Deal with Mukesh Ambani's Reliance not even final, but Future Enterprises stock already up 42%

RIL chairman Mukesh Ambani's interest in the retail business of Kishore Biyani-owned Future Group has fired up stocks of the retailer. Future Group stocks, which were languishing till June, have surged up to 42% in one month on reports that Ambani-led Reliance Industries is in final stage of talks to buy a controlling stake in its retail business.  

Ambani is gearing up to offer competition to US-based Amazon's India  business in the ecommerce space by eyeing a majority stake in the Future Group.

Ambani's ambition to expand in the online sales business has pushed the shares of Future Group higher in one month.

Share price of parent firm Future Enterprises has gained 42.59% in one month when reports of RIL showing interest in the Group's retail assets started pouring in.

However, the share has fallen 23% in one year and lost 11.49% since the beginning of this year amid rise in debt of the Kishore Biyani-led conglomerate.

RIL aims to compete with Amazon India by consolidating its position in the industry by adding Future Groups assets to its kitty. India's largest organised retailer wants to acquire Future Group's assets to enhance its physical store presence and support the operation of e-commerce venture JioMart.

According to reports, RIL is likely to acquire Kishore Biyani-controlled Future Group's retail business for Rs 24,000-27,000 crore. However, RIL will have to fulfil claims of Future Group's creditors before the takeover comes into effect.

Future Group has accumulated a pile of debt over the years. As of September 30, 2019, debt at Future Group's listed entities rose to Rs 12,778 crore from Rs 10,951 crore as on March 31, 2019.

Enthused by RIL's interest, other group stocks too have reversed losses in one month. Future Retail share has gained 24.76% in a month reversing some losses it incurred in 2020 and last one year.  The share is still down 68% in one year and fallen 63.39% since the beginning of this year.

Future Retail operates over 1,500 stores in India and owns several supermarket brands, comprising budget department and grocery chain Big Bazaar, Ezone, Fashion at Big Bazaar (FBB), Foodhall and Easyday.

The companies Mukesh Ambani's Reliance Industries plans to buy in days ahead

Another Future Group stock Future Market Network has fallen 12.41% in a year and declined 3.24% since the beginning of this year.  However, on reports of RIL-led acquisition, the share has gained 23.9% in a month. Stock of Future Group's FMCG arm Future Consumer share has clocked 18.27% gains in one month. However, the stock is down 61.34% in one year and fallen 51.38% since the beginning of this year.

Similarly, shares of fashion company merchandise Future Lifestyle Fashions have delivered 26.77% returns in one month of reports of likely acquisition by RIL.  However, the stock has lost 69.22% in one year and fallen 67.26% since the beginning of this year due to coronavirus lockdown and slowdown in the economy. Future Lifestyle has 300 stores under brands such as Central and Brand Factory.

Shares of another subsidiary Future Supply Chain have gained 9% in one month. The supply chain and  logistics firm has seen its stock plummet 68.03% since the beginning of this year and losing 72.9% in one year.

According to reports, Biyani will relinquish control over all businesses under the Future Retail basket (comprising FBB, Big Bazaar, Food Hall and Central), Future Lifestyle Ltd, and Future Supply Chain Solutions. All three entities will be merged and the combined business will be acquired by RIL. Biyani will be left with control of Future Group's FMCG business and some other smaller group companies.

Reliance-Future Retail deal: Why Kishore Biyani is forced to sell his business to Mukesh Ambani

Future Group lenders may take 40% haircut even after Reliance buys key businesses

By Aseem Thapliyal