Reliance-Future Group deal decoded! Here is what it means for investors

The deal between Reliance Retail and Future Group will take conglomerate Reliance Industries Limited (RIL) to a whole new level, market expert Varinder Bansal told Zee Business Managing Editor Anil Singhvi. This deal is very good for Reliance Retail and RIL, Bansal said. 

Through this deal, Reliance Industries has been able to get the entire Future Group Empire at Rs 24,700 cr, Bansal said. Reliance has over 28.5 million square feet of space which is a very important aspect in retail sector. After acquiring the Future Group, it now has 52 million square feet of space which will make it 2.5 times of DMart. 

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फ्यूचर ग्रुप और RIL डील के क्या हैं मायने?

फ्यूचर ग्रुप के शेयरधारक अब क्या करें?

RIL को इस डील से कितना होगा फायदा?

डील से किन बैंकों को कितनी राहत?

देखिए फ्यूचर ग्रुप और RIL डील पर वरिंदर बंसल का सटीक विश्लेषण#FutureGroup #RelianceRetail @AnilSinghvi_ @varinder_bansal pic.twitter.com/967HhZIEhl

— Zee Business (@ZeeBusiness) August 31, 2020

The revenue of Reliance Retail is likely to go up by 25-30 per cent from here, Bansal said. ALso, Reliance has got this entire asset at a very cheap valuation considering the current circumstances. It has been able to double its capacity with just one deal.  

Bansal said that it is important to understand the deal in respect of Future Enterprises Ltd (FEL). All the swap ratios are based on FEL and if it goes up, all other group companies will come along and if it goes down all the calculations will go down. He said that all the Future Group companies will now merge into FEL and then there will be a demerger and the assets will go to Reliance Retail.  

However, for Future Enterprises, this deal is negative, Bansal said. There is a big equity dilution in Future Enterprises. 

The Reliance-Future Group deal is also likely to get consummated in 6-8 months so the swap ratio will have to be monitored over this period. 

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As for bank stocks, he also cautioned investors to look at the haircut that the banks will be getting. In deals such as this, the banks usually have to settle with a haircut of 30-40 per cent, he said.