RIL to finalize acquisition of Future Group's retail business

Reliance Industries (RIL) is in late-stage talks to acquire the retail business of Future Group. The deal will be announced soon. RIL will acquire the retail, supply-chain and related businesses of Future, which will mark the end of founder Kishore Biyani’s play in India’s modern retail.

A point under discussion has been Biyani’s role after the deal. One of the people quoted earlier pointed out that companies in which RIL acquires a minority stake, the founder-promoters continue to manage the show, with the energy-to-telecom enterprise occupying board seats, and not otherwise.

The deal has taken time due to disagreements over the valuation of Future Retail. Future Retail, meantime, is facing increased liquidity pressure after it missed interest payments on its US dollar-denominated bonds last week. Subsequently, Fitch cut its credit ratings on the company. Promoters own 42% in Future Retail, which runs hypermarket chain Big Bazaar and Easyday Club, but 75% of the holding is pledged as on June 30, 2020.

According to sources, Biyani is likely to retain the FMCG and residual businesses of Future. The deal will be financed through a mix of share-swap and cash.

Emailed queries sent to RIL and Future didn’t elicit any response till the time of going to press. India’s No. 2 retailer by turnover, Future has been compelled to look for an acquirer after rising debt, falling valuation of its listed entities and a decline earnings due to the pandemic, started to weigh on it. The market value of its listed companies plummeted 74% to Rs 10,464 crore in one year and its debt has exceeded Rs 12,000 crore.

The potential deal underlines RIL’s ambitions to dominate the Indian retail sector as it combines the online and offline formats. Once the transaction with Future is concluded, RIL will bring in global partners and investors in Reliance Retail, which is worth $29 billion.