Mukesh Ambani’s Reliance Industries has agreed to pay $ 3.4 billion for Future Group India’s retail assets in a deal that gives Asia’s richest man a stronger foundation to drive e-commerce.
The acquisition of the once pioneering retail chain built by Indian businessman Kishore Biyani will bolster Ambani in its plans to fight Amazon and Walmart-owned Flipkart for dominance of India’s fast-growing retail sector.
Reliance Retail was already the largest brick and mortar retailer in India, operating supermarkets and convenience stores under the Reliance brand, as well as franchise stores for global brands like Hamleys and luxury goods sellers.
But the acquisition of Future Group’s retail assets and its back-end infrastructure will give Reliance control of roughly a third of the physical stores in India’s fragmented modern retail sector. Future Group is known for its popular Big Bazaar chain of hypermarkets, Pantaloons clothing stores, and other retail formats.
Analysts say the deal will give Reliance dominance in the physical retail market and make it more attractive to potential investors seeking exposure to the Indian retail sector.
“By eliminating Mr. Biyani and taking over the second largest retail network in the country, the gap between them and anyone else is so great that tomorrow, you can turn to anyone who says, ‘If you want to do any retail business in India, I’m the one. partner to play, ‘”said Arvind Singhal, president of Technopak, a consultancy based in New Delhi.
Ambani has sold $ 20 billion worth of stakes in his telecommunications company, Reliance Jio, to 15 global investors this year, including Facebook and Google. It had also indicated its openness to partnerships in the retail business, analysts said.
In a statement on the Future Group deal, Ambani’s daughter Isha Ambani, director of Reliance Retail Ventures, said the company “is pleased to offer a home to Future Group’s renowned brands and formats.”
Customers line up at a Big Bazaar hypermarket owned by Future Group © Bloomberg
The acquisition of Future Group is the latest step in Ambani’s transformation of Reliance Industries from a heavy industrial group to a telecommunications and consumer goods conglomerate poised to benefit from the rise of India’s middle class.
Before the coronavirus crisis, India’s retail market was worth an estimated $ 850 million per year, of which about 10-11 percent were modern retail formats, including brick-and-mortar stores and trading companies. electronics, while the rest of the industry was dominated by small, independently owned “family stores.” However, in the coming years, modern retail is expected to grow at the expense of smaller stores.
Selling his retail chain to the richest man in Asia is the culmination of years of struggle for Biyani. The self-made entrepreneur was once dubbed “the retail king of India” for introducing Indian shoppers to large-format retail stores with an unprecedented variety of products under one roof.
Biyani’s retail foray began in the 1980s with clothing stores, including its Pantaloons stores, before diving into supermarkets, dazzling consumers in big cities and towns in India with a wide variety of products, competitively priced. and special discounts during religious and cultural festivals.
“He got it wrong relatively early, when the big guys weren’t there, and he almost got a free run in the market and the attention of the media and many others in the country,” Singhal said.
But Mr. Biyani did not develop a solid e-commerce platform. It has struggled in recent years with increasingly fierce competition from Reliance Retail and others, as well as from Flipkart and Amazon.
Analysts said Future Group was burdened with more than $ 1.7 billion in debt, which it had been struggling to pay off.
