As per an agreement signed between the largest fast-moving consumer goods firm ITC and India’s largest retail company Reliance Retail (RRL) the latter will acquire John Players, a mid-segment menswear brand launched in 2002. This deal helps RRL widen its fashion and apparels portfolio besides improving ITC’s non-cigarettes FMCG business margins. The acquisition will also strengthen Reliance Retail’s readymade garments and accessories portfolio in the fashion and lifestyle retail space and consolidate its leadership position as India’s largest, most profitable and fastest-growing retailer.
Deal reinforces ITC’s focus on improving margins
After the deal, RRL gets ITC’s rights, title and interest, in John Players and its related trademarks and intellectual property. ITC, through this deal, plans to reach Rs 1 trillion revenue from its non-cigarettes FMCG business by 2030. The move reflects the company’s renewed focus on improving margins of its consumer business. The FMCG had company taken up a slew of measures in the past few quarters. These measures were reflected in the company’s earnings before interest, tax, depreciation and amortisation (EBITDA). The company’s EBITDA margin in April-June 2018 was 4.5 per cent, in September it increased to 5 per cent and to 5.4 per cent in the October-December period last year.
As Edelweiss Securities states, sale of John Players will improve ITC’s consumer business by around 3 per cent as the company will focus on the premium end through the WLS stores relaunched last month.
Reliance gets a boost in its retail operations
Reliance, on the other hand, plans to sell the John Players brand of apparels through offline stores and online market place Ajio.com. The company plans to expand Reliance Trend outlets to 2,500 by 2024 from 557 now. It also aims to integrate all its offline and online retail operations, including its flagship telecom services arm Reliance Jio, in the coming years. John Players’ expansion to over 700 outlets in the country will also help RRL sell its other in-house apparel brands. John Players’ reach to over 700 outlets in the country will also help RRL sell its other in-house apparel brands.
The company, with Rs 69,198 crore sales in 2017-18 and a growth rate of 44 per cent and 95 per cent in the past two financial years, is already the largest and fastest growing retail business house in the country.