RIL’s retail footprint to double with Reliance’s acquisition of Future Group’s consumer business

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Updated: Sep 02, 2020 5:35 PM

Reliance Industries Ltd's latest addition to its shopping cart will help expand the company’s retail presence.

ril future group dealRIL-Future Group Deal: Last week, Mukesh Ambani’s Reliance Industries had announced the acquisition of the Kishore Biyani-led Future Group.

Reliance Industries Ltd’s latest addition to its shopping cart will help expand the company’s retail presence. With the acquisition of Kishore Biyani-run Future Group’s consumer business, RIL will be able to strengthen the retail footprint of India’s largest organised retailer, Moody’s Investors Service said on Wednesday. “The acquisition will strengthen RIL’s position within the organised retail sector in India as it will be able to leverage on established brand names and vast network of stores currently owned and operated by the Future Group entities,” Moody’s said. 

Mukesh Ambani-led RIL had last week announced that it will acquire Future Enterprise Limited’s (FEL) consumer business for around Rs 24,713 crore. The oil-to-telecom conglomerate will acquire Future’s retail, wholesale, logistics and warehousing units and is expected to take its footprint to almost double the current figures.

While the deal is pegged around $3.3 billion, the cost of the acquisition remains relatively small when compared to RIL’s total assets of around $155 billion and consolidated EBITDA of $12.8 billion for the fiscal ended March 31, 2020, Moody’s said. “The transaction is credit positive because it will solidify its (RIL’s) position as the largest organised retailer in India and further diversify its earnings,” the rating agency said. In addition, the acquisition will also allow RIL to ramp up its retail footprint in states where it currently does not have a significant presence.

What about Future’s distress?

While the entities in the Future Group are currently under financial distress, the same is unlikely to have an impact on RIL which is only investing in the assets and businesses, the report said. However, the currently prevailing economic conditions may have an impact on the RIL’s plan of adding synergies. 

Is RIL liquid enough to go on a shopping spree?

RIL had a net debt of $21.5 billion as of March 31, 2020, but it raised around $23 billion after April 2020 by monetising stakes in its digital arm Jio Platforms. Reliance Industries Ltd also sold 49% stake in the fuel retailing business to BP Plc. Further, the company is also expected to raise at least $8-10 billion over the next few months as it concludes the sale of its tower assets to Brookfield Asset Management.

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