Addiction to pay $ 3.4 billion for India’s second-largest retailer Future Group

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Mukesh Ambani’s Reliance Industries has agreed to pay $ 3.4 billion for the retail assets of Indian group Future Group in deal that gives Asia’s richest man a stronger footing for a push towards electronic commerce.

Acquisition of once-pioneering retail chain built by Indian entrepreneur Kishore Biyani will bolster Ambani in his plans to fight Walmart-owned Amazon and Flipkart for dominance of the rapidly growing retail industry in India.

Reliance Retail was already India’s largest brick and mortar retailer, operating supermarkets and convenience stores under the Reliance brand, as well as franchise stores for global brands such as Hamleys and luxury goods vendors.

But the acquisition of Future Group’s retail assets and its backbone infrastructure will give Reliance control of around one-third of physical stores in India’s otherwise fragmented modern retail sector. Future Group is known for its famous Big Bazaar hypermarket chain, Pantaloons clothing stores and other retail formats.

Analysts believe the deal will give Reliance dominance in the physical retail market and make it more attractive to potential investors seeking exposure to the retail sector in India.

“By eliminating Mr. Biyani and absorbing the second largest retail network in the country, the gap between them and the rest is so big that tomorrow you can go to anyone and say, ‘If you want doing retail business in India, I am the partner to play, ”said Arvind Singhal, president of Technopak, a New Delhi-based consulting firm.

Ambani this year sold $ 20 billion in stakes in his telecommunications company, Reliance Jio, to 15 global investors, including Facebook and Google. It had also indicated its openness to partnerships in the retail trade, analysts said.

In a statement on the Future Group deal, Mr. Ambani’s daughter, Isha Ambani, director of Reliance Retail Ventures, said the company “is delighted to provide a home for the renowned formats and brands of The Future Group.”

Customers line up at a Big Bazaar hypermarket owned by Future Group © Bloomberg

The acquisition of Future Group is the latest step in Mr. Ambani’s transformation of Reliance Industries from a heavy industrial group into a consumer goods and telecommunications conglomerate poised to take advantage of the growing Indian middle class. .

Before the coronavirus crisis, India’s retail market was worth around $ 850 million per year, of which around 10-11% were modern retail formats, including branded physical stores and trading companies electronics, while the rest of the industry was dominated by small independent “mom-pop stores”. However, in the coming years, modern retail is expected to grow at the expense of small stores.

Selling his retail chain to Asia’s richest man is the culmination of years of struggle for Mr. Biyani. The self-taught entrepreneur was once nicknamed “the king of retail in India” for presenting Indian shoppers with large format retail stores with an unprecedented choice of products under one roof.

Mr. Biyani’s foray into retail began in the 1980s with clothing stores, including his Pantaloons stores, before plunging into supermarkets, dazzling consumers in big and small Indian towns with a vast product choice, competitive prices and special discounts at religious and cultural festivals.

“It was irrelevant relatively early on, when the big boys weren’t around, and it almost got free movement of the market, and attention of the media and many others in the country,” said Mr. Singhal.

But Mr. Biyani has not developed a strong e-commerce platform. It has struggled in recent years with increasingly fierce competition from Reliance Retail and others, as well as Flipkart and Amazon.

Analysts said Future Group was burdened with more than $ 1.7 billion in debt, which it had struggled to repay.

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