Reliance Industries Buys Future Groups Retail Business For Rs 24,713 Crore

Ambani's Reliance buys India's Future Group businesses for $3.4bn

Reliance puts Rs 25,000-crore bet on bright Future for retail

Conrad Doyle | 31 August, 2020, 10:28

Indian conglomerate Reliance is acquiring the retail, wholesale and logistics businesses of the Future Group for $3.38 billion, the oil-to-telecoms giant announced late Saturday, strengthening its presence in the country's hugely competitive e-commerce sector.

Besides, there exists a debt exposure of Rs 11,000 crore on account of Future Group, which needs to be managed.

The acquisition complements and makes a strong strategic fit into Reliance's retail business, the Reliance Retail Ventures release said. Dollar notes sold by Future Retail Ltd. rose 16 cents to 89.1 cents on the dollar, set for the biggest jump since issuance in January, according to Bloomberg-compiled prices. Through the stake in Future Coupons, Amazon managed to pick up shares in Future Retail and access to country's 1.3 billion consumers.

The transaction will see Reliance Retail and Fashion Lifestyle Ltd (RRFLL), a subsidiary of Reliance Retail Ventures Ltd (RRVL), acquiring 6.09 per cent of the post merger equity of Future Enterprises Ltd (FEL) and investing another Rs 400 crore in preferential issue of equity warrants, which after conversion will see its stake going up by another 7.05 per cent in the company.

After this transaction, FEL will retain the manufacturing and distribution of FMCG goods and integrated fashion sourcing and manufacturing business and its insurance JVs with Generali and JVs with NTC Mills. They added, "For this transaction to be value accretive, RIL likely needs to reconfigure these stores and figure out how to meaningfully turn around Future Retail's inventory problem; in view of the scale involved (23 million square feet), this is far from given".

Mr Ambani has raised more than $20bn this year by selling stakes in his technology arm Jio Platforms to investors including Google, Abu Dhabi Investment Authority, Mubadala Investment Company, Saudi Arabia's Public Investment Fund, Facebook, KKR and General Atlantic. The retail and wholesale business includes Big Bazaar, fbb, Foodhall, Easyday, Nilgiris, Central and Brand Factory.

"Beyond the numbers, Future Retail's ongoing inventory issue (high inventory days of about 100) is in our view a clear reflection of store formats and products that are simply not working", said analysts from Macquarie in a report on 31 August. The deal may however risk Future's tie-up with the United States online shopping giant Amazon. Amazon has already pledged to invest Dollars 5.5 billion in the country, while Walmart bought local e-commerce giant Flipkart in 2018 for USD 16 billion. At the same time, the logistics and warehousing undertaking will be transferred to RVVL.

"We hope to continue the growth momentum of the retail industry with our unique model of active collaboration with small merchants.as well as large consumer brands", she said in a press release.

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Reliance Industries Buys Future Groups Retail Business For Rs 24,713 Crore

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