Reliance Retail to acquire Future Group for $3.4 billion

After having been overtaken by Amazon and Walmart-owned Flipkart in online commerce, India's Future Group has seen its debt-laden retail ambitions cave into the onslaught from Mukesh Ambani's Reliance Industries. The Reliance conglomerate, which owns ventures in diverse industries ranging from petrochemicals to mobile services and retail, announced over the weekend that it would be acquiring Future's retail assets for $3.4 billion. 

This deal will help Kishore Biyani, once regarded as India's raja (or king) of retail cut his debt by over $2 billion, according to news reports. On the other hand, the deal will give Ambani's Reliance access to over 1500 stores across formats such as Big Bazaar, Easy Day, Central and Foodhall. 

L-R: Mukesh Ambani, chairman of Reliance Industries and Kishore Biyani, CEO and founder of Future Group.

Already, Reliance Retail is India's largest organised retailer, and in a market dominated by mom-and-pop retail stores, this deal will help Reliance corner a third of India's fragmented market. 

“We are pleased to provide a home to the renowned formats and brands of Future Group as well as preserve its business ecosystem, which have played an important role in the evolution of modern retail in India,” said Isha Amabni, director at Reliance Retail and daughter of Mukesh Ambani, in a statement. “We hope to continue the growth momentum of the retail industry with our unique model of active collaboration with small merchants and kiranas as well as large consumer brands.” 

According to a company statement, Reliance Retail will acquire the retail and wholesale business and the logistics and warehousing operations of Future Group. Then, the retail and wholesale businesses will be merged with Reliance Retail and Fashion Lifestyle, a subsidiary of Reliance Retail, and the logistics and warehousing would merge with the buyer.

Amazon's plans for growth in India are clearly a major motivation for Reliance in making this deal. Incidentally, Amazon owns a stake in Future Retail thanks to an earlier deal where it, along with private equity fund Premji Invest, paid $197 million for a 49% stake in Future Coupons, one of the shareholders in Future Retail.