NEW DELHI / MUMBAI: Ten days after it bought a majority stake in online pharmacy retailer Netmeds, Reliance Industries Ltd (RIL) said on Saturday it had sealed a deal to acquire the Future Group’s retail business, which was in trouble for 24,713 million rupees. The transaction, which has been in the works for months, will strengthen RIL’s retail game in one of the world’s largest economies, where it is already the largest player by scope, scale, revenue and profitability.
The outlines of the agreement include Future First, which combines its various entities in grocery retail, clothing retail, supply chain, logistics infrastructure and consumer products manufacturing with Future Enterprises, which is dedicated to the manufacture of fashion products.
It will then sell the retail and wholesale businesses covering the Big Bazaar hypermarket chain, Easyday grocery stores, Central Malls, and Brand Factory fashion discount outlets to RIL. Future Enterprises will also transfer the logistics and warehousing businesses to RIL.
Business will be transferred on the basis of a retail sale. Retail means the transfer of a division of a company for a lump sum without assigning any value to the individual assets and liabilities of the entity. RIL has routed the proposed deal through its subsidiary Reliance Retail Ventures, which reported consolidated turnover of Rs 1.6 lakh crore and a profit of Rs 5,448 crore in fiscal year 2020.
RIL will assume certain debts and liabilities related to the retail business and invest a further Rs 1.6 billion for a 13% minority stake in Future Enterprises. RIL, controlled by Mukesh Ambani, who is among the five richest people in the world, has stepped up its retail game. In May, the company launched JioMart, an online grocery service, which competes with Amazon and Walmart. Flipkart.
“This acquisition is a watershed moment for Indian retail. It’s the equivalent of Walmart acquiring Target in the US, ”said Dr. Levi Strauss (South Asia, Middle East and North Africa) Sanjeev Mohanty. “Reliance’s retail presence and dominance in the largest grocery business increases in its war against Amazon and Walmart.”
Future Group, owned by the father of modern retail in India Kishore Biyani, was forced to search for an acquirer after rising debt, falling valuation of its listed entities and declining profits due to the pandemic began to weigh. The debt exceeded 12 billion rupees and almost the entire stake of the developer was pledged to the lenders.
“As a result of this reorganization and transaction, the group of the future will achieve a comprehensive solution to the challenges that have been caused by Covid and the macroeconomic environment, ”said Biyani.
Mohanty added that the RIL-Future deal “lays the foundation and pipeline for JioMart to build a true omni business at scale, reaching one billion consumers. Add to that the scope created by Jio Platforms and its association with Facebook and Google; it is going to create a business model and a capacity to scale that would be the first in the world ”.
Technopak founder Arvind Singhal said that Reliance could run Future Group’s shopping center business much better as it has many leading brands in its portfolio to place in shopping centers. “At Future Consumer, the company has built a strong range of private labels that can also contribute to the Reliance repertoire.”
Once the retail and warehouse business transfer is complete, Future Enterprises will take over the manufacturing of consumer goods and fashion apparel, insurance joint ventures with Generali, and textile mills.
.
