Future Group Bonds, Shares Soar After Ambani’s Purchase Plan
Signage for Fashion @ Big Bazaar, the fashion unit of Big Bazaar operated by Future Retail Ltd., stands in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Future Group Bonds, Shares Soar After Ambani’s Purchase Plan

Future Group surged in bond and stock markets Monday after Reliance Industries Ltd. said over the weekend it will acquire certain units of the conglomerate.

Dollar notes sold by Future Retail Ltd. rose 20 cents to 93.5 cents on the dollar, the biggest jump since the bond’s sale in January, according to Bloomberg-compiled prices. The group unit averted a default on the securities earlier this month.

Future Retail’s shares surged by as much as 20% in Mumbai, the most since August 19 when they rose by a similar amount in intra-day trading. Shares in group companies including Future Enterprises Ltd. and Future Lifestyle Fashions Ltd. also jumped.

Future Group Bonds, Shares Soar After Ambani’s Purchase Plan

Mukesh Ambani’s Reliance Industries said it will purchase the retail, wholesale, logistics and warehousing units of Future Group for 247.1 billion rupees ($3.4 billion). The transaction will propel Ambani’s ambitions to dominate India’s retail sector and could also help Kishore Biyani, the tycoon behind the Future Group, pay debts.

Future Retail said last week that it paid interest on the dollar bonds after missing the original July 22 deadline for the coupon payment.

The broader Future Group has about 7.5 billion rupees of interest and principal due to noteholders this year, and 433.4 million rupees of the bill falls on Aug. 31, data compiled by Bloomberg show.

Future Group will merge some of its remaining businesses into Future Enterprises Ltd., Reliance Retail Ventures Ltd. said in a statement on Saturday. Ambani’s unit will then invest 12 billion rupees to acquire about 6.1% stake in Future Enterprises, according to the statement.

The transaction with the Future Group will bolster Reliance Retail -- already the nation’s largest retailer by the number of stores -- in a sector that’s estimated to be worth $1.3 trillion by 2025 from $700 billion in 2019, according to a February study by Boston Consulting Group and Retailers’ Association India. The deal will also help the indebted Future Group pare its borrowings.

“Strong retail franchise and brands, that we have created over time, are going in stronger hands,” Kishore Biyani, founder of the Future Group said in a separate statement. “This transaction takes into account the interest of all its stakeholders including lenders, shareholders, creditors.”

Details of the transaction
  • Reliance to invest 12 billion rupees in preferential shares of Future Enterprises, acquiring 6.1% stake
  • Reliance to also buy 4 billion rupees of equity warrants convertible into 7.05% of Future Enterprises shares

After disrupting India’s telecom sector, Ambani is now pushing ahead with his ambitions in the brick-and-mortar retail and e-commerce space. Asia’s wealthiest man is on a mission to transform his conglomerate into a consumer-services giant and reduce dependence on revenue from its traditional businesses of petrochemicals and oil refining.

Reliance Industries’ deal with the Future Group also draws the battle lines between Ambani and Amazon.com Inc. as well as Walmart Inc., which have spent billions in a bid to dominate the world’s only billion-people-plus market that’s still open to foreign firms.

Amazon last year agreed to buy 49% in one of the Future Group’s unlisted firms that allowed the American company to acquire stake in Future Retail between three and ten years. This transaction gave the American e-commerce giant an indirect stake of 1.3% in Future Retail. It wasn’t immediately clear what happens to Amazon’s stake.

The Future Group has five main listed units including Future Consumer Ltd., which sells food, home and personal care products, and Future Lifestyle Fashions Ltd. that operates fashion discount chain Brand Factory.

©2020 Bloomberg L.P.

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