By Ishani Panda
Business Tycoon Mukesh Ambani’s Reliance Industries is reportedly looking to acquire a controlling stake in the retail business of Kishore Biyani’s Future Group.
According to the reports, the deal will involve Kishore Biyani to relieve the control of all the businesses under the Future Retail Basket that comprises FBB, Big Bazaar, Food Hall, and Central.
The deal is also going to release Biyani from the ownership of Future Lifestyle Ltd, and Future Supply Chain Solutions. All three entities are likely to be merged and brought under the control of Reliance Industries.
Kishore Biyani has long been called the father of modern retail in India. It was Biyani’s vision that ushered in Big Bazaar, India’s first supermarket chain.
However, amid rising debts and a deteriorating business environment due to the Corona Pandemic, Biyani is learnt to be in talks to sell a partial or complete stake in the flagship retail company Future Retail.
Earlier, the Future Group was also exploring stake sale opportunities in Future Retail with PremjiInvest, the family investment arm of Wipro Chairman Azim Premji, and private equity firm Samara Capital.
If any deal is finalised, then it would be a breather for the Future Group, as promoter Kishore Biyani had defaulted on loans in March.
Various rating agencies like Standard & Poor’s and Fitch downgraded credit ratings of Future Retail after the default and invocation of pledged shares by lenders.
The promoters and promoter group held a 40.31 per cent stake in Future Retail as of March 31, 2020. Future Retail operates 1,500 retail stores that cover over 16 million square feet of retail space in 400 cities.
It has large format stores, Big Bazaar, its flagship chain, besides small store neighbourhood retail chains, EasyDay Club and Heritage Fresh. Future Retail has tried every way possible to avoid a loan default over the last six months.
In January, the company raised $500 million through dollar bonds. It also pruned its fixed costs across corporate overheads, operations, people costs, and marketing costs.
Then, it shut down 177 small-format stores, which were in a mix of new low-density clusters or bottom of the tail stores.
On the other hand, Reliance Retail operates a network of 11,784 stores covering 28.7 million square feet and reported a revenue of Rs 38,211 crore in the January-March quarter.
The negotiations between the two companies began early this year after Biyani’s entities defaulted on some of its loans. Post that, Biyani held several meetings with investors in a bid to save the company.
Negotiations between RIL and Future Group have reportedly reached a decisive phase, and RIL wants to sign an agreement before the upcoming AGM (annual general meeting) on July 15.
Worth mentioning here is that this development will give RIL the much-needed firepower to catapult to numero uno position in retail space across categories such as fashion, general merchandise and groceries.