The reorganisation of the Future Group's various businesses and the sale of the retail, wholesale and the logistics and warehousing business to Mukesh Ambani's Reliance Retail will ensure continuity of all the businesses and the decision on this was taken in the interests of all the stakeholders, Kishore Biyani, the founder of Future Group, has said.
Late on Saturday, Future Group had announced a reorganisation of its various businesses, whereby key group companies Future Retail, Future Lifestyle Fashions, Future Consumer, Future Supply Chains and Future Market Networks will be merged into Future Enterprises Limited (FEL).
Subsequently, by way of slump sale, the retail and wholesale business—which includes Big Bazaar, fbb, Foodhall, Easyday, Nilgiris, Central and Brand Factory—will be sold to Reliance Retail and Fashion Lifestyle, a wholly owned unit of Reliance Retail Ventures Limited (RRVL).
Future Group will also sell the logistics and warehousing business to RRVL by way of slump sale. RRVL will also take over certain borrowings and liabilities related to the business and discharge the balance by way of cash.
The total deal is valued at Rs 24,713 crore.
"As a result of this reorganisation and transaction, Future Group will achieve a holistic solution to the challenges that have been caused by COVID and the macroeconomic environment," said Biyani.
"This transaction takes into account the interests of all its stakeholders including lenders, shareholders, creditors, suppliers and employees, giving continuity to all its businesses," he said.
Biyani has often been called the father of modern Indian retail. He had entered the business back in 1987 with Manz Wear and later Pantaloon Retail, one of the earliest fashion and lifestyle retail chains. He went on to build one of the most well-known supermarket chains in Big Bazaar and other brands like fbb, Central and electronics retail chain EZone.
The company also made several acquisitions on the way, including Bharti's retail business under the Easyday brand, Nilgiris, which was famous in south India, and the retail business of Heritage Foods, a company promoted by former Andhra Pradesh chief minister Chandrababu Naidu.
Future Group also expanded over the years into financial services and insurance and set up a fast-moving consumer goods company. It also set up a supply chain company and forayed into warehousing.
However, as debts continued to mount, Biyani had to sell stakes in various businesses. For instance, Pantaloons was sold to Aditya Birla Group in 2012 and Future Capital Holdings was sold to Warburg Pincus.
This year, the imposition of nationwide lockdown to curb the spread of the COVID-19 pandemic hit Biyani's empire hard as barring the grocery stores, much of the other retail businesses had to remain closed for over two months.
The debt had risen to about Rs 13,000 crore, and a large chunk of the promoter shareholding had already been pledged.
As of June 30, promoters held 41.73 per cent stake in Future Retail, of which 74.90 per cent was pledged.
On August 17, Future Enterprises defaulted on its interest payments on non-convertible debentures.
Future Retail had managed to avoid the default when it paid the half-yearly interest on dollar-denominated bonds within the 30-day grace period.
In this backdrop, the sale of the retail and supply chain and logistics business will address Biyani's debt-related issues. But that will also mean an exit from the business he had built over three decades.
Biyani said he was pleased the retail business and brands were going into stronger hands.
Post this deal, Future Enterprises will be left with businesses in manufacturing and distribution of FMCG products, and integrated fashion sourcing and merchandising.
These businesses will further benefit from supply agreements with RRFLL.
"This deal will also enable FEL to focus on the creation of new-age brands in the FMCG and fashion space and expand its reach. The transaction will help FEL expand with a focussed business model and strong balance sheet," Future Group said.
Reliance was already the largest retailer in the country with 11,784 outlets. Acquisition of Future Group's retail businesses will give it access to nearly 1,800 stores and around Rs 26,000 crore in additional sales.
This will give RIL a significantly larger scale over its nearest rival, DMart.
