CCI approves Future Consumer Enterprise-Grasim deal

The Dollar Business Bureau

Competition Commission of India (CCI) has given its approval to the deal of Future Consumer Enterprise’s acquisition of consumer products division of Grasim Industries. The Kishore Biyani-led Future Consumer Enterprise has got the approval of CCI to purchase the business division of consumer products of Grasim Industries, a flagship company of Aditya Birla Group.

Future Consumer Enterprise, a part of Future Group, operates some of the most popular retail networks in India and is involved in the business of branding, sourcing, marketing and distribution of grocery, food and FMCG products.

A diversified firm, Grasim Industries Ltd is engaged in viscose staple fibre, chemicals and cement, among other products. The consumer product division of the company deals in baby wipes, face care wipes, and various other products related to baby and skin care segments, which are available under the brands of Puretta, Kara, Prim and Handys.

CCI is a government body that keeps a check on activities and unfair business practices across sectors that have an adverse effect on competition in India. In May 2015, Future Consumer Enterprise had signed a Business Transfer Agreement with Grasim Industries to buy its consumer products business on the basis of slump sale. This is the second pact that the Biyani group has signed with the Aditya Birla group. Earlier in April 2012, the Aditya Birla Group had bought a majority share in Future Group's flagship fashion apparel retail chain – Pantaloon, by infusing Rs.1,600 crore. The recent move by Future Group according to analysts is due to the growth of  the retail sector in India and of late this sector is in dire need of economies of scale as it faces tough competition from the rapidly growing e-commerce segment.

What is interesting to note here is that mergers and acquisitions are happening at a time when brick-and mortar retail stores are facing a stiff competition from rapidly growing e-commerce companies such as Amazon, Flipkart and Snapdeal on the back of heavy foreign investment support, thereby getting the luxury to dole out huge discounts to attract customers. Perhaps the brick and mortar retail stores need to more than just merge and acquire, as the recent opening up of the Indian market by the Govt may further strengthen the e-commerce segment. It remains to be seen how the big giants in the retail sector face the Davids’ in the e-commerce industry.