How Future fits in Reliance’s retail biz
MUMBAI: The acquisition of Future group’s flagship businesses gives wings to Reliance Retail Ltd’s (RRL) grand retail ambitions currently pursued through offline, online and ‘new commerce’ channels, especially in tier-I cities.
As part of the transaction announced on Saturday, debtladen Future Group will merge five group firms—Future Retail, Future Lifestyle Fashions, Future Consumer, Future Supply Chains and Future Market Networks—into Future Enterprises Ltd (FEL), which will transfer the retail, wholesale, warehousing and logistics businesses to Reliance Retail Ventures Ltd for ₹24,713 crore. FEL will retain the manufacturing and distribution of FMCG goods, integrated fashion sourcing and manufacturing business, and its insurance joint ventures. Reliance Retail will then buy a minority stake in FEL.
Experts said the addition of Future’s assets such as Big Bazaar, fbb, Foodhall, Easyday, Nilgiris, Central and Brand Factory stores vastly expands Reliance Retail, already India’s largest offline retail company, helping RRL capture a large chunk of
India’s $1.32 lakh crore retail market.
“Future Retail’s businesses are a good fit in RIL’s retail business. It will help RIL expand offline retail presence and would see further improvement in margins due to improving scale,” an analyst with a foreign brokerage said on the condition of anonymity.
Despite its recent retail expansion through JioMart, RRL is keen to expand its offline presence. RRL’s retail strategy could be divided into three—offline, online and new commerce, where it is working with local stores in a B2B2C model. RRL has 11,784 stores across its formats of consumer electronics, fashion and lifestyle and grocery.
According to BofA Securities, retail contributes 24% of RIL’s (sum of the parts) valuation. Three analysts Mint spoke to believe this deal could also help Reliance Retail speed up its plans for an IPO in the next three-five years.
Big Bazaar is the flagship brand of Future Retail, and one of the largest hypermarket chains with 290 stores across 150 cities.
FBB or Fashion at Big Bazaar is the fashion brand under FR. The brand has 95 standalone stores across 50 cities.