The acquisition will also help Reliance expand its leadership over its competitors.
Reliance Industries’ $ 3.38 billion deal to acquire Future Group’s retail business presents the conglomerate as an even more formidable force in India, making its retail arm more attractive to potential investors it seeks to attract.
The oil-to-telecommunications group controlled by the country’s richest man, Mukesh Ambani, announced late Saturday that it will acquire Future Group’s retail and wholesale business, as well as its logistics and warehousing operations.
The acquisition of Future Group’s 2,000 retail stores and the Big Bazaar supermarket chain will help Reliance, which sells everything from groceries to electronics through more than 11,000 stores, expand its broad reach across the country.
But with Ambani set to sell stakes in Reliance Retail, the Future-Reliance deal makes it an even more attractive proposition for investors in a market that Boston Consulting Group expects to grow to $ 1.3 trillion by 2025.
“With this deal, Reliance’s dominance in the Indian market is further increased and the valuation that Reliance Retail will now hold will be even higher,” said Arvind Singhal, president of retail consultancy Technopak Advisors.
Reliance, which has raised just over $ 20 billion from global investors, including Facebook Inc, by selling stakes in its Jio Platforms digital business, has said it aims to attract investors to Reliance Retail over the next few quarters.
“We have received great interest from strategic and financial investors in Reliance Retail,” Mr. Ambani told shareholders at the company’s annual general meeting in July.
The acquisition will also help Reliance expand its leadership over its competitors, Singhal added.
Mumbai-based Reliance is well known for its ability to win over clients with financial strength and its breadth of offerings.
The actions of his rivals reflected him so much on Monday.
Avenue Supermarts, which runs the popular supermarket chain DMart, fell as much as 5.4%, while Aditya Birla Fashion and Retail closed 2.6% and V-Mart Retail lost 4.4%.
JioMart, Reliance’s new e-commerce startup offering free express delivery from neighborhood stores, will also gain an advantage from the Future Group deal thanks to a broader wholesale supplier base.
JioMart delivers groceries, clothing, and electronics to more than 200 cities, challenging established online retailers such as Amazon’s India unit and Walmart’s Flipkart.
“Essentially, Reliance has removed a competitor from the market and added Future’s loyal customer base to its own portfolio,” said Harminder Sahni, founder of retail consulting firm Wazir Advisors.
“It is a very serious challenge not only for Flipkart or Amazon, but also for companies like DMart.”
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