The Past and Future of the Future Group
Kishore Biyani, the retail maverick of India, was the man who took the retail industry by storm. He realised the potential of retail, which oligarchs like the Ambanis and Birlas could not appreciate, and therefore came up with household names like Pantaloons, FBB and Big Bazaar. He is often referred to as the Sam Walton (the owner of Walmart) of India. However, recently, Reliance Industries (RIL) bought Biyani’s Future Group for a whopping ₹247 billion. Let’s understand why Mr Biyani had to sell off his dream, but for starters, let’s get acquainted with his story of rags-to-riches before getting onto the bad part.
Kishore Biyani, the current pin-up kid of the Indian retail industry, has assumed numerous jobs, however in the long run, he settled to turn into an inventive retailer. In contrast with numerous others of his class, Kishore wasn’t brought into the world with the proverbial silver spoon in his mouth and has, without any help, ascended the halls of India’s business elite. Nevertheless, coming from a family of businessmen, business flowed in his blood. He always knew that he would end up becoming a businessman because of his mindset and his ability to understand the customer. In order to understand the real world and to interpret the consumer’s nerve, he was often seen spending time visiting various shops rather than studying. His career actually started when he neared the end of his graduation by joining his family business Bansi Silk Mills, which traded fabrics. Though he used to go to his office, he wasn’t getting the kick which he wanted. He was unable to feel the enthusiasm and opportunity and was feeling quieted by the organisation’s moderate business culture and used to leave within 2 or 3 hours. He was totally against the manner in which the organisation worked and felt that their demeanour and approach towards the business wasn’t right.
While he was meeting his friends, he noticed them wearing ‘stonewashed’ fabric, he promptly acted on this new information and contacted a few mill owners and sold it to the garment dealers. Kishore had tasted blood and now he wanted more! He frantically began to search for something new, something other than what’s expected. He launched his own brand of fabric for men’s trousers called, WBB – White, Brown, and Blue. In 1987, he started his own garment manufacturing company, Manz Wear Private Ltd, which he sold under the brand name Pantaloons (he chose the name Pantaloons because it gave the feel of an Italian Fashion House and secondly because it was closer to patloon, an Urdu word for trouser). During the preliminary stages, Biyani went through a difficult phase as banks didn’t want to extend him loans, family and friends were also sceptical about the business. But “it was fun” for him as he steered through the rough phase like a sailor with unbridled confidence and faith in himself. In 1992, he entered the stock market to fuel the car. After raising money, he went on a spree to open Pantaloons stores pan India along with some marketing campaigns and by the end of 1994 Pantaloons laid eggs worth ₹6 million annually.
After tasting initial success with Pantaloons, he forayed into the supermarket business with the brand name Big Bazaar, wooing its core customers into large self-service supermarkets and leveraging his own supply and logistics chain to offer across-the-board discounts on maximum retail prices. Big Bazaar was formed on three pillars of Kishore’s ideology- Food, Fashion, and FMCG. You went to get a few vegetables, yet you needed to go through walkways of kurtas and dresses, and were enticed to purchase them. For budget clothing, Biyani launched the FBB design brand. Future Groups Home Center stores were also launched to force people to redesign their homes with the Future Group. The group also forayed into the tech retail sector with the e-zone varying media item stores.
On the offset of the story, everything seems spick and span but on the inside, the finances weren’t going great. He produced a few films between 2002 and 2003 which turned out to be huge flops. While he was growing at break-neck speed and success seemed to be touching his feet, all the acquisitions and the more than frequent opening up of stores, took him into bucket loads of debt. In fact, in 2012 he sold his flagship Pantaloons retail format to Aditya Birla Group for an estimated ₹16 billion at a time when the group had accumulated a consolidated debt of ₹78.50 billion. In 2014, Future Group acquired the south-based Nilgiris chain of markets for ₹3 billion. In 2011, Foodhall, an upmarket food store, found in luxurious shopping malls, was conceptualised by Biyani’s elder daughter, Avni Biyani. In 2016, a couple of years after Walmart and Bharti Airtel headed out in different directions and failed to set up retail stores as was agreed under their deal, the Future Group took a plunge and purchased the Bharti Airtel’s Easyday chain of supermarkets. A year ago, it trimmed more than 100 Easyday stores, in an endeavour to cut costs.
It is imperative to think that Mr Biyani tried to put his hands in almost everything from insurance to fashion. But the fact is that it was the fashion outlets which outdid every other business he had. Had he stuck to what he was good at, he would not have had to see these days. It’s not that he shouldn’t have diversified but at a steady pace rather than foraying into every other segment at once.
Amazon, which had announced an Indian war chest of $5.54 billion, and Flipkart, which further got strengthened after its buyout by Walmart, were wooing customers across all retail segments. Biyani tried to stick with his core competence customers: the middle-income Indians who preferred to shop in physical stores. Sadly, the customer had tasted the best of both worlds, and were swiftly moving online. Future Group tried but missed the e-commerce opportunity largely because of the promoter’s scepticism of making money on selling goods online. In 2017, the Future Retail also unveiled its ‘Retail 3.0’ platform that would enable tech to merge with offline retail. But it was too late as players were already established and people were happy buying from them.
Therefore, we can say the speed of expansion, acquisition of several retail assets — both regional and national, a chase to build more private labels and in-house manufacturing capabilities have left the company burdened with debt, and caused rating downgrades across the group’s listed entities. As of September 30, 2019, the combined debt of Future Group’s listed companies increased to ₹127 billion from ₹109 billion as of March 31, 2019. His debt woes were further exacerbated by the lockdown, wherein businesses were stalled but he had to keep servicing his debt. Finally, RIL acquired the retail and wholesale business, and the logistics and warehousing business from the Future Group for a lump-sum aggregate consideration of ₹247 billion.
A lot can be said about Mr Biyani but he believed in the ‘Indian Dream’; he always wanted to help the Indian dream fly high and wanted to ensure that the ‘Sone Ki Chidiya’ (Golden Bird) soared once again. We’re left with one question: will Biyani bounce back? Too early to tell. He is a brand and I’m optimistic enough that he’ll come back sooner and much stronger!!
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