The Future Of Indian Retail

For several years, Kishore Biyani, the 59-year-old founder and CEO of the Future Group, would just brush aside the idea that e-commerce was any kind of threat to India’s traditional brick-and-mortar retail business. Credited with pioneering organized retail in the country, he was a firm believer in the Indian shopper’s preference for the touch-and-feel experience of physical shopping. For years, Biyani seemed to be right, at least going by the scenes at his Big Bazaar stores, where people jostled for space on mega sale days. A three-decade veteran in modern retail, Biyani kept expanding his store count, taking the number to 1,800 across formats—apparel, lifestyle, and groceries. Flush with funds from banks, he also acquired as many as six companies in the past seven years to expand his reach. However, this did strain the Future Group’s finances—on sales of Rs 26,000 crore, his company’s debt ballooned to Rs 13,000 crore. When the pandemic set in and the lockdown abruptly halted business, he was pushed closer to defaulting on his loans. The absence of an e-commerce arm made matters worse.

- M.G. Arun

In some ways, Mukesh Ambani, 63, the chairman of India’s largest private-sector firm Reliance Industries (RIL), proved to be his white knight. Ambani, who has big ambitions in e-tail but not much of a presence in offline retail beyond electronics, saw in the Future Group the perfect offline complement for his online retail push. Many think that at Rs 24,713 crore, the deal came cheap for Ambani. But Biyani could not really have asked for better. While valuations have soared for domestic e-commerce players, attracting global giants such as Amazon and Walmart, there are not many takers for brick-and-mortar businesses, especially with the pandemic still raging. Ambani had the ambition and the money, and that mattered. His daughter, Isha Ambani, 28, a director on the board of Reliance Retail, also had a good word to say about Biyani, acknowledging that the Future Group had “played an important role in the evolution of modern retail in India”.

The deal is structured in three parts. First, all Future Group businesses will be transferred to Future Enterprises (FEL). RIL will acquire FEL’s grocery and apparel retail assets for Rs 24,713 crore. FEL will retain its FMCG and apparel (private labels) brands, the Future Generali Insurance JV, and some real estate assets, in which RIL will take an additional 13 per cent stake in two tranches, for Rs 2,800 crore.