Reliance puts Rs 25,000 crore on bright future for retail

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NEW DELHI / MUMBAI: Ten days after purchasing a controlling stake in online pharmacy retailer Netmeds, Reliance Industries Ltd (RIL) announced on Saturday that it had reached an agreement to acquire the retail business of Future Group, in situation of financial stress, for Rs 24,713 crore. The transaction, which has been underway for months, will strengthen RIL’s retail business in one of the largest economies in the world where it is already the largest player in terms of reach, scale, revenue. and profitability.
The outlines of the agreement include Future First combining its various entities in grocery retail, apparel retail, supply chain, logistics infrastructure and manufacturing. consumer products with Future Enterprises, which is dedicated to manufacturing fashion products.
It will then sell the retail and wholesale businesses covering the Big Bazaar hypermarket chain, Easyday grocery stores, central shopping malls and Brand Factory fashion discount stores in RIL. Future Enterprises will also transfer logistics and warehouse activities to RIL.
Businesses will be transferred on a collapsed sales basis. Collapse selling means the transfer of a division of a company for a lump sum without placing any value on the individual assets and liabilities of the entity. RIL channeled the proposed deal through its subsidiary Reliance Retail Ventures, which reported consolidated revenue of Rs 1.6 lakh crore and profit of Rs 5,448 crore for fiscal 2020.
RIL will take over some retail debts and liabilities and invest another Rs 1,600 crore for a 13% minority stake in Future Enterprises. RIL, controlled by Mukesh Ambani, who is among the five richest people in the world, has stepped up its retail business. In May, the company launched JioMart, an online grocery service, which competes with Amazon and Walmart. Flipkart.
“This acquisition is a watershed moment for retail in India. This is the equivalent of Walmart’s acquisition of Target in the United States, ”said Levi Strauss MD (South Asia, Middle East and North Africa) Sanjeev Mohanty. “It increases the retail footprint and Reliance’s dominance in the largest grocery industry as they go to war with Amazon and Walmart.”
Future Group, owned by Indian father of modern retail Kishore Biyani, was forced to seek a buyer after rising debt, declining valuation of its listed entities and declining profits due to the pandemic began to weigh on it. The debt exceeded Rs 12,000 crore and almost all of the promoter’s stake was committed with the lenders.
“As a result of this reorganization and transaction, the group of the future will achieve a holistic solution to the challenges that have been caused by Covid and the macroeconomic environment,” said Biyani.
Mohanty added that the RIL-Future agreement “lays the foundation and the pipeline for JioMart to build a true large-scale omni business, reaching one billion consumers. Add to this the reach created by Jio Platforms and its partnership with Facebook and Google; this will create a business model and a capacity for evolution that would be a first in the world ”.
Technopak founder Arvind Singhal said Reliance would be able to manage Future Group’s shopping center business much better, as it has many big brands in its portfolio to place in shopping centers. “In Future Consumer, the company has built a wide range of private labels which can also enrich Reliance’s repertoire.”
Once the retail and warehouse transfer is complete, Future Enterprises will be left with the manufacturing of consumer goods and fashion apparel, insurance joint ventures with Generali, and textile factories.

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