Reliance Retail, India’s largest retail chain, has found a much simpler way to expand its dominant position in the country: Acquire most of the second largest bricks-and-mortar retailer.
On Saturday evening (local Indian time), Reliance Retail said it has reached an agreement with Future Group to acquire the latter’s retail and wholesaler business, and its logistics and warehousing business for $3.4 billion. The acquisition will help Reliance Retail command one-third of the bricks-and-mortar stores of India’s modern retail sector.
The announcement today further complicates the future of Amazon and Walmart’s Flipkart in India, the largest open market globally by users, where e-commerce still accounts for just 3% of all retail sales. India’s retail market is estimated to balloon to $1.3 trillion by 2025, up from $700 billion last year, according to consultancy firm BCG and local trade group Retailers’ Association India.
Amazon has showed interest in Future Retail, too. The company, which last year bought a tiny portion of Future Group’s business, was in talks to increase its stakes in the firm, according to earlier local media reports. The American e-commerce firm, which has invested over $6.5 billion in its India business, said in January that it had also inked a deal with Future Group to help the Indian firm sell online.
Future Group, which kickstarted its journey as a stonewashed-fabric seller in the 1980s, serves millions of customers through more than 1,500 stores in more than 400 cities. Today’s deal will help Future Retail, known for its Big Bazaar hypermarket chain and Pantaloons clothing shops, reduce its debt.
Ambani addressing the Bengal Global Business Summit on January 16,2018 in Kolkata, India. (Photo by Debajyoti Chakraborty/NurPhoto via Getty Images)
Mukesh Ambani, who controls Reliance Industries (of which Reliance Retail is a subsidiary), has secured about $20 billion from Facebook, Google, and 11 other high-profile investors for his telecom venture Jio Platforms this year.
Now Ambani, who is India’s richest man, has set his eyes on e-commerce. Jio Platforms and Reliance Retail last year announced JioMart. The e-commerce venture, which began test trials in select suburbs of Mumbai late last year, has expanded to more than 200 cities and towns across India.
Facebook, which has invested $5.7 billion in Jio Platforms, said the company will explore ways to work with Reliance to digitize the nation’s 60 million mom and pop stores as well as other small and medium-sized businesses.
“With this transaction, we are pleased to provide a home to the renowned formats and brands of Future Group as well as preserve its business ecosystem, which have played an important role in the evolution of modern retail in India,” said Ambani’s daughter Isha, who serves as a Director at Reliance Retail, in a statement.
“We hope to continue the growth momentum of the retail industry with our unique model of active collaboration with small merchants and kiranas as well as large consumer brands. We are committed to continue providing value to our consumers across the country,” she added.
Read More: India’s Reliance Retail to acquire Future Group’s units for $3.4 billion –
