Nifty 17938.4 (-0.96%)
Sensex 60098.82 (-1.08%)
Nifty Bank 38041.35 (-0.44%)
Nifty IT 37281.7 (-2.13%)
Nifty Financial Services 18269.95 (-1.08%)
Adani Ports 744.20 (-2.46%)
Asian Paints 3280.40 (-2.77%)
Axis Bank 729.60 (0.61%)
B P C L 394.35 (-0.94%)
Bajaj Auto 3436.80 (1.05%)
Bajaj Finance 7571.80 (-2.22%)
Bajaj Finserv 18077.30 (-0.42%)
Bharti Airtel 703.70 (-1.49%)
Britannia Inds. 3575.65 (-1.28%)
Cipla 895.65 (-0.72%)
Coal India 163.90 (1.93%)
Divis Lab. 4481.50 (-1.01%)
Dr Reddys Labs 4684.95 (-0.18%)
Eicher Motors 2718.70 (-0.64%)
Grasim Inds 1806.50 (-2.47%)
H D F C 2620.25 (-1.59%)
HCL Technologies 1199.20 (-1.68%)
HDFC Bank 1518.45 (-0.71%)
HDFC Life Insur. 656.05 (-1.95%)
Hero Motocorp 2699.80 (0.26%)
Hind. Unilever 2309.90 (-2.52%)
Hindalco Inds. 504.80 (1.77%)
I O C L 125.10 (0.93%)
ICICI Bank 808.60 (-1.76%)
IndusInd Bank 893.25 (-0.71%)
Infosys 1867.05 (-2.80%)
ITC 220.35 (-0.18%)
JSW Steel 674.65 (-0.82%)
Kotak Mah. Bank 1905.65 (-1.88%)
Larsen & Toubro 2020.90 (-0.06%)
M & M 894.40 (0.25%)
Maruti Suzuki 8015.70 (1.27%)
Nestle India 18937.00 (-2.28%)
NTPC 134.80 (-0.15%)
O N G C 170.25 (3.91%)
Power Grid Corpn 204.65 (-0.24%)
Reliance Industr 2521.60 (-0.01%)
SBI Life Insuran 1248.10 (-1.41%)
Shree Cement 26402.25 (-2.77%)
St Bk of India 515.80 (1.78%)
Sun Pharma.Inds. 838.50 (-0.97%)
Tata Consumer 717.65 (-1.89%)
Tata Motors 520.85 (1.97%)
Tata Steel 1209.60 (1.23%)
TCS 3914.65 (-1.90%)
Tech Mahindra 1670.10 (0.56%)
Titan Company 2588.90 (-0.45%)
UltraTech Cem. 7434.40 (-1.61%)
UPL 813.25 (1.77%)
Wipro 621.15 (-1.92%)

Reliance Takes Over Future Group; So What is the Big Deal?

Reliance Takes Over Future Group; So What is the Big Deal?
The deal between Reliance Retail Ventures (a unit of Reliance Industries) and the Future Group finally happened on the 28th of August. It looked like an inevitable marriage. The only retail company that had a massive expansion plan and could absorb the breadth of the Future group was Reliance. The Future group was desperate for a stronger balance sheet to prevent a default that would have resulted in its rating being downgraded. It is in this background that the Rs.24,713 crore deal was finally inked in August.

Anatomy of the Reliance – Future Group deal 

As part of the deal, Reliance Retail Ventures will acquire the retail, wholesale, logistics and warehousing business of the Future group via slump sale. That means; the individual assets and liabilities of the Future Group will not be valued but an overall valuation is worked out. This would logically imply that there will be no open offer made to the minority shareholders of the Future group. Here is how the chronology of the deal will look like.

Step 1

Five of the Future group companies will be merged into Future Enterprises Ltd (FEL) based on predetermined Swap Ratio

Step 2

Future Enterprises will hive off all retail assets into a single unit and sell it to Reliance Retail in the form of slump sale

Step 3

The logistics and warehousing units of the Future Group will be transferred separately to Reliance Retail

Step 4

Reliance Retail will infuse Rs.13,000 crore to clear the Future group debt and another Rs.7,000 crore towards operational liabilities

Step 5

Reliance Retail will pay another Rs.6000 crore towards the promoter stake in the Future Group

Step 6

Post the deal, Reliance Retail will invest Rs.1200 crore into FEL for a 6.09% stake, valuing the post merger entity at Rs.20,000 crore

Step 7

Reliance Retail will invest another Rs.1600 crore for 7.05% stake in FEL in two tranches via warrants; taking its total stake in FEL to 13.14%

Data Source: Scheme of Arrangement

After the deal, RRVL will own the retail, wholesale, logistics and warehousing business of the Future group. The Biyani Family will be left with the FMCG business, the manufacturing franchise, integrated fashion sourcing and the insurance JV with Generali.
How the Future group companies will be first merged into FEL?

A total of 19 companies will be merged into a single entity before the assets are transferred to Reliance Retail. However, 14 out of these 19 companies are already wholly owned subsidiaries of FEL and no action would be required. The other five companies will be merged into FEL as the first step in the swap ratio as laid out in the table below. On conclusion of the merger, the 5 listed companies will cease to exist and subsume into FEL.

Company Merged
into FEL

Swap Ratio for the shareholders

Implied Price in the merger deal

Premium / Discount
to CMP (*)

Future Consumer

9 shares of FEL for every 10 shares held



Future Lifestyle

116 shares of FEL for every 10 shares held



Future Retail

101 shares of FEL for 10 shares held



Future Supply Chain

131 shares of FEL for 10 shares held



Future Market Networks

18 shares of FEL for 10 shares held



(*) – Refers to closing price on 28 August 2020

Data Source: Company Filings

If you glance at the indicative price at which the merger has happened, all companies got a premium ranging from 35% to 74% of their pre-deal price. In short; the deal has been value accretive for the shareholders of these companies.
What is in the deal for the Future Group and the Biyani Family?

Will the Biyani Family lose control of the Future Group? They most certainly will! In fact, all their core businesses in retail, wholesale, logistics and warehousing will have to be ceded to the Reliance group. The Biyani family will only retain the manufacturing and FMCG business, integrated fashion sourcing and the insurance JV. The group has been in talks to hive off the insurance JV also to raise funds.

For the Future group, it avoids the embarrassment of another default. In July, the Future Group had come close to defaulting on dollar bonds and in September, Rivaaz Trading, part of the Future Group defaulted on payments. It needs to be noted that Reliance Retail will take on the entire Rs.12,500 crore debt of the Future Group and also its operational liabilities of Rs.7000 crore. That will keep the brand safe and the core business sustains.

About the Author

Open Demat Account

Enter Mobile Number
Enter correct otp
Start investing in just 5 mins
Free Demat account, No conditions apply
  • 0%* Brokerage
  • Flat ₹20 per order
-656.04 (-1.08%)
Nifty 50
-174.65 (-0.96%)
Nifty Bank
-168.95 (-0.44%)
Next Article

Start Investing Now!

Open Free Demat Account in 5 mins

Enter Valid Mobile Number

Stocks Directory

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z All 0-9