Young adults in India are about to be spoiled for choice by two of its largest conglomerates.

Image: Bloomberg5 min read Last Updated : Aug 20 2024 | 7:59 AM ISTBy Andy MukherjeeAsia’s richest man, who made a glamorous splash this year with a $600 million wedding bash for his son, is now in a battle to hawk fashion to paying customers.

Yet in this fight, Mukesh Ambani is getting beaten by a much older conglomerate.

Things are becoming serious enough for him to enlist Chinese help.  Sales at Trent Ltd., the retail unit of the $165 billion Tata Group, have tripled over their pre-pandemic levels in dollar terms.

Net profit has surged 12 times.

Zudio, the retailer’s in-house fast-fashion brand, has caught the imagination of a young clientele with trendy clothing at cheap prices. Four years ago, there were 80 Zudio stores in the world’s most-populous nation.

Last quarter, the count reached nearly 560 — in 164 cities.

Quick inventory turnover in places where rents are reasonable means high profits even at low margins. All of this is a problem for Ambani.

Apart from being a petrochemicals czar, a telecom titan and a media mogul, the 67-year-old is also India’s largest vendor of all kinds of merchandise.

His flagship Reliance Industries Ltd.

has poured more than $2 billion into its retailing unit over the past year, according to a recent report in The Economic Times. That isn’t all.

Reliance Retail raised over $6 billion during the pandemic from sovereign wealth funds in the Middle East and Singapore, along with General Atlantic and Silver Lake Partners.

Last year, it took in more money from Qatar Investment Authority, Abu Dhabi Investment Authority and KKR - Co.

at a valuation of $100 billion.

Ambani’s No.

1 task is to now lead the unit to a blockbuster initial public offering or a spinoff.

For that, he badly needs the fast-fashion crown. Enter — or rather, reenter — Shein.

New Delhi had responded to its 2020 border skirmishes with China by banning some Chinese apps.

The e-commerce firm, wildly popular with Indian teenagers, had to leave.

As the government starts relaxing its stance, Shein is making a comeback, according to media reports, but with platform, data and operations reportedly controlled by Reliance. It’s good news for Shein.

The world’s largest web-only fashion brand, founded in Nanjing and now headquartered in Singapore, has its own IPO coming up.

A partnership with the firm may be the sharpest arrow in Ambani’s quiver.  A year ago, Ambani launched Yousta, a store where everything is available under Rs 999 ($12), pitching it directly against Zudio.

But the results aren’t showing, yet.

Reliance Retail’s 8 per cent year-on-year sales growth in the June quarter was largely from air-conditioners, refrigerators, TVs and groceries.

The company cited “tepid discretionary demand” for fashion and lifestyle.   Granted, with revenue of more than $36 billion, Reliance Retail is a lot bigger than Trent’s $1.5 billion-a-year franchise.

Nevertheless, the Tata firm racked up 56 per cent expansion in sales last quarter. Growing 5 percentage points faster than overall sales, value retail, excluding food and grocery, will be a $170 billion market in India by 2026, according to consulting firm Wazir Advisors.

Apparel accounts for the biggest share of the pie.

With a public float drawing near, Ambani needs a quick win.

As part of his succession plan, the tycoon appears to have earmarked retail for his 32-year-old daughter, Isha Ambani.

He would rather hand over a mature business — a solid No.

1 in key categories — rather than one scrambling for market share and guzzling cash. That should set up an interesting competition between Ambani and Noel Tata.

The half-brother of Ratan Tata, the 86-year-old chairman emeritus of the group’s holding company, set out to build a cheaper, more ubiquitous Indian version of Zara.

(Zara’s owner Inditex SA has been a long-time Tata partner.) He has delivered.

Trent shares have tripled in the past year. What’s more, Trent is replicating the success of Zudio’s private brands elsewhere.

At Star, the hypermarket chain it runs in collaboration with UK’s Tesco Plc, the share of in-house labels has grown to 72 per cent from 63 per cent in one year, according to the latest quarterly earnings presentation.

That figure is not more than 15 per cent to 20 per cent for Reliance Retail, according to the Ken, a news website.

Ambani has some catching-up to do.

Shein is a great name to throw at young buyers, but it may not be enough to close the gap. The stakes are high on the other side, too.

Sustaining the success at Trent is also important to Noel Tata, 67.

He has a shot at joining the board of the holding company that controls the sprawling empire. Whatever the outcome of the contest, one thing is clear: When it comes to affordable casual wear, young adults in India are about to be spoiled for choice by two of its largest conglomerates — and all for under $12.Disclaimer: This is a Bloomberg Opinion piece, and these are the personal opinions of the writer.

They do not reflect the views of www.business-standard.com or the Business Standard newspaperFirst Published: Aug 20 2024 | 7:59 AMIST