The RIL Deals with Future Retail, what does it mean for investor – Shares of Future Retail Ltd (FRL) have risen more than 60% from the bottom low in March. The only reason for this optimism is that reports suggest Reliance Industries Ltd is one among the investors for assets held by the Future Group, including stakes in FRL and Future Lifestyle Fashions Ltd.
BofA Securities analysts said in a note to clients that if the reported deals fructify, margins are likely to improve due to improving scale. Of course, the deal value will be crucial, and investors will have to wait and see which of Future Group’s companies RIL eventually ends up buying. FRL and Future Lifestyle’s enterprise value stands at about ₹10,654 crore and ₹3,834 crore, respectively.
RIL doesn’t have any loss in going with it as they have healthy balance sheet following the recent fundraising spree. RIL has sold 24.7% stake in its digital services subsidiary, Jio Platforms Ltd, for ₹1.15 trillion. It is also raising ₹53,000 crore through a rights issue.
In contrary, the stake sales will offer relief to Future Group on the debt front. This is all the more critical in covid-19 times when sales have taken a beating due to the restrictions and a general demand slowdown.