The deal has finally happened, Reliance Retail, the subsidiary of billionaire Mukesh Ambani’s Reliance Industries (RIL) is acquiring the retail and wholesale business, and logistics and warehousing business of Kishore Biyani’s Future Group.
The deal is worth Rs 24,713 crore, and it would cement the position of Reliance Retail as India’s biggest player in the organised retail segment. It would also spice up the Indian e-commerce market, with the much bigger battle coming up between Reliance Retail, Amazon and Walmart powered Flipkart for the crown jewel.
The Reliance Retail – Future Group deal
Back to the deal, Future Group will first merge most of its companies carrying on the aforesaid businesses to a single entity Future Enterprises Limited (FEL). Then Future Group’s retail and wholesale business is being transferred to Reliance Retail and Fashion Lifestyle Limited (RRFLL), which is a wholly-owned subsidiary of Reliance Retail Ventures Limited (or Reliance Retail or RRVL).
Future Group’s logistics and warehousing business will also be transferred RRVL. Fashion Lifestyle Limited or RRFLL will invest Rs 1200 crore in the preferential issue of equity shares of Future Enterprises Limited (FEL) to acquire 6.09 per cent of post-merger equity. Another Rs 400 crore in a preferential issue of equity warrants which, upon conversion and payment of balance 75 per cent of the issue price, will result in RRFLL acquiring further 7.05 per cent of FEL, said a report from Money Control.
RRFLL and RRVL will take over certain borrowings and current liabilities of Future Group’s, and discharge the balance consideration by cash.
Reliance Retail will now own Future Group’s retail business including supermarket chain Big Bazaar, Easyday and Nilgiris, food stores Foodhall and fashion chain Brand Factory, Central and FBB.
“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, which have played an important role in the evolution of modern retail in India,” said Isha Ambani, Director, Reliance Retail Ventures.
This will also mark the exit of India’s biggest brick-and-mortar retailer, Kishore Biyani who painstakingly built his business over three decades, which also has shown to the world the potential of the Indian retail sector. During the past year, Future Group was soaring in a huge pile of debt, which got worsen due to COVID-19 pandemic. Today’s deal with Ambani, would rescue the business from total collapse and hopefully would bring up the true potential of India’s retail market.