Skip to main content

Is The Reliance Retail-Future Group Deal A Sign Of Things To Come?



Under a complete lockdown with no business for almost three months since the end of March, the organised retail sector, brought down on its knees, has been struggling to get back on its feet. The deal between two giants, Reliance Retail and Future Group, which came about because of the latter’s massive debt burden, is expected to shake things up in the sector.

Experts expect to see some level of consolidation in the sector as the difficult economic environment forces players to take a hard look at their survival options. In the good times, the retail industry contributed about 10 percent of the country’s GDP. Now, with shops shut and people watching their spends amid layoffs and pay cuts, the sector is staring at a contraction.

Even after the various Unlock phases, business hasn’t really picked up for brick and mortar retail outfits. In places such as Maharashtra, while malls have opened, footfalls remain low due to fears over infection and purse strings tightening amid pay cuts.

An analysis by ICICI Securities in March, well before the true extent of the pandemic in India was known, estimated that mall operators would lose 20-25 percent of their annual revenue, assuming that a rent-free period was given to retailers.

According to the Retailers Association of India, non-essential retail sales plunged 80 percent in May after falling 50 percent in March. Essential retail was down 40 percent in April and may slide further given its current run rate, RAI said.

Consolidation on the anvil?

Given this reality, most retail experts believe that there will be a lot of consolidation in the retail space in the medium term, with many smaller and mid-size retailers succumbing to the tough operating environment.

Kumar Rajagopalan, CEO, Retailers Association of India (RAI) said: “Consolidation and new creation keeps an industry interesting and healthy. COVID has also got retailers focussed on collaborations and omni-channel retail play. Various category retailers find ability to grow thanks to collaborations and mergers.”

“We are in the process of evolution as far as organised retail is concerned. So there is enough and more opportunity and headroom for new organisations and new enterprises. At the same time, organised retail has been here for 10-15 years and even more, so that allows for some bit of consolidation. We can see a bit of both in the near future,” said Sanjay Vakharia, CEO of Spykar.

However, some retail industry bigwigs are of the view that such mergers will create a monopolistic market.

“Such deals [Reliance Retail-Future Enterprises] will also create a monopolistic market, which may not be healthy for the industry in the long term,” Lalit Agarwal, Chairman and Managing Director of VMart Retail said.

According to a CLSA report, the Future Enterprises deal strengthens Reliance’s position as India’s largest retailer by expanding its retail outlets by 15 percent and retail footprint and warehousing area by over 80 percent. This will also increase Reliance’s market share in the organised retail sector to 17.8 percent.

“With this deal, Reliance will grow by leaps and bounds and will definitely gain an edge over other retailers in the country as it has now become the largest retailer in India,” said Susil Dungarwal –  Chief Mall Mechanic Beyond Squarefeet Advisory Pvt. Ltd. and Beyond Squarefeet Mall Management Pvt. Ltd.


Sandip Ginodia , CEO

 

ALTIUS INVESTECH PVT LTD

 

We deal in over 60 unlisted companies with 15 years of experience 

For latest prices visit : www.abhisheksecurities.com/unlisted.htm / call : 09830271248 .

Email : ginodiasandip1@gmail.com

Comments

Popular posts from this blog

Reliance's JioMart is averaging half a million orders per day; WhatsApp driving growth

  JioMart , Reliance's online-to-offline commerce  platform that launched in May , has scaled up rapidly, riding on the pandemic-fuelled digital acceleration. The service, which went   live in 200 cities across India, is currently processing an average of  500,000 orders per day. " We can go even higher on peak days",  Jio Platforms CEO   Kiran Thomas  revealed at the Facebook for Fuel India 2020 event. He said, "JioMart is empowering millions of  kiranas  and small merchants through the simple and secure platform of WhatsApp, and linking them to Reliance Retail's pan-India supply chain. We expect to grow manifold in future, and are optimistic about enabling new cohorts of users and making it easier for them to shop for daily essentials."  "Customers are transacting seamlessly on JioMart and the  conversational nature of the service  enabled by WhatsApp has made people adapt to it intuitively," he added. Reliance also stated that it will continue t

TCS merger with TCS e serve

The board of Tata Consultancy Services (TCS) in its meeting on 18 October 2012 has approved the composite scheme of arrangement between TCS, TCS e-Serve (e-Serve) and TCS e-Serve International (TEIL). The composite scheme of arrangement provides for merger of e-Serve into TCS and demerger of TEIL's special economic zone (SEZ) undertaking(s) to TCS. The appointed date proposed for this scheme is 01 April 2013. TCS holds 96.26% of the paid up equity share capital of e-Serve. TEIL is a wholly owned subsidiary of e-Serve. As per the terms of the scheme of arrangement, shareholders of e-Serve (other than TCS) will receive 13 equity shares of Re 1 each of TCS for every 4 equity shares of Rs 10 each of e-Serve held by them. The board has approved the scheme of merger of Computational Research Laboratories (CRL) and Retail FullServe (RFL) with TCS. The proposed appointed date for the merger of CRL is 01 October 2012 and for the merger of RFL is 01 April 2012. Computational Res

Stock broker SMC Global files for IPO

F inancial services company SMC Global Securities has filed draft red herring prospectus with SEBI for public issue of 1,58,67,380 equity shares of face value of Rs 2 each. The issue comprises a fresh issue of 79,33,690 equity shares by the company and an offer for sale of 79,33,690 shares by Millennium India Acquisition Company Inc. As of September 30, 2012, "We service our broking clients through a network of 43 branches and 2,521 registered sub-brokers and authorized persons spread in more than 500 cities and towns. We have also established an office in Dubai for brokerage and trading activities in that region," the company said. SMC has reported a loss of Rs 0.42 crore and total revenues of Rs 292.24 crore in the year ended March 31, 2012. "The proceeds of the fresh issue shall be utilised for margin maintenance with stock exchanges; part repayment of term loan; investments into subsidiary, SMC Comtrade; and general corporate purposes," according to p