New Delhi: In a major consolidation in the Indian supermarket business, Kishore Biyani-led Future group will take control of Bharti Retail in a multi-tier all stock deal worth Rs 750-crore to create a Rs 15,000-crore behemoth.
This is the second major consolidation exercise within two days in the fast-growing Indian retail sector, after Aditya Birla Group yesterday announced merging all its apparel retail businesses into a single entity.
Under the deal announced today, Future Retail will demerge its retail business which will merged into Bharti Retail, while the latter's retail infrastructure business will also undergo a similar process to be merged with Future Retail.
"We are merging our retail businesses to create two separate companies ... The combined retail entity will have a total turnover of Rs 15,000 crore," Future Group CEO Kishore Biyani told reporters here.
Bharti Retail will get about 15 percent stake in both the merged entities. Bharti will get Rs 500 crore worth stocks, representing 9-10 percent equity in both the companies and Rs 250 crore in the form of optionally convertible debentures.
Future Group promoters will hold 46-47 percent stake each in the two new entities and the rest will be held by public shareholders. Both the entities will be listed on the stock exchanges.
Stating that Bharti is not exiting from retail business, Bharti Enterprise Vice Chairman Rajan Bharti Mittal said: "We are only merging. This was needed for faster growth. It is a strategic fit for both the companies."
Retail is an evolving sector and it needs economy of scale. Operational efficiency from the deal will create value for both shareholders and customers, he added.
Earlier in 2013, Bharti and global giant Wal-Mart had terminated their partnership, including a franchise agreement in retail business, pursuant to which the US-based retailer acquired full control of their wholesale cash and carry business joint venture.
While policy allows for 51 percent FDI in multi-brand retail sector, the foreign retailers have been cold to set up shops in India fearing political backlash.
Biyani said Future Group plans to open 4,000 smaller format stores by 2021, up from the total of about 570 stores now. Bharti's Easyday chain of stores and Future's Big Bazaar stores will continue to operate, he added.
Biyani said all new small format stores in North India will be opened under Easyday brand while in South and West India, stores will be opened under Nilgiri and KB's brand.
Bharti Group, which runs over 210 Easyday stores, has been looking out for partners after parting ways with Walmart in 2013. On the other hand, Future Group also has been making move to consolidate its business after selling majority stake in Pantaloons to Aditya Birla Retail in 2012.
