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What are your takeaways now on the Reliance-Future deal?
From Reliance angle, their top line in the fashion business literally doubles from where they are currently. Secondly, their top line in food and grocery gets a big upside of around say 40% and more importantly, you get around 17 million sq ft of retail space, a lot of good locations in various malls of the country and a very good backend which was set up by Future Supply Chain Solutions.
Now it is to be seen how well Reliance can integrate it with their Jio part of business because they have a very strong IT infrastructure in telecom in place and they actually needed the stores on the ground and infrastructure to scale that up significantly. From that angle, it is much easier for Reliance to scale up their overall retail business.
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Do you think the closure of the deal could give the Reliance stock a boost in the near term?
In the near term, definitely it is a positive. But a lot depends on how well they manage the business because I also do not rule out some sort of a store restructuring as we go along. Secondly, on one hand, you have got the valuations at which Reliance has made the purchase which you can say roughly is one time EV to sales on FY20 numbers. There is D-Mart which is currently trading at 3.5x on FY23 EV to sales. So Reliance can catch up in terms of valuations and the market is already factoring in much higher valuations and what they have paid for Future Retail.
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