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NEW DELHI/MUMBAI: Ten days after it bought a majority stake in online pharmacy retailer Netmeds, Reliance Industries Ltd (RIL) on Saturday said it had sealed a deal to acquire the retail business of the financially-stressed Future Group for Rs 24,713 crore. The transaction, which has been in the works for months, will fortify RIL’s retail play in one of the world’s largest economies where it is already the largest player by reach, scale, revenue and profitability.
The contours of the deal include Future first combining its various entities across grocery retail, apparel retail, supply chain, logistics infrastructure and consumer products manufacturing with Future Enterprises, which is into manufacturing of fashion products.
It will then sell the retail and wholesale businesses covering the Big Bazaar hypermarket chain, Easyday grocery stores, Central malls and the Brand Factory fashion discount outlets to RIL. Future Enterprises will also transfer the logistics and warehouse businesses to RIL.
The businesses will be transferred on a slump sale basis. Slump sale means transfer of a division of a company for a lump sum without assigning any values to individual assets and liabilities of the entity. RIL has routed the proposed deal through its subsidiary Reliance Retail Ventures, which reported a consolidated turnover of Rs 1.6 lakh crore and profit of Rs 5,448 crore in fiscal 2020.
RIL will take over certain debt and liabilities related to the retail business and will invest another Rs 1,600 crore for a minority stake of 13% in Future Enterprises. RIL, controlled by Mukesh Ambani, who is among the top five richest persons in the world, has been ramping up its retail play. In May, the company launched JioMart, an online grocery service, which competes with Amazon and Walmart-owned Flipkart.
“This acquisition is a watershed moment for India retail. It’s the equivalent of Walmart acquiring Target in the US,” said Levi Strauss MD (South Asia, Middle East and North Africa) Sanjeev Mohanty. “It augments the retail footprint and dominance of Reliance in the most important grocery business as they go to war against Amazon and Walmart.”
Future Group, owned by India’s father of modern retailing Kishore Biyani, was compelled to look for an acquirer after rising debt, falling valuation of its listed entities and declining earnings due to the pandemic started to weigh on it. Debt exceeded Rs 12,000 crore and almost the entire promoter holding was pledged with lenders.
“As a result of this reorganisation and transaction, the Future Group will achieve a holistic solution to the challenges that have been caused by Covid and the macro economic 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 reach created by Jio Platforms and its partnership with Facebook and Google; it’s going to create a business model and ability to scale that would be a first in the world”.
Technopak founder Arvind Singhal said Reliance would be able to manage the malls business of Future Group much better as it has many top brands in its portfolio to place in the malls. “In Future Consumer, the company has built a strong range of private labels that can add to Reliance’s repertoire as well.”
Once the transfer of retail and warehouse businesses is completed, Future Enterprises will be left with the manufacturing of FMCG and fashion apparel products, insurance joint ventures with Generali and textile mills.
The contours of the deal include Future first combining its various entities across grocery retail, apparel retail, supply chain, logistics infrastructure and consumer products manufacturing with Future Enterprises, which is into manufacturing of fashion products.
It will then sell the retail and wholesale businesses covering the Big Bazaar hypermarket chain, Easyday grocery stores, Central malls and the Brand Factory fashion discount outlets to RIL. Future Enterprises will also transfer the logistics and warehouse businesses to RIL.
The businesses will be transferred on a slump sale basis. Slump sale means transfer of a division of a company for a lump sum without assigning any values to individual assets and liabilities of the entity. RIL has routed the proposed deal through its subsidiary Reliance Retail Ventures, which reported a consolidated turnover of Rs 1.6 lakh crore and profit of Rs 5,448 crore in fiscal 2020.
RIL will take over certain debt and liabilities related to the retail business and will invest another Rs 1,600 crore for a minority stake of 13% in Future Enterprises. RIL, controlled by Mukesh Ambani, who is among the top five richest persons in the world, has been ramping up its retail play. In May, the company launched JioMart, an online grocery service, which competes with Amazon and Walmart-owned Flipkart.
“This acquisition is a watershed moment for India retail. It’s the equivalent of Walmart acquiring Target in the US,” said Levi Strauss MD (South Asia, Middle East and North Africa) Sanjeev Mohanty. “It augments the retail footprint and dominance of Reliance in the most important grocery business as they go to war against Amazon and Walmart.”
Future Group, owned by India’s father of modern retailing Kishore Biyani, was compelled to look for an acquirer after rising debt, falling valuation of its listed entities and declining earnings due to the pandemic started to weigh on it. Debt exceeded Rs 12,000 crore and almost the entire promoter holding was pledged with lenders.
“As a result of this reorganisation and transaction, the Future Group will achieve a holistic solution to the challenges that have been caused by Covid and the macro economic 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 reach created by Jio Platforms and its partnership with Facebook and Google; it’s going to create a business model and ability to scale that would be a first in the world”.
Technopak founder Arvind Singhal said Reliance would be able to manage the malls business of Future Group much better as it has many top brands in its portfolio to place in the malls. “In Future Consumer, the company has built a strong range of private labels that can add to Reliance’s repertoire as well.”
Once the transfer of retail and warehouse businesses is completed, Future Enterprises will be left with the manufacturing of FMCG and fashion apparel products, insurance joint ventures with Generali and textile mills.
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