John Sarkar & Reeba Zachariah | TNN
New Delhi/Mumbai: Reliance Industries (RIL) is in late-stage talks to acquire the retail business of Future Group as it moves to bolster its brick-and-mortar play in Asia’s third-largest economy. The two have ironed out their differences over certain terms and conditions and a deal will be announced soon, said people familiar with the negotiations.
Future’s interests are spread across various entities, including six listed companies. RIL will acquire the retail, supply-chain and related businesses of Future, which will mark the end of founder Kishore Biyani’s play in India’s modern retail, an industry he pioneered. A point under discussion has been Biyani’s role after the deal. One of the people quoted earlier pointed out that companies in which RIL acquires a minority stake, the founder-promoters continue to manage the show, with the energy-to-telecom enterprise occupying board seats, and not otherwise.
A second person said that the deal has taken time due to disagreements over the valuation of Future Retail, the flagship of Biyani’s enterprise. Future Retail, meantime, is facing increased liquidity pressure after it missed interest payments on its US dollar-denominated bonds last week. Subsequently, Fitch cut its credit ratings on the company. Promoters own 42% in Future Retail, which runs hypermarket chain Big Bazaar and neighbourhood grocery chain Easyday Club, but 75% of the holding is pledged as on June 30, 2020.
“The board members of Future have finally agreed with the final contours of the deal that was being worked out among the parties. A resolution will be passed over the next few days,” said a person familiar with the development. Biyani is likely to retain the FMCG and residual businesses of Future, the person added. The deal will be financed through a mix of share-swap and cash.
Emailed queries sent to RIL and Future didn’t elicit any response till the time of going to press. India’s No. 2 retailer by turnover, Future has been compelled to look for an acquirer after rising debt, falling valuation of its listed entities and a decline earnings due to the pandemic, started to weigh on it. The market value of its listed companies plummeted 74% to Rs 10,464 crore in one year and its debt has exceeded Rs 12,000 crore.
The potential deal underlines RIL’s ambitions to dominate the Indian retail sector as it combines the online and offline formats. Once the transaction with Future is concluded, RIL will bring in global partners and investors in Reliance Retail, which, according to Morgan Stanley, is worth $29 billion.