Reliance Industries Ltd’s acquisition of debt-strapped Future Group will almost double the footprint of its retail business, which now could be valued at up to USD 68 billion. The oil-to-telecom conglomerate on Saturday announced the acquisition of Future’s retail, wholesale, logistics, and warehousing units for Rs 24,713 crore. The deal phrases entail a merger of five listed units of Future Group into Future Enterprises Ltd (FEL).
While UBS stated that the deal could require approvals from SEBI, CCI, and NCLT in addition to no objection from lenders and minority shareholders, JP Morgan said it stays to be visible if Reliance would look to re-brand the present Future Group stores under personal formats.
HSBC said the purchase implies a smooth acquisition of Future Retail, Future Lifestyle Fashions Ltd (FLFL), and Future Supply Chain Solutions Ltd (FSCSL). Similarly, it’ll gather a 13.1 percent shareholding in the closing of FEL. The deal will allow Reliance Retail to nearly double its retail region under operation and increase the store count by 15 percent.
Goldman Sachs stated the proposed transaction ought to solidify Reliance Retail’s market leader positioning in organized retail across classes, bolster warehousing and logistics enabling faster increase for its online imparting JioMart and improve competitive positioning versus foreign shops like Walmart and Amazon.
Motilal Oswal stated the deal holds very excessive strategic interest to RIL as it would aid in improving footprint, provide an amazing legacy franchise and help build aggressive strength.
Credit Suisse said EBITDA per square feet of the obtained portfolio is less than one-1/3 of that of Reliance Retail and Avenue Super marts. Further synergies have to come from a better scale with benefits from saving in procurement, logistics, and supply chain costs.
Nomura said after Reliance Retail, Future Group’s retail enterprise is the largest offline organised retail business in India, that it is particularly strong in the grocery and fashion/lifestyle segments, has a pan-India presence, and has retailers at strategic locations.
Kotak said the proposed acquisition will increase Reliance’s retail footprint to 13,540 shops from its existing base 11,806 outlets reported as on June 30, 2020.
FRL suggested footprint stands at 16.1 mn square feet throughout a network of 1,388 shops which include 290 Big Bazaar shops (big format grocery) and 990 Easyday, Heritage Fresh, and Nilgiri stores (small format grocery). FLFL has a presence of 7.7 mn sq.ft across 348 shops.
FRL operates store formats including Big Bazaar (hypermarket), FBB (value fashion), Easyday (local grocery store), and Foodhall (premium food and grocery). FLFL is an apparel retailer and operates the Central (premium apparel large format shop) and Brand Factory (apparel discount store) formats. Besides, FLFL also has partnerships with foreign brands and operates certain standalone stores (EBOs) for those manufacturers (a number of these manufacturers encompass Clarks, Celio). It had a network of 348 shops (which include EBOs) as of March 2020 and a retail trading region of 7.7 mn sq.ft.