What Does Reliance’s $3.38 Billion Deal with Future Group mean?

Reliance Industries’ $3.38 billion deal to acquire Future Group’s retail business pitches the giant as an even more formidable force in the nation, making its retail arm even more attractive for retailers than before.
The Reliance group, controlled by the country’s richest man Mukesh Ambani, announced one week ago that it will acquire Future Group’s retail and wholesale businesses as well as its logistics and warehousing operations.
Acquiring Future Group’s 2000 retail stores and Big Bazaar grocery chain will help Reliance, which sells everything from clothes to electronics increase its reach all over the country.
With Mr. Ambani looking to sell stakes in Reliance Retail, this acquisition makes Reliance’s retail arm an even more attractive proposition for potential investors in the market which is expected to grow to $1.3 trillion by 2025.
“With this deal, Reliance’s domination in the Indian market increases further and the valuation that Reliance Retail will now command will be even more,” Arvind Singhal, chairman of retail consultancy Technopak Advisors, was quoted as saying.
Reliance has already raised more than $20 billion from global investors like Facebook Inc by selling stakes in its Jio Platforms digital business. It aims to attract more investors in the upcoming quarters.
“We’ve received strong interest from strategic and financial investors in Reliance Retail,” Mr. Ambani told shareholders at the company’s annual general meeting in July.
Reliance is well known for its ability to win over customers with financial muscle and its breadth of offerings.
JioMart, the new e-commerce venture of Reliance Industries that offers free express delivery from neighborhood stores, will also stand to gain from the acquisition, 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 India and Walmart-owned Flipkart.
“Reliance has essentially removed one competitor from the market and added Future’s loyal customer base to its own portfolio,” Harminder Sahni, founder of retail consultancy Wazir Advisors, was quoted as saying. “It’s a very serious challenge not just for Flipkart or Amazon, but for the likes of DMart, too,” he added.

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