 4,330.17 (1,841.07) (42.52)
Other financial Assets 1,508.67 381.30 1,127.37 295.66
Other current assets 1,660.01 1,720.39 (60.38) (3.51)
Total 15,340.44 21,056.27 (5,715.83) (27.15)
TOTAL 35,565.91 34,377.55 1,188.36 3.46
Interpretation:
 It is evident that current liabilities have decreased by 24.08% and the current assets also
decreased by 27.5%. This indicates that the company might finding challenging to meet its
113
114
short term obligation. But since it’s a very small proportion it doesnot have a negative
impact on the liquidity position.
 COMMON-SIZE BALANCE SHEET ANALYSIS FOR THE PERIOD OF 5 YEARS
(2015-16 to-2019-2020)
This study analyse common size statement for the period of 5 years.
Table 5.6: Common size Balance Sheet of Reliance Retail Limited (RRL) for the year
2015 & 2016
Absolute Amounts Percentage change to

(in crore) Balance Sheet total
2015 2016 2015 2016

Shareholders’ funds Share
capital 4,989.54 4,989.54 58.25 50.26
Reserves and surplus 198.82 505.36 2.32 5.09
Total 5188.36 5494.9 60.57 55.35
Long-term borrowings 3.37 76.03 0.04 0.77
Other long-term liabilities 75.00 - 0.88 -
Long-term provisions 11.95 14.62 0.14 0.15
Total 90.32 90.65 1.05 0.91
Current liabilities
Short-term borrowings 1,670.16 1,086.89 19.50 10.95
Trade payables
Micro and Small Enterprises 4.51 7.32 0.05 0.07
Other 1,194.91 2,761.08 13.95 27.81
Total 3286.89 4341.85 38.37 43.74
TOTAL 8565.57 9927.40 100 100
ASSETS
Non-current Assets Fixed
Assets
Tangible assets 2,053.83 2,026.87 23.98 20.42
Intangible Assets under - 48.87 - 0.49
Development
Total 2,477.35 2,562.26 28.92 25.81
Non-current investments 470.10 484.81 5.49 4.88
Deferred tax assets (net) 563.33 445.58 6.58 4.49
Long-term loans and advances 448.62 491.83 5.24 4.95
Total 3959.40 3,984.48 46.22 40.14
Current assets
Inventories 3,881.73 5,251.22 45.32 52.90
Cash and bank balances 150.52 47.60 1.76 0.48
Short-term loans and advances 363.03 426.09 4.24 4.29
Other current assets 0.08 0.08 0 0
Total 4606.17 5942.92 53.78 59.86
TOTAL 8565.57 9927.40 100 100
115
Interpretation:
For instance, there is a relative decrease in the share capital from 2015 to 2016. While the
current liabilities show an uptrend during the same period. Shareholders fund in relation to
total equities and liabilities are too high in 2015 & 2016. Similarly, current assets show a
greater percentage in relation to the total assets as the base value.
Table 5.7: Common-size Balance Sheet of Reliance Retail Limited (RRL) for the year
2016 & 2017
Absolute Amounts Percentage change to
(in crore) Balance Sheet total
2015 2016 2015 2016

Equity 4,989.54
Other Equity 1,134.51 1,830.03 10.82 15.68
Total 6124.05 6,819.57 58.42 58.42
Long-term Borrowings 1.03 0.22 0.01 0.00
Total 15.65 20.07 0.15 0.17
Current liabilities
Short-term borrowings 1,086.89 27.48 10.37 0.24
Trade payables 2,711.25 3,926.86 25.86 33.64
Others 119.32 287.67 1.14 2.46
Total 4,343.54 4,832.78 41.43 41.40
TOTAL 10,483.24 11,672.42 100 100
ASSETS
Non-current Assets
Intangible Assets under 48.87 290.65 0.47 2.49
Development
Total 2562.26 2980.76 24.44 25.54
Loans 31.57 53.39 0.30 0.46
Deferred tax assets (net) 1,001.42 851.85 9.55 7.30
4,316.66 4,518.58 41.18 38.71
Total
Current assets
Inventories 5,249.57 5,096.68 50.08 43.66
Investments - 340.00 - 2.91
116
Other current assets 384.37 502.43 3.67 4.30
Total 6,166.58 7,153.84 58.82 61.29
TOTAL 10,483.24 11672.42 100 100
117
Interpretation:
Current assets as a percentage of total assets increased substantially from 58.82% to 61.29%.
Investments increased to 2.91% in 2017, whereas Inventories shows a decrease of 6.42%.
Equity/ Shareholders fund remained same for both the year
2017 & 2018
Absolute Amounts Percentage change
(In crore) (In crore)
2017 2018 2017 2018

