Reliance Industries Ltd is rolling out a cost-efficiency drive across its units Reliance Retail and Reliance Jio Infocomm, reducing hiring, reviewing compensation benchmarks, and firing underperformers, multiple executives from the company and the wider industry said.
The retail business wants to eliminate the duplication of roles that followed its recent acquisitions, while in telecom, most of its 5G network rollout is complete, the people said, all of whom spoke on condition of anonymity.
“Reliance Retail and Jio had hired over the last year on a very large scale. They had recruited employees at higher-than-usual market value and now have been told by the top management to scale down. Those who are in the lower rung of performance may get retrenched,” a company executive said.
The two companies have slowed down on their recruitment efforts and will only hire on a “need basis”, said a second person, a senior consultant.
Reliance Retail employs 418,000 people, while Reliance Jio has over 80,000, many of them hired to fuel expansion in various retail formats and 5G networks.
“The large-scale hirings for 5G have happened, and more use cases are needed in the telecom business for the ramp-up to continue,” said a third person, also an executive with Reliance.
Although the companies have fared well, the managements have been told to become prudent with their costs despite a global slowdown, the executive added.
Reliance Retail Ventures Ltd had acquired Metro AG’s India business, including 31 wholesale stores, for ₹2,850 crore last December and earlier took over the lease of several Big bazaar outlets of debt-laden Future Retail. The acquisitions helped Reliance aggressively expand its retail footprint; as of 31 March 2023, it had 18,040 stores, including Jio mobility and communication stores.
According to a fourth person, this was also followed by job cuts, mostly ground staff under its B2B division JioMart Partner, which sells FMCG and general merchandise in bulk to retail stores, restaurants, offices and hotels. After the acquisition, people from JioMart Partner and Metro Cash & Carry were effectively covering the same kirana or institutional accounts; some were asked to move to other locations but did not want to, the person said on condition of anonymity. JioMart is Reliance Retail’s online commerce platform.
A fifth person, a retail industry executive, said some jobs at JioMart’s supply and delivery sides were eliminated since Metro Cash & Carry staff was more established in the segment than Reliance. “JioMart, per se, didn’t crack what they wanted to,” the executive added.
Hirings are expected to cool, especially in retail businesses where excess capacity is available due to the company’s recent acquisitions.
“Hiring may not be required, say, in the business-to-business side, at least for some time, as the company integrates the Metro business,” a sixth person said.
In fact, a May report by JP Morgan questioned RIL’s expansion in the retail business, which it said is yet to reflect in earnings despite the scale-up. “RIL has aggressively added floor space with square feet increasing three times to an estimated 65 million sq. ft —nearly doubling in last two years—with a sharp increase in overall store count, warehousing space addition, and acquisitions of multiple brands across categories and entry into newer categories and formats.
However, as the same is not yet reflected in earnings, there are investor questions on what is the eventual end game in retail, when would spending ease and when should a sharp uptick in margins and returns come through,” they said.
The sixth person also said the retailer shut certain JioMart warehouses, especially where large Metro stores already exist and serve similar areas.
RIL clocked 19.11% year-on-year and 22.21% quarter-on-quarter growth in consolidated profit after tax (PAT) in the March quarter. Revenue from operations rose 2.1% year-on-year and fell 1.91% sequentially.