Kishore Biyani's Future Enterprises Set To Seal Reliance Retail Deal On Saturday

The board of Future Enterprises will meet on Saturday to finalise the sale of the group’s retail business to Reliance Retail. The all-cash deal will see the Mukesh Ambani company take on Future Group’s debt and liabilities, and pick up a minority stake in the latter’s FMCG arm.

According to the terms of the deal, valued at about Rs 29,000-30,000 crore, Future Group will merge five listed units across grocery, apparel, supply chain and the consumer business into Future Enterprises Ltd NSE 4.96 % (FEL), which currently houses the group’s retail back-end infrastructure. FEL will then hive off all retail assets and sell them to RIL as a single unit, according to two people familiar with the matter.

“Reliance will pay about Rs 13,000 crore to Future Group for clearing debt, another Rs 7,000 crore for its liabilities (including payments to landlords and vendors), and Rs 6,000-7,000 crore to the promoter group,” said one of the persons. In addition, Reliance will pick up 14-16% stake in Future Enterprises for 3,000 crore through a preferential allotment by the latter.

Future Enterprises will house the residual businesses, primarily the FMCG products of Future Consumer, textile mills and the insurance arm.

FEL will have a long-term supply agreement with Reliance Retail for apparel and groceries. Reliance Industries and Future Group did not respond to queries till press time Thursday.

Shares of the flagship Future Retail rose 10% on the Bombay Stock Exchange (BSE) on Thursday while Future Consumer, Future Enterprise and Future Lifestyle shares surged 5% each.

Founded in 1987 as the erstwhile Manz Wear and later Pantaloon Retail, the Future Group used aggressive pricing to become a retail juggernaut over the past two decades, but is now burdened with net debt of Rs 12,989 crore. Almost the entire shareholding of the promoters is pledged with lenders.

For Reliance Industries, which clocked revenues of Rs 1.63 lakh crore in the retail business last fiscal, the deal could mean a significant share in the groceries and apparel segments, where it hasn’t made a dent, as it has in electronics. “This will make Reliance the market leader by a long mile, putting pressure on rivals. In telecom and digital, it is hard to displace the market leader, but in retail, higher store count doesn’t guarantee success. Retail in India is still very fragmented or local, and having more successful stores matter instead of an absolute number of outlets,” said Devangshu Dutta, founder of Third Eyesight, a strategy consulting firm.

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