Equity 4,989.54
Other Equity 1,830.03 4,076.92 15.68 16.93
Total 6,819.57 9,066.46 58.42 37.64
Long-term Borrowings 0.22 - 0.00 -
Total 20.07 21.46 0.17 0.09
Current liabilities
Short-term borrowings 27.48 3,447.80 0.24 14.32
Trade payables 3,926.68 8,231.87 33.64 34.18
Others 287.67 2,811.94 2.46 11.68
Total 4,832.78 14,996.49 41.40 62.27
TOTAL 11,672.42 24,084.41 100 100
ASSETS
Non-current Assets
Capital work-in-progress 434.18 2,007.78 3.72 8.34
Intangible Assets under 290.65 2,138.58 2.49 8.88
Development
Total 2,980.76 7,305.31 25.54 30.33
Financial Assets Investments
486.28 534.41 4.17
2.22
Loans 53.39 462.47 0.46 1.92
Deferred tax assets (net) 851.85 620.38 7.30 2.58
Total 4,518.58 9,131.96 38.71 37.92
Current assets
Inventories 5,096.68 10,465.28 43.66 43.45
Investments 340.00 - 2.91 -
Trade receivables 730.09 2,215.72 6.25 9.20
Other current assets 502.43 1,848.12 4.30 7.67
Total 7,153.84 14,952.45 61.29 62.08
118
TOTAL 11,672.42 24,084.41 100 100
Interpretation:
119
 Equity have decreased from 42.25% to 20.72% in 2018. In 2017 equity remained the
major portion of total base value, whereas in 2018, current liabilities share become high in
relation to the total base value of Equities and Liabilities.
 Investments show a decreased trend in the year of 2018. Current assets form a major part
in relation to total assets in 2017 & 2018.
2018 & 2019
Absolute Amount Percentage change
(in crore) (in crore)
2018 2019 2018 2019

Equity 4,989.54 4,989.54 20.72
Equity Share capital 14.51
Other Equity 4,076.92 7,597.87 16.93 22.10
Total 9,066.46 12,587.41 37.64 36.62
Deferred Tax Liabilities (net) - 22.85 - 0.07
Total 21.46 49.53 0.09 0.14
Current liabilities
Other than MSE 8,207.10 4,109.07 34.08 11.95
Total 14,996.49 21,740.61 62.27 63.24
TOTAL 24,084.41 34,377.55 100 100
ASSETS
Non-current Assets
Intangible assets 58.34 1,091.03 0.24 3.17
Development
Total 7,305.31 11,480.61 30.33 33.40
Financial Assets
534.41 573.24 2.22
Investments 1.67
Loans 462.47 1,122.14 1.92 3.26
Deferred tax assets (net) 620.38 - 2.58 -
Total 9,131.96 13,321.28 37.92 38.75
Current assets
Inventories 10,465.28 11,291.83 43.45 32.85
Investments - 3,002.89 - 8.74
Trade receivables 2,215.72 4,330.17 9.20 12.60
Other current assets 1,848.12 1,720.39 7.67 5.00
Total 14,952.45 21,056.27 62.08 61.25
TOTAL 24,084.41 34,377.55 100 100
120
121
Interpretation: Equity and liabilities decreased in a very small proportion from 2018 to 2019.
Non-current liabilities show a very less proportion in relation to total base value of Balance
Sheet. Whereas, in asset side Non-current assets have small proportion in relation total assets
value than current assets.
2019 & 2020
Absolute Amount Percentage change

