In a two-tier deal announced on Monday, Future Retail will demerge its retail business to be merged into Bharti Retail, while Bharti's retail infrastructure business will also undergo a similar process to be merged into Future Retail.

As part of the deal, Bharti Retail will get 15 percent stake in both the merged entities. Bharti Retail will get Rs 500 crore stocks at present and Rs 250 crore stocks will be converted at a later date.

"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.

Future Group promoters will hold 46-47 percent stake each in the two new entities. Bharti will have representation on their board with one member. The new retail entity will have one of the largest networks in India with 570 stores across 243 cities.

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.
     
The announcement comes a day after Aditya Birla Group merged its apparel businesses into a Rs 5,290 crore entity named Aditya Birla Fashion and Retail (ABFRL), which will be the largest pure-play fashion lifestyle company in India.

Biyani said they plan 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.

When asked about new stores, Biyani said all new small format stores in North India will be opened under Easyday brand. In South and West India, stores will be opened under Nilgiri and KB's brand.

Bharti Group has been looking out for partners for a full-fledged retail play after parting ways with erstwhile cash and carry partner Walmart in 2013. Bharti Retail runs over 210 Easyday stores across different formats in India, mostly concentrated in the northern region.
     
Future Group also has been making move to consolidate its business after selling majority stake in Pantaloons to Aditya Birla Retail in 2012. It has a chain under different formats, including hypermarkets under Big Bazaar and supermarkets under Food Bazaar brand. Following the announcement, Future Retail shares soared 12.06 percent to close at Rs 129.65 on BSE.

 

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