Reliance Retail Ventures Limited (RRVL), a subsidiary of RIL owned by the country’s richest businessman Mukesh Ambani, announced the acquisition of future group retail and wholesale business and logistics and storage business on Saturday. “Reliance Retail Venture Limited (RRVL), a subsidiary of Reliance Industries Limited (RIL), today announced a one-time acquisition of future group retail and wholesale business and logistics and storage business at a lump sum price of Rs 24,713 crore,” a company release said. ”
RRVL said that under this acquisition scheme, the future group is merging some of its companies into future Enterprises Limited (FEL). The company informed that under the scheme, the future group’s wholesale business will be transferred to Reliance Retail and Fashion Lifestyle Limited (RRFLL), a company with full self-reliance of RRVL. In addition, the logistics and storage business will be transferred to RRVL. Through this deal, Reliance will acquire retail, which owns the big market and sell all kinds of products from groceries to cosmetics and apparel. In addition, future lifestyle fabrics will also be acquired. However, the financial and insurance businesses of the future group are not part of the deal.
Ambani’s company has bought a full promoter stake in future retail and future lifestyle fabrics, but it is not yet clear what happens to Amazon’s share in the future. In August last year, Seattle-based Amazon took a 1.3 percent stake in Future Retail by purchasing a 49 percent stake in Future Coupons Ltd. indirectly. The partnership grew deeper in January this year when Amazon became an authorized online sales channel for future retail stores. Reliance may have to make an open offer to acquire a 26 percent stake from minority shareholders of Future Enterprises Ltd. The juvenile Biyani-led future group has confirmed the deal in the information given to the stock exchange.
Future Retail operates 1,550 stores and its major brands are Big Market, FBB, Foodhall, Easyday, Heritage Fresh, and WHSmith. Future Lifestyle Fashion operates 354 stores. Reliance and future retail will intensify the war in India’s retail sector. Amazon has already pledged an investment of USD 5.5 billion, while Walmart bought e-commerce giant Flipkart for USD 16 billion in 2018.
According to the release, RRFLL will invest Rs 1,200 crore to acquire a 6.09 percent equity share in FEL after the merger. These investments will be made through the preferential issue of equity shares. In addition, Rs. 400 crores were engaged in share warrants issued on a preferential basis. After converting these warrants into shares and paying three-fourths of their outstanding value, RRFL will have a further 7.05 percent stake in FEL.
What did Isha Ambani say?
Isha Ambani, director, Reliance Retail Ventures Ltd. said, “We are happy to preserve the famous formats and brands of the future group as well as its commercial eco-system (surroundings) that play an important role in the development of the modern retail sector in India. We hope that the retail business will continue to grow with active collaboration with small traders and grocery stores and large consumer brands. We are committed to providing better services to our consumers across the country. According to the release, SEBI, NCLT, CCI, shareholders and other clearances are to be taken for this acquisition. The acquisition of future group business will help Reliance Retail to strengthen its presence in the retail business. Future groups do business in segments such as textiles, general goods, and FMCG.