The 'Future' of Reliance: A mega deal destined to shape future of India's retail space, post-Covid
Publish- January 21, 2021, 03:51 PM
S Kumar - UNB Delhi Correspondent
Update- January 21, 2021, 04:06 PM
India's retail industry is changing, fast. From supply chain to distribution and delivery -- the industry is rapidly remodelling itself for the digital age amid Covid. And by the end of this fiscal on April 30, the fast-paced retail industry is projected to touch USD 1.1 trillion in India, despite Covid temporarily affecting consumer spending.
The latest game-changer in the country's retail space is the approval of a USD 3.4 billion mega business deal between India's richest man Mukesh Ambani-owned oil-to-telecom conglomerate Reliance Industries and prominent merchandise chain Future Group by
markets regulator, setting aside all objections raised by US e-commerce giant Amazon.
The Securities and Exchange Board of India (SEBI) Wednesday gave its nod to the August 2020 deal between the Future Group, founded by billionaire businessman Kishore Biyani in 2013, and Reliance Retail, the retail arm of Reliance Industries, Under the USD 3.4 billion deal, Reliance will acquire Future's retail, wholesale, logistics and warehousing businesses.
"Company (Future Group) shall ensure that the shares of the transferee entity issued in lieu of the locked-in shares of the transferor entities are subjected to lock-in for the remaining period post scheme," SEBI said in a letter to the company.
"Company shall ensure that proceedings pending before SEBI against the entities part of the promoter/promoter group or are directors of the companies involved in the scheme, should be highlighted in the scheme document filed before National Company Law Tribunal (NCLT)," the letter stated.
SEBI's approval has come as a huge setback for Amazon. The e-commerce giant, which has invested over USD 6.5 billion in this country, wrote to the markets regulator umpteen times in the past three months, seeking to block the deal between the two large Indian retail chains that it fears could hurt its business in the sub-continent.
In its objections, Amazon claimed that the deal between Reliance and Future was "illegal" as the US e-commerce giant bought 49% stake in one of Future’s unlisted firms in 2019 in USD 100 million deal that doesn't allow Biyani to sell business assets to rivals. Amazon's earlier attempt to block the Reliance-Future deal also did not yield the desired result.
"We will continue to pursue legal options," a spokesperson for Amazon told the media, reacting to the developments.
Experts foresee Reliance's "almost monopoly" in India's retail space, with the culmination of this deal. "India is the world’s fifth largest global destination in the retail space. India's e-commerce market is estimated to touch USD 200 billion by 2027. This mega deal between the two large retail companies is expected to change the face of India's retail industry, for better," Delhi-based economist Nayana Singhal said on Thursday.
UNB had earlier extensively reported about Ambani's aggressive fundraising spree to make his conglomerate debt-free amid Covid and his strategic decision to reduce Reliance's dependence on the flagship oil sector to diversify into telecom and e-commerce. Reliance
had, in fact, raised USD 15.2 billion by selling stakes in its telecom unit Jio and another USD 7 billion through rights issue just in the first quarter of this fiscal.
The digital news outlet had also reported about Reliance's plans to take its telecom arm Jio public in the next fiscal, riding on the increased digital adoption across the world, including in India, in the wake of Covid. India's internet users are likely to grow to 850 million by 2022.
Jio has attracted some 370 million subscribers to its network since its mega launch in 2016, despite being a late entrant to India's telecom sector.