Future Group bonds soar after RIL purchase plan

Bloomberg August 31 | Updated on August 31, 2020

Mukesh Ambani plans to buy the retail, wholesale, logistics and warehousing units of Future Group for $3.4 billion

Future Group surged in the bond market on Monday after Reliance Industries said over the weekend it will acquire certain units of the conglomerate.

Dollar notes sold by Future Retail rose 16 cents to 89.1 cents on the dollar, set for the biggest jump since issuance in January. The group unit averted a default on the securities earlier this month.

Mukesh Ambani’s Reliance Industries said it will purchase the retail, wholesale, logistics and warehousing units of Future Group for$3.4 billion. The transaction will propel Ambani’s ambitions to dominate India’s retail sector and could also help Kishore Biyani, the tycoon behind the Future Group, pay debts.

Future Retail said last week that it paid interest on the dollar bonds after missing the original July 22 deadline for the coupon payment.

Future Group will merge some of its remaining businesses into Future Enterprises, Reliance Retail Ventures said in a statement on Saturday. Ambani’s unit will then invest 12 billion rupees to acquire about 6.1 per cent stake in Future Enterprises, according to the statement.

The transaction with the Future Group will bolster Reliance Retail – already the nation’s largest retailer by the number of stores – in a sector that’s estimated to be worth $1.3 trillion by 2025 from $700 billion in 2019, according to a February study by Boston Consulting Group and Retailers Association India. The deal will also help the indebted Future Group pare its borrowings.

Retail franchise

Strong retail franchise and brands, that we have created over time, are going in stronger hands, said Kishore Biyani, founder of the Future Group in a separate statement. This transaction takes into account the interest of all its stakeholders including lenders, shareholders, creditors.

After disrupting Indias telecom sector, Ambani is now pushing ahead with his ambitions in the brick-and-mortar retail and e-commerce space. Asia’s wealthiest man is on a mission to transform his conglomerate into a consumer-services giant and reduce dependence on revenue from its traditional businesses of petrochemicals and oil refining.

Reliance Industries deal with the Future Group also draws the battle lines between Ambani and as well as Walmart, which have spent billions in a bid to dominate the world’s only billion-people-plus market thats still open to foreign firms.

Amazon last year agreed to buy 49 per cent in one of the Future Group’s unlisted firms that allowed the American e-tailer to acquire stake in Future Retail between three and ten years. This transaction gave the American e-commerce giant an indirect stake of 1.3 per cent in Future Retail. It was not immediately clear what happens to Amazon’s stake.

Published on August 31, 2020

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