(in crore) (in crore)
2019 2020 2019 2020

Equity 4,989.54 4,990.40 14.51
Equity Share capital 14.03
Other Equity 7,597.87 13,124.78 22.10 36.90
Total 12,587.41 18,115.18 36.62 50.93
Deferred Tax Liabilities (net) 22.85 38.10 0.07 0.11
Total 49.53 946.30 0.14 2.66
Current liabilities
Other than MSE 4,109.07 5,642.87 11.95 15.87
Other current liabilities 673.84 1,049.33 1.96 2.95
Total 21,740.61 16,504.43 63.24 46.41
TOTAL 34,377.55 35,565.91 100 100
ASSETS
Non-current Assets
Intangible assets 1,091.03 981.80 3.17 2.76
Development
Total 11,480.61 16,988.22 33.40 47.77
Financial Assets 573.24 578.24 1.67 1.63
Investments
Loans 1,122.14 2,436.10 3.26 6.85
Deferred tax assets (net) - - - -
Total 13,321.28 20,225.47 38.75 56.87
Current assets
Inventories 11,291.83 9,348.16 32.85 26.28
Investments 3,002.89 - 8.74 -
Trade receivables 4,330.17 2489.10 12.60 7.00
Other financial Assets 381.30 1,508.67 1.11 4.24
Other current assets 1,720.39 1,660.01 5.00 4.67
Total 21,056.27 15,340.44 61.25 43.13
TOTAL 34,377.55 35,565.91 100 100
122
123
Interpretation:
 Shareholders fund showed an increase from 36.62% in 2019 to 50.93% in 2020.Thus, it

forms a high relation with total base value of liabilities in 2020. Current liabilities show a
decreased trend in relation with total value in 2020.
 Non-current asset shows an upper trend in 2020. In 2019, Current assets were in high
relation to total assets value whereas, it changed to non-current assets in the year 2020.
 TREND ANALYSIS FOR THE PERIOD OF FIVE YEARS (2015-16 to 2019-20)
 ESTIMATING NET PROFIT FOR THE PERIOD OF NEXT FIVE YEARS (2020-
21 to 2024-25
Table No 5.11: Table calculating trend analysis for Net Profit
YEAR X Y XY X2
2015-16 1 306.54 306.54 1
2016-17 2 442.6 885.2 4
2017-18 3 1246.89 3740.67 9
2018-19 4 3138.26 12553.04 16
2019-20 5 5539.79 27698.95 25
TOTAL 15 10674.08 45184.4 55
Y= a + bX Where,
b = N×∑XY-∑X×∑Y a
N×∑X2 - ∑(X)2
b a
b a=
Estimated Net Profit for the year 2020-21 to 2024-2025
Y = a + bx
For the year 2020-21, Y = -1813.81 + 1316.21(6) =6083.45

124
125
126
 ESTIMATING NET SALES FOR THE PERIOD OF NEXT YEAR (2020-21 to 2024-
25)
Table no 5.13: Table showing Net Sales from 2015-16 to 2019-20
YEAR X Y XY X2
2015-16 1 18399.22 18399.22 1
2016-17 2 26437.68 52875.36 4
2017-18 3 51456.17 154368.5 9
2018-19 4 101946.52 407786.1 16
2019-20 5 130367.36 651836.8 25
TOTAL 15 328606.95 1285266 55
Y= a + bX Where,
b = N×∑XY-∑X×∑Y a
N×∑X2 - ∑(X)2
b a
b a=
Estimated Net Sales for the year 2020-21 to 2024-2025
Y = a + bx
For the year 2020-21, Y = -24112.7 + 29944.52(6) =155554.42
For the year 2021-22, Y = -24112.7 + 29944.52(7) =185498.94
For the year 2022-23, Y = -24112.7 + 29944.52(8) =215443.46
For the year 2023-24, Y = -24112.7 + 29944.52(9) =245387.98
For the year 2024-25, Y = -24112.7 + 29944.52(10) =275332.5

127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145
146
147
148
149
Total Asset Turnover
Table No 5.36: Total Asset Turnover

YEAR SALES NET ASSETS ASSET TURNOVER
2015-16 18418.36 5942.92 3.10
2016-17 26473.13 11672.42 2.27
2017-18 51501.73 24084.41 2.14
2018-19 102058.6 34377.55 2.97
2019-20 130627.7 35565.91 3.67
Leverage factor
Table No 5.37: Leverage Factor
YEAR ASSETS SHAREHOLDERS EQUITY LEVEARAGE FACTOR

