Reliance Future-proofs retail arm as it seeks to woo investors (updated)

V-Mart Retail

01/09/2020 24:30

(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.  urn:newsml:reuters.com:*:nL4N2FV067
    The 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.
    
    FINANCIAL MUSCLE
    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'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."

 (Reporting by Sankalp Phartiyal Chandini Monnappa
Additional reporting by Sachin Ravikumar
Editing by David Goodman)
 ((sankalp.phartiyal@thomsonreuters.com; +91-11-49548064;))