Kishore Biyani-controlled Future Retail and Sunil Mittal-led Bharti Retail will merge to create one of India’s largest retail chains, with more than 570 stores, in a Rs 750-crore mega deal, the two companies said on Monday.
Bharti Retail is part of Mittal-led Bharti Enterprises, which runs 212 Easyday stores across India. Future Retail, which runs 203 popular Big Bazaar stores, currently operates about 17 million square feet (1.6 million square metres) of retail space selling products ranging from grocery items, apparels to gadgets and gizmos.
The combined entity will have an operational retail space of over 18.5 million square feet and an estimated revenue of Rs 15,000 crore.
Bharti has been looking for a partner since October 2013, when Bharti Enterprises and Walmart Stores Inc called off their Indian retail joint venture — Bharti –Walmart — bringing the curtains down on a troubled deal marred by government-probes.
Walmart has since been operating as an independent wholesale cash-and-carry business in India that allows up to 100% FDI in the sector.
Under the deal, a new entity called Future Retail will hold the combined store operations. Another new entity called Future Enterprises will own the infrastructure, investments and assets of both chains, a joint statement issued by the two companies said.
Future Group, the parent of Future Retail, will hold 46-47% and Bharti Retail will own roughly 10% stake in each of the two firms.
“It will bring us closer to millions of consumers and provide new opportunities for our supply partners,” said Kishore Biyani, founder and group CEO, Future Group.
The two entities will be operated by four directors each from Bharti Enterprises and Future Group. The CEO will be appointed by the Future Group.
“The retail entity will have a debt of Rs 1,200 crore and the infra entity will have a debt of Rs 3500 crore,” said Biyani.
“The partnership offers compelling synergies in terms of reach, efficiency and experience to build a truly world-class retail network to serve the Indian consumer,” said Rajan Bharti Mittal, vice-chairman, Bharti Enterprises.
Future Retail’s share closed at Rs 129.65 on the Bombay Stock Exchange — a jump of 12% —after surging 18.4% to Rs 137 during intra-day trade.
The deal comes amid a boom in India’s fast-expanding e-commerce industry where companies are increasingly hawking products online through deep discounts and tempting bargains for consumers.
This has attracted private equity and venture capital investment in droves to the booming online retail space driving up billion dollar valuations of start-up online market places.
“It (the Bharti-Future Retail deal) is a step towards consolidation of in retail markets in India and open up new opportunities for others,” said Sanjeev Krishnan, leader Private PWC India.
Government currently allows 51% FDI in multi-brand retail.