InvestorQ : How do you see the impact of the Reliance and Future Group deal on the valuation of these stocks?
Dilmini Mercia made post

How do you see the impact of the Reliance and Future Group deal on the valuation of these stocks?

Answer
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Dinesh C Nagpal answered.
4 weeks ago


Positive for RELIANCE - they are getting a running establishment at low cost.

Positive for BANKS - the debt will be returned to the extent of Reliance investment

Negative for Future shareholders - promoter pledge still remains, Reliance has only taken part of the debt the rest remains. Also Reliance has no interest in taking over the entire co. just part of the business will change hands.


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diksha shah answered.
4 weeks ago


Here is what you must know about the proposed deal between Reliance and Future groups.

· Reliance Retail Ventures will buy Future Group’s retail, wholesale, logistics and warehousing businesses for Rs.24,713 crore.

· It will be an all-cash deal and will include the taking over of all the debt in the books of the Future Group companies.

· As the first step, Future Group will merge a number of companies carrying on the above businesses into Future Enterprises.

· Future group will then transfer its retail and wholesale franchise to Reliance Retail and one of its subsidiaries. Logistics and warehousing will be go directly to RRVL.

· For RRVL, this fits perfectly into their overall plan to dominate the Indian retail formats along with the online commerce space as well as the entire ecosystem of retail. RRVL will take over all the consumer facing businesses of the Future Group.

· This deal will also end the debt woes of the Future group as RIL is also expected to take all the debts and liabilities of Future Group; either by taking over or by cash payment.

· Future Enterprises will get to retain the manufacturing and distribution of FMCG goods and integrated fashion sourcing. Insurance is not part of this deal.

· As part of the deal, Future Retail, Future Consumer, Future Lifestyle Fashions, Future Supply Chain and Future Market Networks will be merged into Future Enterprises. Subsequently, FEL will hive off all retail assets and sell them to RIL as a single unit.

· As of last year, Future Group debts stood at Rs.12,778 crore while Biyani also has a large personal debt. In the past, he had sold Pantaloon to Aditya Birla group and Future to Warburg Pincus.

· With this deal RIL will be in a much better position to leverage the Jio subscriber-base and attract customers belonging to non-metros to take on Amazon and Flipkart.

· Reliance Retail does have the reach of the Future group and this deal will help them get a massive brick and mortar network to support their ecommerce platform.

Post the deal, it remains to be seen how much haircut the lenders may have to eventually take, because also have an exposure of Rs.11,900 crore to the promoter entities. The deal will allow Biyani to substantially come out debt and breathe a tad easy.


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4 weeks ago


I fully agree with the detailed analysis provided by Diksha on the Reliance / Future Group deal. However, please note that in terms of operational efficiency, the stores of Future Group are substantially weaker than stores of D-Mart. So Reliance Retail will have a big task in streamlining the stores and inventory management systems of the Future Group.