Business India ×
  Magazine:
Acquisitions

Published on: Sept. 8, 2020, 3:40 p.m.
Future belongs to Reliance
  • Big Bazaar now in Reliance's shopping cart

By Ritwik Sinha. Consulting Editor, Business India

The two major deals in the Indian retail business (Walmart taking over Flipkart in 2018 and now Reliance Retail Ventures acquiring the main businesses of Kishore Biyani’s Future Group) have a common string. Both of them emanated from a serious existential crisis faced by the acquired entity which happened to be a leading player in its respective domain for a long time. And these deals probably happened just in the nick of time. Analysts say that Flipkart, with its mounting losses two years back, would have found it difficult to sustain itself and carry the valuation game any further if Walmart had not extended its helping hand. Amazon, with its financial might, had begun to increase its market share with Jeff Bezos making his intentions clear that he would spare no effort and investment in making India a happening turf for him. And a similar pattern has been noticed in the case of the Future Group where rising debts and inevitable credit downrating brought the company close to a breaking point. 

There is no gainsaying the fact that Reliance’s entry has saved the day for Biyani and his company, with the bankers getting jittery over the increasing debt of the listed companies of the group which had stood close to Rs13,000 crore at the end of September, 2019.

In precise terms, the deal entails Reliance spending Rs24,713 crore to buy out four major divisions of Biyani’s empire – retail, wholesale, logistics and warehousing assets. Reliance Retail Ventures Limited (RRVL), a subsidiary of Reliance Industries, and its divisions, will be acquiring different arms. For instance, Future’s retail and wholesale businesses will be added to the profile of Reliance Retail and Fashion Lifestyle Limited (RRFLL), a wholly-owned subsidiary of RRVL. And the logistics and warehousing arms of the Future Group will be directly transferred to RRVL. In a cumulative sense, the  deal ensures some of the popular retail brands created by Biyani like Big Bazaar, FBB, Easyday, and Central stay alive.

The timing couldn’t have been more opportune for Reliance with Mukesh Ambani recently garnering support from global giants like Google and Facebook for his own larger technology play, JioMart, which has been positioned at the fulcrum of Reliance’s retail drive.

As analysts point out, the deal has bolstered Reliance Retail’s positioning significantly in several ways. It has got control of a positive cash flow business (estimated close to Rs30,000 crore). More importantly, the deal takes Reliance Retail miles ahead of any competition when it comes to grocery strength – the largest vertical of the modern and organised vertical in the country estimated at $800 billion annual retail sales.

The two companies have been the leading entities in the space and now their combined might takes the Reliance grocery business to the point where all other entities will be overshadowed. Going by the market buzz following the takeover announcement of Future Group, DMart will be the only competition worth mentioning for Reliance Retail.   

It remains a mystery to many why someone like Biyani who clearly emerged as a pioneer in the Indian retail business simply failed to look beyond the capital intensive, brick and mortar model of retail business. Something which is now strongly believed to have pushed him on to the debt path, finally forcing him to exit the game.

And there is another dimension which seems to be equally baffling. While Reliance has chosen to make the most of the worst possible spell in scaling up its retail business, why have other conglomerates like Tata, Aditya Birla or RPG Group (with specific retail businesses) shied away from taking a shot at buying a stressed Future and enhance their footprint? Are they resigned to the fact that strength picked up by Reliance Retail in recent years is invincible and can’t be challenged? This again is a major open-ended question as of now.

Don't miss this

Cover Feature

In control of its growth momentum

JK Tyre readies itself for an exceptional growth spell

Special Report

Ready to roll

NCRTC could be the mascot of changes the government has planned for the railways

Focus

Pegasus affair rocks the nation

Unless cleaned up, it will only bring down India’s global image

Corporate Report

GHFL consolidates its leadership

Garware High Tech Films dominates the market with its differentiated portfolio

Our letter to you, once a week.
Register with The CSR Weekly for free!

E-MAGAZINE
BI 1105 digital-jk-tyre-exceptional-growth-ahead
Can we do another 1991?
Amazing turnaround
FROM THIS ISSUE

Selections

Guest Column

States

Corporate Report

MSMEs

Profile

Social Responsibility

Healthcare

Goodyear India partners Americares India Foundation

Published on Feb. 2, 2021, 9:21 p.m.

The partnership will support COVID-19 healthcare facilities in Faridabad and Aurangabad

Environment

Tata Motors launches a 'Go Green' initiative

Published on Dec. 23, 2020, 10:34 a.m.

The company will plant a sapling for the sale of every new commercial vehicle

Women Empowerment

Tata Starbucks ties up with Educate Girls to empower women

Published on Dec. 2, 2020, 3:10 p.m.

The partnership aims to provide volunteering and educational support to those who have relocated to urban cities from villages

Environment

Indian Oil has a social initiative for a clean and green world

Published on Nov. 25, 2020, 2:53 a.m.

The public sector company is planting a tree for every retail customer visit during its TreeCheers campaign period

Climate Change

Environment

Risks and opportunities

Published on July 28, 2021, 3:08 p.m.

Climate risk disclosures are expected to help investors identify firms’ business sustainability risks

Environment

Turning the table on developed nations

Published on July 28, 2021, 2:35 p.m.

India demands that the developed countries commit to cut their emission to global average by 2030

Government and Policy

India, US to fight climate crisis jointly

Published on July 28, 2021, 12:53 p.m.

The US has sought co-operation from India in tracking climate crisis

Air Quality

Electric vehicles best placed to tackle Climate Change

Published on July 28, 2021, 12:11 p.m.

A recent study underlines EVs' clear superiority to combat the climate crisis

Stay ahead of the times.
Register with The Climate Change Weekly for free!