Reliance Industries has agreed to buy Future Group’s retail business across apparel, lifestyle and grocery segment, a deal that will help Mukesh Ambani’s oil-to-media conglomerate control more than a third of India’s organised retail market.
The acquisition, valued at ₹27,513 crore, includes a take over of retail stores and a minority stake in Future’s consumer business, apart from assumption of all debts and liabilities.
The deal will see the merger of five listed entities of the Future Group — including Future Retail, Future Lifestyle and Future Consumer — into Future Enterprises, which currently houses the group’s retail back-end infrastructure.
In turn, FEL will then sell the retail, wholesale business, logistics and warehouse business as a slump sale to Reliance Retail and Fashion Lifestyle Limited. RRFLL, a wholly owned subsidiary of Reliance Retail Ventures, will also take over borrowings and current liabilities related to the business in an all-cash deal worth ₹24,713 crore.
Post the transaction, FEL will retain the manufacturing and distribution of consumer products, fashion sourcing and manufacturing business, the insurance joint venture with Generali and the textile partnership with NTC Mills.
Reliance will also invest ₹2,800 crore in FEL, which includes ₹1,200 crore in the preferential issue of equity shares for a 6.09% stake, and another ₹400 crore in warrants, which when converted upon payment of balance 75% consideration of ₹1,200 crore, will result in an additional 7.05% stake.
“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,” Isha Ambani, Director, Reliance Retail Ventures Limited, said.
For Kishore Biyani, who is often called the father of India’s organised retail, this deal effectively means his exit from the segment he built over the past three decades.
Founded in 1987 as the erstwhile Manz Wear and later Pantaloon Retail, Biyani used aggressive pricing to attract middle-class Indian consumers to his stores — Big Bazaar, Central and Brand Factory — and become a retail juggernaut.
But it also led to his companies being burdened with a net debt of ₹12,989 crore with the entire shareholding of the promoters being pledged with lenders.
“As a result of this re-organisation and transaction, Future Group will achieve a holistic solution to the challenges that have been caused by Covid and the macro economic 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,” Kishore Biyani, Group CEO, Future Group, said in a statement.