Reliance Retail, India's largest retail chain has found a much easier way to expand their dominant position in the country: acquire most of the units from the second largest chain.
On Saturday evening (local Indian time), Reliance Retail announced that it had entered into an agreement with Future Group to acquire the retail, wholesale, logistics and warehousing businesses for $ 3.4 billion.
Today's announcement complicates the future of Amazon and Walmart's Flipkart in India, the world's largest open market for users, where e-commerce is still only 3% of all retail sales. According to consulting firm BCG and local retail group Retailers' Association India, the Indian retail market will grow to $ 1.3 trillion by 2025, up from $ 700 billion last year.
Amazon has also shown interest in Future Retail. The company, which had bought a tiny portion of Future Group's business last year, was in talks to increase its stake in the company, according to previous local media reports. The American e-commerce company, which has invested over $ 6.5 billion in its India business, announced in January that it has also signed a deal with Future Group to allow the Indian company to sell online help.
The Future Group, which began its journey as a seller of stonewashed fabrics in the 1980s, serves millions of customers in more than 1,500 stores in more than 400 cities. Today's deal will help Future Retail reduce its debt.
Mukesh Ambani, Whoever controls Reliance Industries (whose subsidiary Reliance Retail is) has secured around $ 20 billion from Facebook, Google and 11 other high-profile investors for its telecommunications company Jio Platforms this year.
Now Ambani, India's richest man, has turned its eyes to e-commerce. Jio Platforms and Reliance Retail announced JioMart last year. The e-commerce company, which began trials in select suburbs of Mumbai late last year, has expanded to more than 200 cities across India.
Facebook, which has invested $ 5.7 billion in Jio Platforms, said the company will be looking at ways to work with Reliance to digitize the country's 60 million mom and pop stores as well as other small and medium-sized businesses.
“With this transaction, we are pleased to provide a home and business environment for the prestigious formats and brands of the Future Group, which have played an important role in the development of modern retail in India. We hope to continue the retail growth momentum with our unique model of active collaboration with small traders and kiranas as well as large consumer brands. We are determined to continue delivering value to our consumers across the country, ”said Isha Ambani, Director at Reliance Retail, in a statement.