Reliance Industries (RIL) on August 29 said it was acquiring the retail and wholesale business and the logistics and warehousing business of rival Future Group for a cash consideration of Rs 24,713 crore in a deal which is likely to give the oil and telecom conglomerate a stronghold in grocery and apparel segments.
The deal is being seen as coming together of a future digital giant and a retail goliath popularly known to be the veteran of the consumer story in India.
"Future brings with it brands where the business models have been established over the years, a strong supply chain and a robust understanding of the Indian consumer segment. They are the pioneers who introduced the Indian common man to multi-storied hypermarkets. The ability to service the aspirations of the common man is what Future had successfully done all these years. This with the new digital ways of life powered by Reliance can create a powerful consumer ecosystem," said Sreedhar Prasad, an independent e-commerce analyst.
With this deal, Future brings on table Big Bazaar, Fashion at Big Bazaar, EasyDay and Brand Factory. The deal is likely to provide Reliance Retail an additional store strength of around 18,000 across grocery and lifestyle segments.
The deal comes at a time when world over the retailers are struggling to cope up with the decline in business and the challenges caused by the COVID-19 pandemic. Things became worse for Future which had been in bad financial health since the last few years. The company had a debt of Rs 12,778 crore as of September 2019, a significant increase from Rs 10,951, six months ago.
Reliance has agreed to take up the group's debt as part of the deal.
The retail market is still primarily served by the conventional brick-and-mortar stores which account for over 88 percent of the total market. The organised retail is pegged at $60 billion which is expected to witness a rise of 22-25 percent with a market size of $140-160 billion by 2021, according to recent industry reports.
This growth is expected to be driven by economic and socio-demographic factors like growth in income, rise in nuclear families and urbanisation.
This happens at a time when even the e-tailing industry is also witnessing a massive surge. The sector which was expected to cross $200 billion by 2026 is only going to see the numbers multiply given the uptake of e-commerce as a platform in the post-pandemic scenario.
With the two companies combined together, the majority of the market share of the organised retail will fall in their kitty.
The deal is also expected to give firepower to Reliance when it fights Amazon in the grocery segment. "In grocery, you need small locations from where you can pick items and deliver to consumers. Some companies do it with dark stores, some do it by partnering with third-party outlets. But when you have your own store and can see what kind of inventory you have you are in a very powerful position," said Satish Meena, senior forecast analyst at Forrester Research.
Interestingly, Future was also reported to be in talks for a stake sale with Amazon. Amazon also already holds a 49 percent stake in a vertical called Future Coupons of the group as per a deal which was signed last year, giving Amazon around 3-4 percent stake in Future Retail.
Currently, it allows Amazon India to be the authorised online sales channel for Future's products.
It wasn't immediately clear as to what happens to this arrangement post the RIL-Future deal.
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