Mumbai: Reliance Industries Ltd. said it will acquire the retail, wholesale, logistics and warehousing units of India’s Future Group for 247.1 billion rupees ($3.4 billion), in a transaction that will propel Mukesh Ambani’s ambitions to dominate India’s retail sector.
Future Group will merge some of its remaining businesses into Future Enterprises Ltd., Reliance Retail Ventures Ltd. said in a statement on Saturday. Ambani’s unit will then invest 12 billion rupees to acquire about 6.1% stake in Future Enterprises, according to the statement.
The transaction with the Future Group will bolster Reliance Retail — already the nation’s largest retailer by the number of stores — in a sector that’s estimated to be worth $1.3 trillion by 2025 from $700 billion in 2019, according to a February study by Boston Consulting Group and Retailers’ Association India. The deal will also help the indebted Future Group pare its borrowings.
“Strong retail franchise and brands, that we have created over time, are going in stronger hands,” Kishore Biyani, founder of the Future Group said in a separate statement. “This transaction takes into account the interest of all its stakeholders including lenders, shareholders, creditors.”
Details of the transaction
- Reliance to invest 12 billion rupees in preferential shares of Future Enterprises, acquiring 6.1% stake
- Reliance to also buy 4 billion rupees of equity warrants convertible into 7.05% of Future Enterprises shares
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.com Inc. as well as Walmart Inc., which have spent billions in a bid to dominate the world’s only billion-people-plus market that’s still open to foreign firms.
Amazon last year agreed to buy 49% in one of the Future Group’s unlisted firms that allowed the American e-tailer to acquire stake in Future Retail between three and ten years. This transaction gave the American e-commerce giant an indirect stake of 1.3% in Future Retail. It wasn’t immediately clear what happens to Amazon’s stake.
In January, Future Group and Amazon had also signed pacts to sell Indian retailer’s products on latter’s online marketplace.
The sales will help Biyani pay debts. The group has about 7.5 billion rupees of interest and principal due to bondholders this year, and 433.4 million rupees of the bill falls on Aug. 31, data compiled by Bloomberg show.
One of its units, was unable to pay coupons amounting to 126.5 million rupees on two local-currency notes on Aug. 16. Future Retail Ltd., another unit, said on Monday that it paid interest on its dollar bonds after missing the original July 22 deadline for the coupon payment.
Ambani, meanwhile, has been on a shopping spree. Reliance Industries acquired a majority equity stake in digital pharmacy market place Netmeds for 6.2 billion rupees earlier this month. It is also in negotiations to either buy out or purchase stakes in companies including Urban Ladder, an online furniture seller and Zivame, a lingerie maker, according to people familiar with the matter.
The Future Group has five main listed units including Future Consumer Ltd., which sells food, home and personal care products, and Future Lifestyle Fashions Ltd. that operates fashion discount chain Brand Factory.- Bloomberg