India Retail: Reliance forays into Consumer finance

In what appears to be a big-ticket foray into the consumer finance space in India, Reliance Retail is entering into a joint venture (JV) with Citigroup for setting up a non-banking finance company (NBFC).
The NBFC will largely deal in loans/credit cards in India for Reliance Retail customers.

In the coming together of India’s largest business group and one of the world’s largest financial services groups, Citi is likely to hold a majority stake in the retail venture.

Consumer finance, which would include loans and credit cards, also is the most growing segments in the Indian financial services sector.

Annual growth rates of 30-40% are luring global financial companies including
GE and Deutsche Bank.
The investment will be to close to Rs 430-450 crore. Reliance is already
contemplating high-street retail in India with luxury brands as well as
the high-value consumer durables.

It has signed up with Apple Computer
to set up co-branded stores in the country.
The company is going from strength to strength and currently has around
340 stores across formats, and seeks to fulfill expansion plans of reaching
the 700 figure by December 2008.

While annual credit card spends in India are estimated to be in the
range of Rs 50,000 crore, the total size of the consumer finance segment
in India is a little difficult to predict as analysts say. For credit
cards, India’s penetration is below 1% against a global average of 4.6%.

Kishore Biyani-promoted Future group, known for Big Bazaar and Food Bazaar,
has also made an entry with its own consumer finance outfit called Future
Money. It will provide credit up to 70-80% of the cost of purchases made
by customers at Future group’s retail stores.