Reliance Retail acquires Future Group for Rs. 27,513 Cr

All you need to know about Reliance Retail and Future Group deal

Introduction

In this blog, we will discuss about Reliance Retail’s recent deal with Future group for Rs 27,513 crore. We will discuss the structure of the deal and how it impacts Reliance Retail.

Reliance Retail – Future Group deal

Deal Structure

• Reliance Retail bought Future Group for a consideration of Rs 27,513 crore. Let us take a look at the structure of this deal

• Reliance Retail has acquired future group’s retail, wholesale, warehouse and logistics businesses for Rs. 24,713 crore.
• Before understanding the structure of Rs 2800 deal , let us understand the corporate structure involved here.

• Now let us take a look at structure of Rs 2800 crore deal. Reliance Retail’s subsidiary Reliance Retail Fashion & Lifestyle Ltd (RRFL) will pickup a stake in Future Enterprises Limited post its merger via preferential share allotment and through stock warrants.
• RRFL will take this stake through allotment of preference shares and equity warrants.
• RRFL will invest ~ Rs. 1200 crore in FEL through preferential issue of shares for a stake of 6.09% and RS. 400 crore through preferential issue of equity warrants.
• Once this equity warrants are exercised , RRFL can invest the remaining Rs. 1200 crore in FEL.
• Post this Rs 2800 deal, stake of RRFL in Future Enterprises Limited will be 13.14%.

• The logistics and warehousing business of Future Group will be absorbed in Reliance Retail and the retail and wholesale business of Future Group will be absorbed into its subsidiary RRFL.

Impact of acquisition and way ahead for Reliance Retail

• Future Group’s expertise of 3 decades will definitely help Reliance Retail in acing its distribution and logistics capabilities.
• Future group has a huge debt of ~ Rs.13,000 crore, which will be repaid by Reliance Retail and this will provide some NPA relief to the banks.
• After this deal, Reliance has emerged as a strong competitor for two e-commerce giants i.e Amazon and Walmart (Flipkart).
• As mentioned in Reliance’s AGM, Reliance Retail is receiving many interests from strategic and financial investment point of view.
• So there is a possibility that we can see similar slew of investments for Reliance Retail as we saw for Jio platforms.

Key Financials of Reliance Retail

• This deal will definitely add value to its financial performance in the upcoming years.
• This optimism is evident from the Future Retail’s stock price movement. Also post the deal goes through, Reliance Industries stock can also see some upward price movement.