RPT-UPDATE 1-Reliance Future-proofs retail arm as it seeks to woo investors
(Repeats without change)
By Sankalp Phartiyal and Chandini Monnappa
NEW DELHI, Aug 31 (Reuters) - Reliance Industries ' RELI.NS $3.38 billion deal to acquire Future Group's retail business pitches the conglomerate as an even more formidable force in India, making its retail arm more attractive to the potential investors it seeks to woo.
The oil-to-telecoms group controlled by India's richest man, Mukesh Ambani, announced late on Saturday that it will acquire Future Group's retail and wholesale business as well as its logistics and warehousing operations. acquisition of Future Group's 2,000 retail stores and Big Bazaar grocery chain will help Reliance, which sells everything from groceries to electronics through 11,000-plus stores, to broaden its extensive reach across the country.
But with Ambani set to sell stakes in Reliance Retail, the Future-Reliance deal makes it an even more attractive proposition for investors in a market that Boston Consulting Group expects to grow to $1.3 trillion by 2025.
"With this deal, Reliance's dominance in the Indian market increases further and the valuation that Reliance Retail will now command will be even more," said Arvind Singhal, chairman of retail consultancy Technopak Advisors.
Reliance, which has raised a little more than $20 billion from global investors including Facebook Inc FB.O by selling stakes in its Jio Platforms digital business, has said it aims to attract investors in Reliance Retail over the next few quarters.
"We've received strong interest from strategic and financial investors in Reliance Retail," Ambani told shareholders at the company's annual general meeting in July.
The acquisition will also help Reliance to extend its lead over its competitors, Singhal added.
Mumbai-based Reliance is well known for its ability to win over customers with financial muscle and its breadth of offerings.
Shares in its rivals reflected as much on Monday.
Avenue Supermarts AVEU.NS , which runs popular grocery chain DMart, fell as much as 5.4% while Aditya Birla Fashion and Retail ADIA.NS closed 2.6% down and V-Mart Retail VMAR.NS lost 4.4%.
Shares in Reliance rose in early trade but closed 1.7% down, in line with the broader market .NSEI as a fresh border flare-up between India and China outweighed initial optimism from a further opening of the economy after coronavirus lockdowns. .BO
JioMart, the new Reliance e-commerce venture that offers free express delivery from neighbourhood stores, will also gain a leg-up from the Future Group deal thanks to a wider wholesale supplier base.
JioMart delivers groceries, apparel and electronics in more than 200 cities, challenging established online retailers such as Amazon's AMZN.O India unit and Walmart (NYSE: WMT )'s WMT.N Flipkart.
"Reliance has essentially removed one competitor from the market and added Future's loyal customer base to its own portfolio," said Harminder Sahni, founder of retail consultancy Wazir Advisors.
"It's a very serious challenge not just for Flipkart or Amazon, but for the likes of DMart, too."
Add Chart to Comment
We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
- Enrich the conversation
- Stay focused and on track. Only post material that’s relevant to the topic being discussed.
- Be respectful. Even negative opinions can be framed positively and diplomatically.
- Use standard writing style. Include punctuation and upper and lower cases.
- NOTE: Spam and/or promotional messages and links within a comment will be removed
- Avoid profanity, slander or personal attacks directed at an author or another user.
- Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
- Only English comments will be allowed.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.
Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb
Drop an image here or