Future Group To Buy Or Merge With Aditya Birla Retail

Future Group, which is owned by Indian business magnate Ashok Biyani, is looking to buy or merge with Aditya Birla Retail’s (ABRL) supermarket business, More. The Future Group is planning on grabbing the topmost position in the retail sector with a huge network of food and grocery stores.

“While the discussions are still exploratory, the Future Group is preparing to conduct a due diligence exercise for a possible merger or acquisition,” people close to the matter said. But he added that there was no guarantee that these talks will culminate in a deal.

With almost 500 stores spread over a colossal 2 million square feet of retail space, the Aditya Birla Retail group raked in a gross revenue of INR 2,948 crore during FY 2014-15.

The Future Group, on the other hand, could be walking towards a substantial increase in its debt burden. ABRL had a net loss of Rs 571 crore in FY14-15 and total debt of Rs 5,232 crore as of March 31, 2015. Future has a debt burden of Rs 4,941 crore, and high interest outgo has been impacting profits. A couple of years ago, the company took several measures to reduce its debt, including the sale of Pantaloon Stores to Aditya Birla Group.

According to experts, the acquisition/merger will result in larger revenues due to joint sourcing and synergies and in turn enable the Future Group to expand its presence Southern India, where More currently has a strong footprint. Moreover, the large network of stores could be leveraged for online sale of food and groceries that is estimated to generate annual revenues of $5 billion by 2020.

This will be Future Group’s fourth successful acquisition in less than 5 years of a food and grocery chain if the deal is cracked. The business group had earlier acquired Big Apple, Nilgiri’s and Bharti Retail to put together a colossal entity with 738 retail stores spread over around 13 million square feet of space across 221 cities functioning under it.

One person familiar with Biyani’s plans said the deal will also enable Future Group’s FMCG arm — which sells more than two dozen private label products across segments such as foods, snacks and beverages, home care and personal hygiene — to expand its reach, ET reported.

Food and grocery makes up for almost 50% of the country’s pverall retail segment. The online sphere right now makes up only 1% of this, but according to a Morgan Stanley report the number is estimated to climb up to 4% by the year 2020, touching gross merchandise (GMV) of $19 billion, and also making it the largest category following second after electronics and apparel.

Source: Economic Times