- Reliance Industries (RIL) is concluding a deal that would see it acquire stakes in some Future Group units which already have investment from Amazon.
Reliance Industries (RIL) is concluding a deal that would see it acquire stakes in some Future Group units, said people familiar with the matter, a move that would bolster the conglomerate’s e-commerce ambitions and its billionaire chairman Mukesh Ambani.
An agreement may be revealed as early as next month, people said, between Ambani’s Reliance (RIL) and Future Group, which already has a relationship with Amazon.com Inc., asking not to be named as the information is not public. Although unit Future Retail Ltd. has attracted suitors, including Amazon, the people said that Reliance’s offer to buy into the holding company of the group is likely to sway the outcome in its favor.
The Future Group has five key units listed, including Future Consumer Ltd., which sells food, home, and personal care goods, and Future Lifestyle Fashions Ltd., which operates Brand Factory, a fashion discount chain. No final decision was made and the talks could be delayed or a transaction could not result, the people said.
A successful deal could draw the battle lines between Amazon and Ambani, 63, who have just secured nearly $14 billion from investors including Facebook Inc. for his e-commerce venture Jio Platforms Ltd. Amazon has made the nascent Indian market a key focus of its global expansion, with 1.3 billion consumers. Investment from Reliance, India’s most profitable firm, will help Future’s founder Kishore Biyani pare debt, even if it threatens the U.S. online shopping empire that the Mumbai-based company announced a few months ago.
Future Group’s talks are part of the intensifying battle to win over the Indian shopper — both online and in physical stores. Amazon has already promised to spend $5.5 billion in the country while Walmart Inc. invested $16 billion in 2018 buying Flipkart Online Services Pvt., the local e-commerce giant.
Future Retail’s stock jumped about 5 percent on Thursday in Mumbai, cutting the loss of the year to 69 percent and giving it a $757 million market cap. Future Lifestyle increased by 3%, while Future Enterprises Ltd. and Future Consumer increased by around 5%.
Amazon, based in Seattle, agreed in August to buy 49 percent of one of the unlisted firms of Future Group, allowing it to buy into Future Retail after a period of three to ten years. In January, the two deepened that partnership, with Amazon becoming the authorized online sales channel for Future Retail’s stores selling everything from groceries to cosmetics and clothing.
Amazon, which holds a 1.3 percent indirect stake in Future Retail as a result of buying 49 percent of Future Coupons Ltd., will continue to retain that stake and will also have the right to raise its holdings to some extent, the people said.
As recently as May, Amazon was considering adding a holding off as much as 49 percent to its investment in Future Retail, people familiar with the matter said last month.
Biyani ‘s family had been negotiating with creditors after racking up debt to sell stakes in many group companies, people familiar with the matter told Bloomberg News in March. The value of family holdings was eroded by a stock meltdown sparked by the coronavirus pandemic, resulting in a breach of some loan covenants raised against shares, the people said. Reliance will have an advantage over competing suitors by promising to invest in the holding enterprise.
The holding firm, from which the family of Biyani owns its share in the companies, owes lenders like Apollo Global Management Inc., Blackstone Group Inc., and UBS Group AG. The listed entities have a debt of about 100 billion rupees ($1.3 billion), while the sum is similar for the family’s holding vehicles, the people said.
Reliance has aggressively raised funds from a slew of private equity firms for Jio Platforms since Facebook’s investment in late April, and an Ambani vehicle is using them to turn its empire away from its legacy oil and petrochemicals business.