Reliance-Future Deal: How Future Enterprises Looks Post-Consolidation
The deal will involve merger of 19 Future Group entities, including five listed and 11 promoter companies, into Future Enterprises
Kishore Biyani’s Future Enterprises Ltd. will consolidate all businesses as part of a three-step deal to sell its retail, wholesale, logistics and warehousing businesses to Reliance Industries Ltd. at a value of Rs 27,513 crore.
The transaction will involve merger of 19 Future Group entities, including five listed and 11 promoter companies, into Future Enterprises, according to an exchange filing.
Reliance Retail and Fashion Lifestyle Ltd., a wholly-owned subsidiary of Reliance Retail Ventures Ltd., will then acquire the wholesale, retail, logistics and warehousing assets via a slump sale, along with their certain debt and vendor liabilities. The privately held entities of Biyani will add at least Rs 2,661 crore gross debt to Future Enterprises’ books.
Of the 14 non-listed entities of Future Group, only three have positive net worth. But combined, they have a negative net worth of Rs 303.5 crore. After the sale of assets to Reliance Retail, and Rs 2,800 crore infusion in equity and warrants, Future Enterprises will have a net worth of Rs 3,290 crore and a net debt of Rs 2,315 crore.
The promoter companies are mostly involved in providing services to the retail and wholesale business, including leasing spaces.
Except for Nice Texcot Trading & Agency Pvt. Ltd., a wholesaler, and Unique Malls Pvt. Ltd., engaged in management and development of space for out-of-home media and supporting group’s retail business, all other entities are involved in acquiring and leasing of assets to group companies. Lease rentals are the only source of income for these entities.
Post Restructuring
After the reorganisation, Future Enterprises will have three businesses—apparel, fast-moving consumer goods and insurance joint ventures.
While the company will continue to sell through its existing network of stores—Big Bazaar, Easy Day, Central, Brand Factory and Nilgiris, it expects to generate sustained cash flows from its apparel business.
Future Enterprises, according to the filing, also expects its FMCG business to grow 25% over the next few years with an expansion in margin, and its fashion business to grow at an annual rate of 20%. Its insurance business is expected to accelerate its value creation with access to added physical distribution channels.