Reliance to transfer consumer business to new entity as part of restructuring

Reliance Retail plans to transfer its fast-moving consumer goods (FMCG) from from Reliance Retail Ltd (RRL) to a new entity called the New Reliance Consumer Products Ltd (New RCPL) as part of its internal restructuring exercise, according to scheme filed before the National Company Law Tribunal (NCLT), it has been announced.

Earlier on June 25, the Mumbai bench of the NCLT had asked Reliance Retail to convene a meeting for approval of the internal restructuring process, under which its consumer business is transferred as a going concern.

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As things stand, Reliance’s consumer goods business is spread in three verticals, namely Reliance Retail Ltd (RRL), Reliance Retail Ventures Ltd (RRVL) and Reliance Consumer Products Ltd (RCPL). RRVL is in the business of supply chain and logistics management for the retail business of Reliance, while RCPL is engaged in manufacturing, distribution, selling as well as marketing of multiple products under the FMCG category, and investments in subsidiaries and joint ventures engaged in the FMCG category retail business.

Explaining the reasons behind the internal restructuring exercise, Reliance has stated that its consumer brands business is a business where brands are built by managing the entire product lifecycle from research, development, manufacturing, distribution and marketing.

“This is a large business by itself, which requires specialised and focused attention, expertise and different skill sets as compared to retail business. This business also entails large capital investments on an ongoing basis and can attract a different set of investors,” the company had stated.

The restructuring of companies in the RIL group would house the Consumer Brands Business in New RCPL and would have RIL and other investors of Reliance Retail Ventures Limited (RRVL) holding the same percentage shareholding as in RRVL, the company had told NCLT.

The proposed scheme intends to transfer and vest the FMCG brands business from Reliance Retail Ltd (RRL) to the parent firm RRVL as a going concern on slump sale, as well as a merger of RCPL with RRVL, besides a demerger of the consumer goods business from RRVL to New RCPL, during the third stage. Both RRL and RCPL are wholly owned arms of RRVL.  

On April 25, the boards of directors of RRl, RRVL and RCPL had passed a resolution to transfer the FMCG brands business from RRL to RRVL. Reliance Industries Ltd (RIL), the parent company, holds 83.56% in RRVL, while other investors hold 16.44%.

Later, NCLT had directed that a meeting of the unsecured creditors of RRL, RRVL and RCPL be convened and held within 70 days from the date of the order being uploaded on its website, for the purpose of considering and approving the scheme.