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Takeover of the Future group by the Reliance Group

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Starting his journey of building a stunning retail empire since 1987, Kishore Biyani, the founder of Future Group which is an Indian Multi-Industry company, operating multi-branded retail outlets sold the group’s retail and lifestyle business to the billionaire Mukesh Ambani’s Reliance Industries Limited (RIL) because of the huge amount of loan taken by him in his capacity, which resulted in a rising pile of debt and the searing pain brought by the covid-19 Pandemic. Asia’s richest man Mukesh Ambani aims to stiffen his position in India’s retail sector to emulate global giants such as Amazon.

The takeover by Reliance Retail was under an acquisition scheme, a deal of ₹24,713 crores. This deal happened at the time when Future Group was facing cash flow and debt servicing issues. According to the scheme, the retail and wholesale business of the Future group were transferred to Reliance Retail and Fashion Style Limited (RRFLL), the Logistics and Warehouses Undertaking were transferred to Reliance Retail Ventures (RRVL) and RRFLL who invested ₹1200 crores to purchase 6.09% of the post-merger equity. ₹400 Crores Investment of Equity in the preferential issue of warrants lessened the ownership of another 7.05% stake in RRFLL. As a result of this deal, Reliance acquired Future Retail that owns BigBazaar, Brand Factory, FoodHall, Nilgiris, FBB, Central, Heritage Foods and all the retail formats of the Future group. Over 1700 stores has been acquired by RIL. On one side, the acquisition tends to add about 1700 large stores to RIL’s 11806 stores in its retail segment to increase its organized retail revenue market share by around 5 percent while on the other side the asset acquisition will add about 2%-2.5% to RIL’s overall financial performance in the financial year ending March 2022. Future Group’s robust presence in Tier 1 Indian cities with well-established retail formats, including Central, FBB, Bigbazaar, will tend to aggregate RIL’s increasing strength in second and third-tier cities. Future Retail Limited, Future Consumer, Future Lifestyle Fashions, Future Supply Chain and Future Market Networks have merged into Future Enterprise Limited (FEL). The financial and insurance business of Future Group is kept out of the deal. Reliance Retail Ventures Limited and Reliance Retail Ventures will gain control over certain borrowings and current liabilities related to the logistics and warehousing business and then execute the balance consideration by way of cash. FEL will keep a hold on the manufacturing and distribution of fast-moving consumer goods and integrated fashion sourcing,manufacturing business and its insurance with Generali and NTC Mills after this transaction.

This deal with the Future group has considerably opened the door of becoming The King of Retail Business of India for Reliance as they look forward to being more attractive to potential global partners. Future Groups Retail, Wholesale and Supply chain business acquisition is an increase in Reliance Retail’s business that tends to accelerate the direction of providing support to the increasing competitiveness of millions of small merchants and also to help them improve their income in the current difficult times. The director of Reliance Retail Ventures Limited, Isha Ambani, said that they’ll be happy to preserve the popular brand of the future group as well as it’s commercial ecosystem, as it will play a key role in the development of modern retail in India and the participation of small traders, grocery stores and big consumer brands. Hence, the takeover brought incredible news for the vendors of Future group as they would have secured outstanding loans and for the employees who lost their jobs as Reliance Retail is determined to expand across India.Moreover, the business will benefit from the creation of new-age brands in the fast-moving consumer goods and fashion space, expanding its reach. Reliance is targeting to perk up the retail business of Future group. To increase the profit, Reliance started being adaptable to the changes and new things that are coming with the changing times.The acquisition was laid down to strengthen Reliance’s presence by adding 1800 stores to its retail envelope, which already covers around 11000 stores in many Indian towns and cities.

Nevertheless, this deal now risks Future’s tie-up with the US online shopping giant Amazon, as Amazon objected to this deal in August 2020.

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