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Synergistic and attractive: Experts weigh in on the Reliance Retail - Future Group deal

Updated : August 31, 2020 01:05 PM IST

The Reliance Retail - Future Group deal where Reliance Retail will acquire Future Groups's retail and wholesale business along with the logistics and warehousing business. This acquisition by Reliance Retail is on a slump sale basis for a little over Rs 24,700 crore.

On the Future Group side, it will merge all entities into future enterprises and then sell the assets to Reliance Retail. The following are the brands they will sell - Big Bazaar, FBB, Foodhall, Easyday, Nilgiris, Central and Brand Factory as well as the businesses of future supply.

Jal Irani, research analyst and senior vice president for Institutional Equities at Edelweiss Securities and Harshvardhan Dole, vice president institutional equities, IIFL are in conversation with CNBC-TV18.

While giving his take on this transaction Jal Irani said, “Firstly, the businesses are very synergistic actually from the perspective that Future Retail and the consolidated entities of the Future Group that Reliance is acquiring together are about 40-45 percent in the grocery and foods business which is a key focus for Reliance Retail going forward. Reliance Retail itself has 21 percent coming from that business so as this business is a key focus especially with the launch of JioMart to that extent it is synergistic.”

IIFL said, “Deal values on an EV to sales basis is typically between 0.9 to 1 times FY20 sale, which is very favorable and best comparable as of now will be someone like a DMart which is trading in upwards of 6 times on FY20. So relative to DMart, I think it is a very attractive acquisition and there is significant scope for value creation towards minority shareholders for Reliance Industries Limited (RIL) as RIL takes over the operations.”

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