2015-16 5942.92 5494.9 1.08
2016-17 11672.42 6819.57 1.71
2017-18 24084.41 9066.46 2.66
2018-19 34377.55 12587.41 2.73
2019-20 35565.91 18115.18 1.96
DU PONT ANALYSIS
= Net profit margin × Total Asset Turnover × Leverage Factor
Table No 5.38: Du-pont Analysis
PAT ASSET
YEAR MARGIN TURNOVER LEVERAGE FACTOR RETURN ON EQUITY
2015-16 1.66 3.10 1.08 5.56
2016-17 1.67 2.27 1.71 6.48
2017-18 2.41 2.14 2.66 13.69
2018-19 3.07 2.97 2.73 24.89
2019-20 4.24 3.67 1.96 30.57
150
151
152
 CORRELATION ANALYSIS
Hypothesis – Finding the significance between Sales and Profit
H0: There is no relationship between sales and profit
Table No 5.40: Calculating Correlation analysis –sales and profit
X Y XY X2 Y2
18399.22 306.54 5640096.899 338531296.6 93966.77
26437.68 442.6 11701317.17 698950923.8 195894.8
51456.17 1246.89 64160183.81 2647737431 1554735
101946.52 3138.26 319934685.9 10393092940 9848676
130367.36 5539.79 722207797.3 16995648553 30689273

∑X= ∑Y= ∑XY= ∑X2= ∑Y2=
328606.95 10674.08 1123644081 31073961145 42382545
Co-efficient of correlation, r =
= 0.979
H1: There is high correlation between sales and profit
153
GraphNo5.24: Correlation
betweennetsalesandprofit
INTERPRETATION:
Sincethecorrelation
is positiveandit is nearto 1 signifiesthatthereis highcorrelationbetween
sales and profit. So, it is evident that the value of sales and profit moves in same direction i.e.,
increase in the value of one variable results into an increase in the value of other variable also
or if a decreasein thevalueof onevariable,resultsintoa decreasein thevalueof othervariable.
Fromthis itis clearthat anychangein net saleswill affect net
profit asit ishighlycorrelated.
154
155
CHAPTER – VI
FINDINGS OF THE STUDY
156
157
Findings:
The following were the findings from the study of financial performance & analysis on
Reliance Retail Limited:-
 Findings from comparative statement analysis:

