The Buzz: Future Group to offload its stake to multinational conglomerate RIL

Reliance Industries has moved close to clinching a deal to acquire the retail businesses of Kishore Biyani’s Future Group.

Owner of the oil-to-retail conglomerate, Mukesh Ambani, said that commenting on media speculations and rumours was inappropriate on his part. In a regulatory filing, RIL said it evaluates various opportunities on an ongoing basis.

Biyani-led Future Group’s response to this was that they continue to “explore and evaluate various opportunities”.

The company also claimed that the board has not taken any such decision by far. However, both companies have not denied the possibility of the deal.

Three companies – Future Retail, Future Lifestyle Fashions & Future Supply Chain – are in talks for the merger. According to media reports, this deal will necessitate Biyani to give up authority over the abovementioned. His control will then be over Future Group’s FMCG business and a few gathering organizations.

It is believed that the discussion is in an advanced stage. RIL wishes to seal the deal before it’s AGM on 15th July.
Amid mounting debts and defaulted loans, Biyani has been forced to lookout for a buyer. Credit rating agencies – Standard & Poor’s, Fitch & ICRA relegated Future Retail’s rating.

ICRA degraded Future Corporate Resources Pt Ltd to junk grade rating of BB+. It recently stated that the debt of Future Group’s 6 listed firms increased to Rs. 12,778 cr as on September’19 from Rs. 11,463 cr in Mar’19. This was due to the default and invocation of pledged shares by lenders.
Kishore Biyani will breathe a sigh of relief if this deal transpires. It will help Reliance Retail assert its position and give its offline presence a major boost.

When talks were doing rounds in mid-June regarding this deal between RIL and Future Group, shares of Kishore Biyani-led Future Retail hit an upper circuit limit of 5% while those of Mukesh Ambani-led Reliance Industries’ surged 2%.

Future Retail and Future Lifestyle operate over 1500 and 300 stores respectively. On the other hand Reliance Retail has a network of 11,784 stores and reported revenue of Rs. 38,211 cr in Jan-Mar quarter.
Retail business, particularly the grocery segment, could be the next big ticket for RIL. Goldman Sachs has forecasted the gross merchandise value (GMV) for the sub-segment surging to $83 billion by FY29 from $5 billion in FY20.

PremjiInvest and Jeff Bezos-founded Amazon have a stake of ~6% and ~3.6% respectively in Future Retail.
Presently, RIL’s stake in Reliance Retail stands at 99.95%.

As on Mar’19 (in Rs. cr):
Reliance Retail
• Total income: 1,02,058.55
• Profit: 3,138.26

Future Retail
• Total income: 20,185.37
• Profit: 732.81

Future Lifestyle Fashions
• Total income: 5,416.01
• Profit: 145.37
Future Supply Chain
• Total income: 1,118.38
• Profit: 96.38

Will RIL write the retail future of Biyani-led “Future Group”?
Are the paving blocks laid by RIL for Biyani’s” Future”?

By – Sakina