WHAT IS FUTURE OF THE KISHORE BIYANI's FUTURE GROUP & MUKESH AMBANI's RELIANCE RETAIL? - Deal Explained - Stocks in News.

KISHORE BIYANI's FUTURE GROUP vs MUKESH AMBANI's RELIANCE RETAIL.

Friends, You would have heard of Mr Kishore Biyani, who is the promoter and owner of the future group. If I tell you a bit about Future Group, it started penetrating in the retail sector at an early stage and it grew really well in its early days. Whenever a company grows aggressively, it needs funds from different places. In the same way, even the future group needed the funds for the expansion which they bought in the form of debt from different institutions.

Now you know, if the debt is used in the form of expansion and uses it to expand well and its financials and profit does well regularly then there won't be any problem with the taking of debt. But from the time COVID situation came along, the retail sector got impacted pretty bad, People stopped going to retail places cause of which their sales went down, especially of Big Bazaar, which impacted the company bad cause of which their profit got impacted and wasn't able to repay its debt cause of which Future Group started finding different sources for funds. We heard recent news here that Reliance Retail is going to acquire this company's businesses at a particular amount.

Now the question here is Future Group has many companies if I talk about the last 2,3 days its share price is continuously going up & then coming down.

As an investor, if you had bought its shares, what implications will it have on your share?

Other than that, if you had invested in Reliance or were planning to, what implications will it have on you?

Let's discuss in detail about this deal. Which company is going to get how much of shares?

If you have invested in Future Group or Reliance, What are its implications on you?

Let's start with today's article

Before starting the article, I want to inform you that Reliance Retail bought Future Enterprise at Rs 24,700 Cr. The question raised here is there are many companies under Future Group, thus why did Reliance Retail buy the Future Group itself?

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There is news that there are 5 companies which trade-in Future Group & 14 other companies that Future Group owns. All these companies would be merged under Future Enterprise Ltd and many companies from that would be directly acquired by Reliance Industries.

The names of the five companies which trades under Future Group are

1. Future Consumers Ltd, 
2. Future Lifestyle Fashion Ltd, 
3. Future Market Networks Ltd, 
4. Future Retail Ltd,
5. Future Supply Chain Solutions Ltd.

These companies currently trade in the market, there are other 14 companies owned by Future Group, which will be merged under Future Enterprise Ltd.

Now the question is If Reliance Group acquires many businesses in this company than the existing shareholders who actually trade in these five companies, how will they be benefitted?

If these 5 companies get acquired in Future Enterprise Ltd then its shares will stop getting traded because of which Future Enterprise Ltd will have to replace them with their shares to these shareholders

Now the question arises, which company shareholders are eligible to how much percentage of shares?

This chart on my screen implies how many shares will be issued for each company shareholders.

1. Like the Future Consumers Ltd, if you have 10 shares of this company, then you find 9 shares from Future Enterprise Ltd in your DMAT Account.
2. In the case of Future Lifestyle Fashion Ltd, if you have 10 shares of this company then you can find 116 shares from Future Enterprise Ltd in your DMAT Account.
3. In the case of Future Market Networks Ltd, if you have 10 shares of this company, then you find 18 shares from Future Enterprise Ltd in your DMAT Account
4. In the case of Future Retail Ltd, if you have 10 shares of this company, then you find 101 shares from Future Enterprise Ltd in your DMAT Account
5. In the case of Future Supply Chain Solutions Ltd, if you have 10 shares of this company, then you will get 131 shares from Future Enterprise Ltd

Now let's talk about the other 14 companies, subsidiaries of Future Enterprise Ltd, no new shares would be allocated against them. Good learning here is whenever a company is acquiring another company and the share trading is involved.

For Example, Future Consumer Ltd if you had 10 shares of this company you would have got 9 shares of Future Enterprise Ltd. This ratio, that for 10 shares you will get 9 new shares, we call this Swap Shares and the other companies will stop trading in the future.

Coming to shareholders say of Future Consumers, would be in profit or loss with the allocation of new shares?

Let's discuss a bit on it.

If we talk about profit that which company is getting the most profit then the most benefitted are the people who had invested in the different companies of Future Group.

If I try to explain to you with an example then if you 10 shares of Future Consumers, you would be entitled to 9 shares of Future Enterprise Ltd. If I talk about the Value, the closing on Friday night of Future Consumers was Rs 11.5. If I look at it from this deal's point of view then the new effective price would be of Rs 80 after they get the new shares of Future Enterprise Ltd means here they are receiving a premium of Rs 59 cause of this particular deal. 

1. Future Retail shareholders are receiving a premium of 49% 
2. Future Supply Chain shareholders are receiving a premium of almost 74% cause of this deal 
3. Future Market Network receives a 35% premium here

 This shows how much you would have benefitted if you had shares from these companies in the Demat account.

You would have noticed that these companies share prices are going for the upper circuit cause somewhere they are trying to reach its intrinsic value as this value is out due to this particular deal.

Let's talk about this deal in detail now.

This company has been bought by Reliance Retail &  Fashion Lifestyle Ltd which is under Reliance Industries. This deal happened at Rs 24,713 Crores. Let's find out which all businesses of Future Group has been acquired.

1. First its Retail Businesses including its retail stores.
2. Secondly, it's Wholesale Business.
3. Thirdly, Logistics & Warehousing Ltd

All the liabilities of these companies would be paid off by Reliance Industries after this deal. You would have understood how much percentage profit would each company be gaining after this particular deal. You also understood which all companies did Reliance Retail buy.

Now the next question, which all companies did Future Group sell to Reliance Group?

Then the answer is even after this deal, Future Group would be left with many businesses. Now taking about those particular businesses left with Future Group after this deal are Manufacturing & Distribution, Fashion & T Sourcing business, Insurance business, their Textile partnership.

Reliance has said that they will make an investment of Rs 2800 Cr after this, Wherein after investing Rs 1200 Cr, they will 6.09% stake in Future Enterprise Ltd. After which they will be investing Rs 1600 Cr for 7.05% of stake in Future Enterprise Ltd. Reliance has bought some of its businesses directly which will be merged under Future enterprise Ltd which help Reliance to expand as they already have a good brand value. Reliance group will be directly acquiring many retail brands directly.

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The second part of the deal was after investing Rs 2800 Cr Reliance Industries would be buying 13% of the stake in Future Enterprise which can help a lot in expansion. After this deal, 1700 stores would be added to its 10,500 existing stores, which tells us how well the Reliance's expansion has been in the whole country and how this particular deal can help in expanding in the future.

Friends, Today's article was on the deal between Reliance and Future Group in which we tried to explain mainly 3 things,

First, what was the deal all about?

Second, How the companies trading under Future Group would get merged under Future Enterprise Ltd

and how much shares of Future Enterprise each shareholder would be entitled to? and how much profit can they gain in the coming time?

In the second part, we explained how Reliance Industries are planning to invest Rs 2800 Cr for 13% stake.

How can it help in expanding and how will Reliance Retail benefit from this whole deal

How their no. of stores would increase and how Reliance can benefit from different brands under this deal.

If you liked this article, Press Like! Comment and tell us if you should still invest in Future Enterprise Ltd or buy shares from Reliance Industries and tell us what is your reason to do so?

At the end of the article, I would like to tell you that I do not recommend buying and selling any shares, I thought of going in-depth with this current news as you should aware of it's implications on you as an investor in those companies.

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Happy Investing!

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