Future Group’s Baton Passes from Biyani to Ambani

We can call it an end of an era. For a staggering amount of Rs 24,713, Reliance has acquired the retail chain of Future Group. For a period of over three decades, Kishore Biyani had built a retail empire that had earned him the nickname of Retail King of India. But on August 29, the baton was shifted from Biyani to Ambani.

After leading his own company RIL to the path of becoming complete net-debt free, Mukesh Ambani has come to the rescue of the lenders of the Future Group.  The merger includes Future Group’s wholesale, logistics, and warehousing business, bringing closure to Future Group’s journey in the retail sector.

A significant change in India’s retail landscape, the massive deal cements Reliance’s position as a market leader, adding power to its ongoing battle with Amazon and Walmart backed, Flipkart. Reliance will now have access to over 1800 retail outlets combining Future Group’s supermarket chain Big Bazar, Easyday, apparel outlet Central, upscale food stores Foodhall, and bargain clothing brand Brand Factory.

The Timeline Of Biyani’s Journey To The Top

The rise of Kishor Biyani was no short of a fairy tale. It is a story of how a man with a vision can transform the century-old approach to a business and give it a modern twist. The story started in 1987, young Biyani got frustrated with the traditional approach of his family business and started his venture in garment manufacturing. Exactly a decade later in 1997, he opened the first Pantaloons in Kolkata, introducing the city, for the first time, an entirely different way of buying fashion. The store was said to be twice big compared to any other stores in the city at that time. The brand attracted the new-age middle class, emerging in the post-liberalisation phase. In 2001, Biyani introduced Big Bazar, his successful supermarket chain. Both pantaloons and Big Bazar expanded fast, and in the next six years, the later added more than 100 outlets across several Indian cities.

Motivated by his success in retail, Biyani diversified into other sectors. He produced two films in Bollywood, but both tanked, and he couldn’t get the money back that he had invested. Next, he ventured into the insurance business, and Future General Insurance came to being. In the same year, 2007, he formed  Future Capital to offer financial products, wealth management services, equity broking solutions, and also into real-estate development. But these ventures turned out to be costly, and by that time, several other retail competitors had started to dig into the brand’s market share.  The losses were mounting, and so was the debt. Finally, in 2019, Biyani agreed that he can no longer hold it all together and started looking for suitors to sell his beleaguered business. In September 2019, the debt of Future Group stood at Rs 12,778 crore, up from March 2019. And, in March 2020, Future Group slipped to negative in ICRA rating.

The financials of the group further worsened under the pandemic condition. According to some reports, Future Retails has taken out Rs 170 crore since April under Common COVID-19 emergency Credit Line to stay afloat. The last moment deal with Reliance will help the company avoid defaulting in Rs 100 crore or $14 million in debt payment, which would have placed the company in the defaulter list of rating companies.

Biyani went from pillar to pole, holding lengthy talks with prospective buyers to prevent his ship from sinking. Closing the deal with reliance Retail Venture Limited (RRVL) a subsidiary of Reliance Industries Ltd. offered it the much-needed lifeboat and its lenders hope to get their money back.

Commenting on the deal, Isha Ambani, Director, Reliance Retail said: “Pleased to provide a home to the renowned formats and brands of Future Group”. Indeed, Biyani envisaged a new format of business much before other players recognised its potential.

The Deal

The RIL Future Group deal is undoubtedly a milestone in India’s retail landscape. Experts commented that with the acquisition Reliance has made its intention clear to shift from its energy business to becoming a consumer-focused retail and telecom company.

The oil-to-telecom major has recently ventured into online grocery segment with the launch of JioMart and looking at strengthening its foothold in retail to give a tough competition to the growing presence of Amazon in India. With the Future Group deal, Reliance acquired its retail, logistics, and warehouse business which will add muscle to its retail efforts.

Reliance Retail and Fashion Lifestyle (RRFLL) and RRVL jointly will take over certain borrowings and current liabilities of the Future Group. Under the scheme, FEL or Future Enterprise will transfer its rights of retail and wholesale undertakings to RRFL, along with logistics and warehouse segments. Experts believe that the deal will help Reliance Industries in its deep-discount policies that it has introduced with JioMart, letting it earn higher margin and better control over the market.

The Reliance Future Group deal is significant on many counts. It will help RIL increase its footprint in the retail sector, adding more power to it to compete with Amazon and Flipkart. Secondly, India’s retail sector is expected to grow at a rate of 8 percent compounding annually until FY26 to become $1.32 trillion industry from its current value of $822 billion. The organised retail sale sector will grow at CAGR of 17 percent during the same period to become $230 billion industry, indicating a massive growth potential for all its players.

After the Reliance Future Deal is announced, RIL shares jumped 0.2 percent in BSE to close at Rs 2,115.60. The deal is pending for approval from SEBI, CCI, NCLT, shareholders, creditors and others.