KRChoksey: Reliance Industries - Leveraging The Consumption Space Through Inorganic Route 

KRChoksey Report

On August 29, 2020, Reliance Industries Ltd. announced the acquisition of Future Group for Rs 24,713 crore on a slump sale basis through its subsidiary Reliance Retail Ventures Ltd. (RRVL)

Through the deal, Reliance will acquire Future Retail Ltd. (FRL) that owns the BigBazaar that sells everything from groceries to cosmetics and apparel, and Future Lifestyle Fashions Ltd. (FLFL) that operates fashion discount chain Brand Factory.

The Logistics and Warehousing undertaking will also be transferred to Reliance Retail. Future Group will be merging these companies into Future Enterprises Ltd. (FEL) In order to consummate the deal.

Reliance Retail will also invest Rs 1,200 crore in the preferential issue of equity shares of Future Enterprises to acquire 6.09% of post-merger equity and Rs 400 crore in a preferential issue of equity warrants which, upon conversion and payment of balance 75% of the issue price, will result in Reliance Retail acquiring further 7.05% of Future Enterprises aggregating to approximately 14% stake.

This acquisition is subject to The Securities and Exchange Board of India, Competition Commission of India, National Company Law Tribunal, shareholders, creditors and other requisite approvals.

We view the merger as a positive event for Reliance Industries as it will help consolidate its space in the organized retail market

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