Reliance Retail-Future Group Deal: RIL Acquires Future Group’s Retail and Logistics Business for Rs 24,713 Crore

Reliance Retail Ventures Limited (RRVL), a subsidiary of Reliance Industries Limited, on Saturday announced that it is acquiring the retail and wholesale business and the logistics and warehousing business from the Future Group for Rs 24,713 crore.

The deal for the crown jewel of Future Group culminiates the reversal of fortunes for Kishore Biyani, once celebrated as India’s retail king, and will cement Reliance’s position as the undisputed leader of India’s retail segment. It will also add muscle to Reliance for its ongoing battle with Amazon for the Indian e-commerce market.

Future Group’s retail and wholesale undertaking is being transferred to Reliance Retail and Fashion Lifestyle Limited (RRFLL), a wholly-owned subsidiary of RRVL. The logistics and warehousing undertaking is being transferred to RRVL.

The deal will make Reliance Retail the top player in brick-and-mortar space after getting access to over 1,800 Future Retail stores in India. As part of the deal, fashion and grocery retail formats from Future Group’s listed entities such as Big Bazaar, FoodHall, Nilgiris, FBB, Central, Heritage Foods and Brand Factory, barring apparel brands Lee Cooper and All, will be acquired by RIL.

Reliance Retail currently operates close to 11,784 stores split across value fashion, footwear, premium fashion, grocery, jewellery, electronics, connectivity, etc. In the last financial year, Reliance Retail achieved a turnover of Rs 1.63 trillion. Reliance Retail also works as the master distributor for Jio connectivity services.

Experts opine that the RIL-Future deal will make Reliance Retail the undisputed leader in retail space as it would get around Rs 26,000 crore worth additional sales from Future Retail. Future Retail owns several supermarket brands mainly engaged in home and electronics retailing and value retailing.

The move will mark significant consolidation in India’s retail market. Future Group CEO Kishore Biyani built a sizable organized retail business—since the late 1980s. In 1991, Biyani changed the name of his company to Pantaloon Fashion (India) Ltd. In 2001, it opened the first Big Bazaar store in India.

There was pressure on Biyani to go ahead with the RIL offer after Future Retail (FRL) defaulted on its interest payments of Rs 100 crore on July 22, leading to rating firm S&P Global Ratings warning it could downgrade the retail firm to ‘default’ after 30 days because the company faced liquidity pressure.

Through Saturday’s deal, Reliance Retail, controlled by Ambani, Asia’s richest man, has emerged as a white knight and thwarted the collapse of a vast retail group that would have otherwise been dragged through India’s bankruptcy court.

The deal will also ensure that the banks get their outstanding loans protected as the value includes the liabilities of Future Group that Reliance plans to absorb. The employees of Future Group could get absorbed as Reliance Retail is still in an expansion mode.

Mukesh Ambani’s interest in Biyani’s retail business had already fired up stocks of the retailer. After June, Future Group stocks have surged up to 42 per cent in one month.

The privately held subsidiary of Mukesh Ambani’s Reliance Industries Ltd. is nearly twice the size of the comparable business—grocery, technology products and apparel—of the Future Group, according to their filings for the year ended March.

Disclaimer:Reliance Industries (RIL), which also owns Reliance Retail, is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments.