The Shah of Mahindra
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Nearly three decades after he became the poster boy of India’s retail sector, Kishore Biyani, is all set to exit Future Retail through a stake sale to Mukesh Ambani’s Reliance Retail.
According to the deal, Biyani will give up control over all businesses under the Future Retail basket, including Big Bazaar, FBB, Food Hall and Central. Future Supply Chain Solutions and Future Lifestyle Fashion Ltd will also be sold to Reliance Industries. Biyani will be left with only Future Group’s FMCG business and some of the other smaller group entities. He had earlier sold the Pantaloons retail chain to Aditya Birla group in 2012.
“The financial situation of the group is extremely fluid, so Biyani has made up his mind to sell the retail venture to Reliance Industries. The final contours of the deal are being discussed and a formal announcement is expected soon,” said a banker aware of the development.
Earlier this month, BusinessLine had reported that along with Reliance, Biyani was in talks with other potential investors, including Premji Invest and Samara Capital, along with Amazon.
“The other two potential players, Premji Invest and Samara, are unable to close the deal because they are finding it tough to meet Future Group’s debt repayment requirements. That conversation is taking longer than expected and Biyani does not have time given the stress in the company,” said another source.
Debt burden
Credit rating agency ICRA had recently said the debt of Future Group’s six listed firms increased to ₹12,778 crore as of September 2019 from ₹11,463 crore in March 2019.
Future Retail has tried every way possible to avoid a loan default over the last six months. In January, the company raised $500 million through dollar bonds. It also pruned its fixed costs across corporate overheads, operations, people costs, and marketing costs. Then, it shut down 177 small-format stores, which were in a mix of new low-density clusters or bottom of the tail stores. In addition, Biyani sold 49 per cent stake in Future Coupons for ₹1,500 crore to Amazon and Samara.
A senior executive from the Group said despite these measures, the coronavirus pandemic and the overall economic slowdown have made things worse.
“We’re expected to save jobs, but there is no money. We’re expected to be fully stocked but there is no clarity on any regulation at all. It’s been over 100 days since most of our stores were shut. There is little or no working capital and manpower to run the businesses. To top this, the banks aren’t supporting us at all. How is a company to run a business like this?” he questioned.
Reliance’s retail unit, on the other hand, has emerged the largest retail player in the country with a revenue of ₹1,62,936 crore as on March 31, 2020 with 11,784 retail stores. When contacted, RIL spokesperson said: “As a policy, we do not comment on media speculation and rumours. Our company evaluates various opportunities on an ongoing basis.”
Future Group spokesperson was not available for comment.
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