 As per the analysis done on comparative balance sheet for the period of 5 years (2015-
16 to 2019-20), the current assets of Reliance Retail Limited have increased by
29.02
% in the year 2016 over 2015 whereas, it changed to 16.01% in the year 2017 over
2016, 109.01% in the year 2018 over 2017, 40.82% in the year 2019 over 2018 and
decreased by 27.51% in the year 2020 over 2019
 Comparative balance sheet of 2015 & 16, shows good sign of investment of long-term
fund. It further hints towards the fact that company might find it challenging to meet
its short term obligations.
 In the year 2016 & 2017, Long term borrowings have decreased. The owner’s equity
has improved by 10%. This indicates that the company need not depend on the
external lenders thus showing a great financial strength.
 In the year 2017& 2018, there was on account of the huge addition made to the plant
and machinery by the company in the given accounting periods. Such additional
machinery leads to an incredible improvement in the revenue of the company during
the year.
 Findings from common-size balance sheet:
 From the analysis over the period of 5 years, each line item on balance sheet is
expressed as a percentage of total assets or total liabilities. The common size
percentages show how each line item or component affects the financial position of
the company.
 Findings from trend analysis:
 The Net profit on the basis of last 5 years (2015-16 to 2019-20) position, we can
predict the profit trend for the future years (2020-21 to 2024-25). Here this trend
shows out a positive growth for the company in their future period of time. The
estimated profit for the next five years is moving with a CAGR of 13.28%. This
positive net profit indicates the firm is in a good position and is earning more than its
competitors.
 Estimated Net sales shows a positive trend for the next 5 years (2020-21 to 2024-25)
from the analysis of sales over the period of past five years (2015-16 to 2019-21). It
indicates good sign of financial performance and business profitability.
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159
 Findings from Ratio analysis:
 From the analysis of Current ratio, it is found that, overall the company has good
liquidity position, it can able to meet its current liabilities during the period 2015-16
& 2016-17. But in the year 2017-18, current ratio became equal to current liabilities
not leaving a comfortable margin of working capital after paying off the current
liabilities. In the year 2018-19 & 2019-20, current ratio again comes down leaving
inadequate safety to creditors. From this, it is clear that short-term financial position
of RRL is may not be desirable.
 From the analysis of quick ratio, it is found that the company has not meet ideal ratio
in the five years. The ratio is less than 1 over these years, indicating the financial
position of the concern shall be deemed to be unsound. It is evident that quick ratio is
less than 1 in these 5 years, indicating company might find it challenging to meet its
short term obligations, especially in the year 2015-16 & 2017-18.
 From the analysis of absolute ratio, the ratio is comparatively less than 0.5, so it
represents the company’s day-to-day cash management is in a very poor light. During
the year 2017-18, the ratio is considerable more compared to other years, so it
represents enough funds within the type of cash in order to fulfil its short-term
obligations in time.
 From the analysis of Debt –equity ratio, it is found that the company is using low
debt, the company is focusing on shareholders not creditors. Here, for Reliance Retail
it suits low debt-to equity ratio as it is operating under volatile and unpredictable
business environments as they cannot afford financial commitments that they cannot
meet in case of sudden downturns in economic activity. So, here, low debt-equity ratio
implies a higher claim of owners than that of the long term lenders and is favourable
to the firm.
 Proprietary shows the financial strength of the company. It helps the lenders to find
out the proportion of shareholders’ fund to the total assets. Higher ratio of Reliance
Retail Limited indicates a secured position to lenders.
 The lower Solvency ratio of 2016-17, ensures stability is the long term solvency
position of a firm.
 From the analysis of fixed asset ratio, indicates the extent to which the total of fixed
assets are financed by total long term funds of the firm. The ratio over these years
indicates good financial policy of the company.
 Interest Coverage ratio shows how many times the interest charges are covered by
EBIT. Higher the ratio better is the position of long term lenders and vice-versa. It is
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better to have the ratio at more than 6 or 7 times. So, for RRL 2017-18 has higher interest
coverage ratio. It indicates the better position of long term lenders.
 The fixed assets to net worth ratio over these years was satisfactory.
 From the analysis of Fixed asset turnover ratio, it is found that the company had
utilizing the asset efficiently in all the years. It has reached the ideal ratio in all the
years.
 From the analysis of gross profit ratio, it is found that the company gross profit ratio grew
with a CAGR of 59.75%
 Higher Net Profit Ratio in 2017-18, indicates efficiency and profitability of business.
 It appears that RRL has maintained its EBITDA at an average of 7%, and in fact, on a
closer look it is clear the EBITDA margin is increasing from 2017-18. This is a good
sign as it shows consistency and efficiency in the management’s operational
capabilities.
 Mostly, a robust ROE indicates that a company is utilizing the fund generated through
shareholders’ investment efficiently. It is evident that RRL has a desirable return on
equity and it is increasing over the years.
 The higher the return on investment ratio, the more efficiently the company is using its
asset base to generate sales. ROI is higher in the year 2018-19 and lower in the year
2015-16. Therefore, ROI of RRL is considered desirable.
 From the analysis, it shows that capital turnover ratio increases year by year till 2018- 
19. So we can conclude that the company able to achieve maximum sales with minimum
amount of capital employed.
 Inventory turnover ratio and Trade receivable ratio of RRL for these years found
satisfactory.
 From the analysis of working capital turnover ratio, it is found that the company has
utilized its working capital usefully for sales in the year 2016-18, but it is reduced in
the year 2019 and 2020.
161
 ROE calculated from du-pont analysis and from ratio analysis remains to be same.
162
CHAPTER – VII
CONCLUSION
163
164
The study aims to evaluate the financial performance of Reliance Retail Limited by using
analysis tools. Financial performance analysis is the process of identifying the financial
strengths and weaknesses of the firm by properly establishing the relationship between the
items of balance sheet and profit and loss account. An analysis of financial performance
shows that the company’s ability to meet its current obligation is satisfactory. Meanwhile the
company has to go for more debt component, because the company is using low debt
component and moreover it can develop further business activities with the help of more
funds. The company has to control over expenses, because the expenses is keep on increasing
in all the years, and it results in decreasing in profit available for shareholders. The company
has to maintain adequate cash level to meet out its immediate requirement, because the
company maintains less cash availability. The company inventories is keep on increasing
from the beginning of the year, so it has to take necessary steps like sales promotion,
advertising to clear the stocks because it affects the liquidity position. The company has to
properly utilize the assets efficiently to generate more profits. Overall financial performance
analysis of Reliance Retail found to very satisfactory when compared with industry average.
The company has a great growth opportunity in the coming years.
165
166
ANNEXURE
167
168
169
170
171
172
173
174
BIBLIOGRAPHY
175
176
Reports
Annual accounts & reports of Reliance Retail Ltd. from 2015-2016 to 2019-2020.
Jay Gandhi, Rutvi Chokshi. “HDFC Securities- Institutional Research”- Reliance Retail-
Company update – 14 April 2020
Alok Shah, Abneesh Roy. “Edelweiss Securities Limited – India Equity Research | Retail”
Sector update
Anarock retail, “Indian Retail” – Retail Association of India – September 2020

