Reliance almost doubles retail footprint with acquisition of Future Group

August 31, 2020 17:01

Reliance Industries Ltd's acquisition of debt-strapped Future Group will almost double the footprint of its retail business, which now is valued at up to USD 68 billion, analysts said. 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 terms entail a merger of five listed units of Future Group into Future Enterprises Ltd (FEL). Reliance Retail has also proposed to invest Rs 1,200 crore in FEL preferential equity (6.09 per cent of post-merger equity of FEL) and Rs 1,600 crore in preferential warrants (option to acquire further 7.05 per cent).

The deal increases the retail store footprint of Reliance Retail Ltd, a unit of RIL, from current 28.7 million square feet to 52.5 million sq ft, consolidating its pole position, analysts said.

While UBS said the deal would require approvals from SEBI, CCI and NCLT in addition to no objection from creditors and minority shareholders, JP Morgan said it remains to be seen if Reliance would look to re-brand the existing Future group stores under own formats.

The deal brings potential synergies from the increased geographic presence, improving sourcing efficiencies and cost rationalisation, UBS said raising its valuation of Reliance Retail from USD 64 billion to USD 68 billion. HSBC said the acquisition implies a clean acquisition of Future Retail, Future Lifestyle Fashions Ltd (FLFL) and Future Supply Chain Solutions Ltd (FSCSL).

In addition, it will acquire a 13.1 per cent shareholding in the remaining of FEL. "The deal will allow Reliance Retail to almost double its retail area under operation and increase the store count by 15 per cent," it said. -- PTI

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