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.
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?
I, Jagdeep Singh, Welcomes you to Groww's Youtube Channel
Let's start with today's video
Before starting the video, 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?
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
Future Consumers Ltd, Future Lifestyle Fashion Ltd, Future Market Networks Ltd
Future Retail Ltd and 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 then
then 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
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
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
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
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
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
Future Retail shareholders are receiving a premium of 49%
Future Supply Chain shareholders are receiving a premium of almost 74% cause of this deal
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 Crs
Lets find out which all businesses of Future Group has been acquired
First is its Retail Businesses including its retail stores. Secondly, it's Wholesale Business.
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
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 video 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 video, 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 video, I would like to tell you that we do not recommend buying and selling any shares
We thought of going in-depth with this current news
as you should aware of its implications on you as an investor in those companies
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