Future Group bonds ride high; set for biggest jump thanks to Mukesh Ambani’s purchase plan

By: |
August 31, 2020 10:01 AM

Future Group surged in the bond market Monday after Reliance Industries Ltd. said over the weekend it will acquire certain units of the conglomerate.

Kishore Biyani, The rise and fall of the pioneer of Indian retail, future group reliance retail dealKishore Biyani. Image: Reuters

Future Group surged in the bond market Monday after Reliance Industries Ltd. said over the weekend it will acquire certain units of the conglomerate. Dollar notes sold by Future Retail Ltd. rose 16 cents to 89.1 cents on the dollar, set for the biggest jump since issuance in January, according to Bloomberg-compiled prices. The group unit averted a default on the securities earlier this month.

Mukesh Ambani’s Reliance Industries said it will purchase the retail, wholesale, logistics and warehousing units of Future Group for 247.1 billion rupees ($3.4 billion). The transaction will propel Ambani’s ambitions to dominate India’s retail sector and could also help Kishore Biyani, the tycoon behind the Future Group, pay debts.

Future Retail said last week that it paid interest on the dollar bonds after missing the original July 22 deadline for the coupon payment.

The broader Future Group has about 7.5 billion rupees of interest and principal due to noteholders this year, and 433.4 million rupees of the bill falls on Aug. 31, data compiled by Bloomberg show.

Future Group will merge some of its remaining businesses into Future Enterprises Ltd., Reliance Retail Ventures Ltd. said in a statement on Saturday. Ambani’s unit will then invest 12 billion rupees to acquire about 6.1% stake in Future Enterprises, according to the statement.

The transaction with the Future Group will bolster Reliance Retail — already the nation’s largest retailer by the number of stores — in a sector that’s estimated to be worth $1.3 trillion by 2025 from $700 billion in 2019, according to a February study by Boston Consulting Group and Retailers’ Association India. The deal will also help the indebted Future Group pare its borrowings.

“Strong retail franchise and brands, that we have created over time, are going in stronger hands,” Kishore Biyani, founder of the Future Group said in a separate statement. “This transaction takes into account the interest of all its stakeholders including lenders, shareholders, creditors.”

After disrupting India’s telecom sector, Ambani is now pushing ahead with his ambitions in the brick-and-mortar retail and e-commerce space. Asia’s wealthiest man is on a mission to transform his conglomerate into a consumer-services giant and reduce dependence on revenue from its traditional businesses of petrochemicals and oil refining.

Amazon last year agreed to buy 49% in one of the Future Group’s unlisted firms that allowed the American e-tailer to acquire stake in Future Retail between three and ten years. This transaction gave the American e-commerce giant an indirect stake of 1.3% in Future Retail. It wasn’t immediately clear what happens to Amazon’s stake.Reliance Industries’ deal with the Future Group also draws the battle lines between Ambani and Amazon.com Inc. as well as Walmart Inc., which have spent billions in a bid to dominate the world’s only billion-people-plus market that’s still open to foreign firms.

The Future Group has five main listed units including Future Consumer Ltd., which sells food, home and personal care products, and Future Lifestyle Fashions Ltd. that operates fashion discount chain Brand Factory.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1UTI AMC, Mazagon Dock, Likhitha Infrastructure: 3 IPOs open next week; price band, lot size, other details
2Has the gold bull run ended? Even as gold prices off Rs 6,200 from record high, gold will bounce back
3Maintain ‘buy’ on Balkrishna Industries