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Business deals

Ambani's Reliance buys India's Future Group businesses for $3.4bn

Acquisition sets up showdown with Amazon over country's 1.3bn consumers

Future Group has long been a leader in India's modern retail industry. In recent years, the group has been battling competition from up-and-coming players including e-commerce companies.   © Reuters

MUMBAI -- Reliance Retail Ventures, an arm of billionaire Mukesh Ambani-run Reliance Industries, announced on Saturday that it plans to buy Indian retail pioneer Future Group's units for 247.13 billion rupees ($3.37 billion).

Reliance Retail Ventures will acquire the retail and wholesale business as well as logistics and warehousing operations of Future Group. Following the acquisition, the retail and wholesale businesses will be merged with Reliance Retail and Fashion Lifestyle, a wholly owned subsidiary of Reliance Retail Ventures, while logistics and warehousing will merge with the buyer.

The announcement marks an end to months of speculation over a stake sale in Future Group, India's storied but debt-laden retail and consumer goods conglomerate founded by billionaire CEO Kishore Biyani. The move also signals oil-to-telecoms conglomerate Reliance Industries' intent to focus more on its retail business. 

Reliance Retail Ventures said in a statement that the operations of Future Group makes for a strong strategic fit into Reliance's retail business. Future Group, which originated as a stonewashed-fabric seller in the 1980s, has long been a leader in the development of India's modern retail industry. It now serves millions of customers through over 1,500 stores in more than 400 cities.

Reliance Industries, on the other hand, is heading for an aggressive fight not only in the online space but e-commerce as well, where it will square off against Amazon India.

"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," said Isha Ambani, director at Reliance Retail Ventures, referring to India's mom-and-pop stores. "We are committed to continue providing value to our consumers across the country." 

Sources had told the Nikkei Asian Review that Future Group was also in talks with Amazon India, as well as private equity companies Premji Invest and Samara Capital.

Premji Invest and Amazon already own stakes in Future Retail, a core business unit of the group. In August, Amazon bought a 49% stake in Future Coupons, one of the shareholders in Future Retail, for 15 billion rupees ($197 million). Through the stake in Future Coupons, Amazon managed to pick up shares in Future Retail and access to country's 1.3 billion consumers.

The current sale may see Biyani's stake substantially reduced in some of the companies, mainly Future Retail, a source said. If this happens, the influence of Biyani -- an industry pioneer once called "the king of modern retail" -- will recede.

In recent years, the retail group has been battling competition from up-and-coming players such as the Aditya Birla Group, Reliance Retail and V-Mart on the brick-and-mortar retail side. On the other side are e-commerce players such as Walmart-owned Flipkart and Amazon India.

Future Group's attempts to establish a multichannel presence have not really worked out after Biyani previously dismissed e-commerce companies as serious threats.

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