RIL may buy Future Group’s retail biz for ₹27,000 crore

The estimated deal value includes the liabilities of Future Group that Reliance plans to absorb, the people said on condition of anonymity.

Five listed entities, including Future Retail Ltd, Future Consumer, Future Lifestyle Fashions, Future Supply Chain and Future Market Networks, will be merged into Future Enterprises Ltd (FEL) before the sale of the assets, the people said on condition of anonymity.

FEL will then conduct a slump sale of its retail assets to one of the retail subsidiaries of Reliance Industries Ltd.

RIL has exclusivity on the deal till 31 July, by when it needs to sign a binding agreement, said the first person, requesting anonymity. Negotiations are currently on and the deal could take time to culminate, he added.

FEL develops, owns and leases the retail infrastructure for the group, according to information on the company’s website. It also holds the group’s investments in subsidiaries and joint ventures, including insurance, textile manufacturing, supply chain and logistics.

As part of the deal, fashion and grocery retail formats from Future Group’s listed entities such as Big Bazaar, FoodHall, Nilgiris, FBB, Central, Heritage Foods and Brand Factory, barring apparel brands Lee Cooper and All, will be acquired by RIL. In all, over 1,700 stores across formats are expected to go to RIL.

RIL will also absorb partnerships that the Future Group has with foreign brands and retailers.

For instance, Future Retail had signed a master franchise agreement with 7-Eleven Inc. to develop and operate 7-Eleven stores in India. No stores have opened so far, but the business is expected go to RIL.

The deal comes at a time when Future Group, founded by Kishore Biyani, has accumulated heavy debt over the years. As of 30 September 2019, debt at Future Group’s listed companies increased to ₹12,778 crore from ₹10,951 crore as on 31 March 2019.

The move will mark significant consolidation in India’s retail market. Biyani built a sizable organized retail business—since the late 1980s. In 1991, Biyani changed the name of his company to Pantaloon Fashion (India) Ltd. In 2001, it opened the first Big Bazaar store in India.

Reliance Retail, on the other hand, operates close to 11,784 stores split across value fashion, footwear, premium fashion, grocery, jewellery, electronics, connectivity, etc. In FY20, Reliance Retail achieved a turnover of ₹1.63 trillion. Reliance Retail also works as the master distributor for Jio connectivity services.

In an e-mail response to a query from Mint, a spokesperson from Reliance Industries said: “As a policy, we do not comment on media speculation and rumours. Our company evaluates various opportunities on an ongoing basis. We have made and will continue to make necessary disclosures in compliance with our obligations under Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015 and our agreements with the stock exchanges."