Reliance to Buy Stake in Kishore Biyani's "Future Group" Big-Bazaar and Lifestyle for Rs 24,713 cr

Another Day, Another Deal. Mukesh Ambani's Reliance Industries on Saturday announced the acquisition of businesses of Kishore Biyani's Future Group for ₹24,713 crores. It will add it to the fast-expanding retail business and bolster e-commerce. This puts Walmart-owned Flipkart and Jeff Bezos' Amazon in a great fix in the Indian Market.

With this deal, the Reliance group will have access to 1,800 stores across Future Group's 5 formats. This includes Big Bazaar, FBB, Easyday, Central, Foodhall formats, which are there in over 420 cities in India. This acquisition is a part of the scheme of Future Group to merge certain companies in FEL. (Future Enterprise Ltd.) Further, it will transfer all its logistics and warehousing undertakings to Reliance directly.

The deal terms entail a merger of five listed units of Future Group. These include grocery, apparel, supply chain, and the consumer business of FEL. They get to keep the manufacturing and distribution of FMCG goods. Further, they will keep the integrated fashion sourcing and manufacturing business. Also, it will keep its insurance JVs with Generali and JVs with NTC Mills.

Future Group will probably close the deal this month. Its lenders want the group to resolve the debt issues before the moratorium ends on 31 August. Reliance has also asked Future Group’s vendors to take a haircut of around 40% on their past dues. Some of the top Indian FMCG companies, including ITC and HUL, are suppliers to Future Group’s retail stores.

About the deal

Reliance will invest Rs 1200 crore in the preferential issue of equity shares of FEL. It'll acquire 6.09 percent of post-merger equity. Further, it will inject Rs 400 crore to acquire warrants convertible into equity shares of FEL; which will result in it acquiring further 7.05 percent of FEL.

In a statement, the acquiring conglomerate said, "Reliance Retail Ventures Ltd (RRVL), subsidiary of Reliance Industries Ltd will acquire the retail and wholesale business and the logistics and warehousing business from the Future Group as going concerns on a slump sale basis for lumpsum aggregate consideration of INR 24,713 crore."

Speaking on the account, Isha Ambani, Director at Reliance Retail said:

"With this transaction, we are pleased to provide a home to the renowned formats and brands of Future Group as well as preserve its business ecosystem. It has played an important role in the evolution of modern retail in India. We hope to continue the growth momentum of the retail industry with our unique model of active collaboration with small merchants and kiranas as well as large consumer brands. We commit to continue to provide value to our consumers across the country."

The retail and wholesale undertaking of Future Group will be transferred to Reliance Retail and Fashion Lifestyle Limited (RRFLL), a wholly-owned subsidiary of RRVL.

Talking about the deal, Kishore Biyani, Group CEO of Future Group said:

"As a result of this reorganization and transaction, Future Group will achieve a holistic solution to the challenges that have been caused by Covid and the macroeconomic environment. This transaction takes into account the interest of all its stakeholders including lenders, shareholders, creditors, suppliers, and employees giving continuity to all its businesses. We are pleased that our strong retail franchise and brands, that we have created over time, are going in stronger hands and will continue to grow and delight Indian shoppers."

The transaction with the Future Group will bolster Reliance Retail. The deal will also help the indebted Future Group pare its borrowings.

Brick-and-Mortar and e-Commerce the new Oil for Reliance?

After disrupting India’s telecom sector, Ambani is now pushing ahead with his ambitions in the brick-and-mortar retail and e-commerce space. Asia’s wealthiest man is on a mission to transform his conglomerate into a consumer-services giant and reduce dependence on revenue from its traditional businesses of petrochemicals and oil refining.

Reliance Industries’ deal with the Future Group also draws the battle lines between Ambani and Amazon and Walmart; which have spent billions of dollars in a bid to dominate the world’s only billion-people-plus market that’s still open to foreign firms.