IBEF, “Retail” – March 2021
Books of Reference
1. Chandra , P. “Financial Management”, Tata Me Graw-Hill Publishing Company Ltd.,

New Delhi,2014
2. Dr. Maheshwari, S.N. “Financial Management Principles and Practices”, Sultan
Chand and Sons, New Delhi, 2009
3. Jain and Narang. “Financial Accounting”, Kalyani Publishers, 2005
Websites and Journals
● www.ril.com
● https://www.ibef.org/industry/retail-india.aspx
● https://www.relianceretail.com/investor-relations.html
● https://www.investindia.gov.in/sector/retail-e-commerce
● https://www.indiaretailing.com/2017/11/16/retail/indian-retail-industry-growth-
trends-challenges-opportunity/
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178
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FINANCIAL PERFORMANCE ANALYSIS OF

RELIANCE RETAIL LIMITED, MUMBAI

Under the guidance of

Prof. Dr. VP Vijayamohan Faculty

Accredited by NAAC with ‘A’ Grade

This is to certify that the project report entitled “FINANCIAL PERFORMANCE OF

Prof.Dr. VP Vijayamohan Dr. Sudeep B. Chandramana

Rev. Dr. Cherian J.Kottayil

Table No. Title Page No.

Graph. No. Title Page No.

FDI: Foreign Direct Investment

Sl.No. CHAPTERS Page no.

6. CHAPTER VI FINDINGS OF THE STUDY

1.1 BACKGROUND OF THE STUDY

Analysis of financial performance of a company is the process of determining the significant

The analysis of financial statements consists of a study of relationships and trends to

Financial performance analysis involves using financial data to assess a company’s

1.2 STATEMENT OF THE PROBLEM

1.4 OBJECTIVES OF THE STUDY

The objectives of the study include:-

 To evaluate the financial performance of Reliance Retail Ltd in terms of solvency,

• India ranked No. 2 in Global Retail Development Index (GRDI) in 2019.

2.1.3 Retail formats in India

2.1.4 Reliance Retail - Operating Model

 Data Analytics:Serving individuals, kiranas, hotels, restaurants, caterers and B2B

 Design & Develop Solutions:

Customerplacesan orderthroughoneof theonlinemarketplace

In caseof an onlineorder,themarketplace

 For marketplaces, which anyway make slim margins

 Considering increasing usage of smartphones and deepening internet penetration, it is a

• In this backdrop, when a customer places an order through online/app platform,

2.1.5 Business process- Strategies adopted by retail industries

 Offering value added services:

In February 2021, Reckitt Benckiser, a consumer health and hygiene company, in

 Joint Venture (JV):

2.2 MARKET DEMAND & SUPPLY – CONTRIBUTION TO GDP – REVENUE

2.2.1 Global Economy Overview

2.2.2 Indian Economy Overview

2.2.3 Retail Market Overview:-

2.2.4 Contribution to GDP

 Multipledriversareleadingto stronggrowthin Indianretailthrougha consumption

2.2.5 Revenue Generation

 Pantaloon has 342 stores in >155 towns

Threat of New Entrants:

• Entry as a retailer is quite simple. However, players need to establish strong

Bargaining power of Suppliers:

Bargaining power of Customers:

2.3.4 PESTEL Analysis of Retail Industry

• Government Regulation & Political Influence

Social factors affecting Retail Industry

Technological Factors Affecting Retail Industry

Legal Factors Affecting Retail Industry

Environment Factors Affecting Retail Industry

Effect of COVID-19 on Indian Retail Market

During Lockdown a survey conducted by Retailers Association of India says, In Non-Grocery

2.4 PRICING STRATEGIES IN THE INDUSTRY

Below is the pricing strategy in Reliance Retail marketing strategy:

Reliance Retail stores offer goods at extremely competitive prices.