Business Desk, ETV Bharat: If someone does not believe in too many cooks spoil the broth logic; she/he may look at the fate of erstwhile Retail King of India-Kishore Biyani’s Future Group.
One of the brightest minds of Indian retail, Kishore Biyani's Future Group that encompasses food, fashion, grocery verticals did too many things concurrently that led the company to lose sight and now to see a sell-out in a week's time from now.
Recently, due to liquidity crunch, it delayed an interest payout on its non-convertible dividends (NCDs) estimated around Rs.100 crore dated to be cleared on 16th August.
However, on 24th of August, the company repaid around Rs. 103 crore as interest on its dollar notes.
What went wrong?
Future Group was one of the early retail group conceptualised by Kishor Biyani. It was the second major retail group after Shoppers Stop.
“Kishor Biyani did a very good job of ramping up but I think what really happened is, it went to too many spaces and in the bargain, he did not focus on very specific spaces that he opened up. And over a period of time, its debt book deepened. Today we are talking about nearly Rs. 13, 000 crore debt on the books of Future Group. This kind of debt cant be serviced where the profit margins are low. Retail is a low-profit margin business be it any segment like a garment, food, grocery, anything,” said Harish Bijoor, a brand expert and head of Harish Bijoor Consults Inc.
According to Bijoor, Kishor Biyani experimented with too many omnichannel options, not only the big, medium, or the small format.
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“He went into KB stores and then he bought into names like Nilgiris, Heritage Foods, etc. I think these buyouts have not been fructified at all. Then he got into the 7-Eleven formats; there was a bit too much,” Bijoor explained.
To service that debt, the sell-out has to have happened. And the current sell-out is talking about raising some Rs 27, 000 crore, thereby creating a respite to the Rs. 13, 000 crore debt.
“I think the company was beautifully conceptualised but the speed at which it increased its width was slow with the speed at which the company deepened its debt. Retail business is all about width and depth. Depth is more important because it gives you the day-out and day-in in the margin whereas width is for the image. Depth also brings sustainability. And I think that sustainability question now hits the roof”, he added.
Deal with Reliance Industries Limited
Although completion of the RIL-Future Group deal is just a matter of time, industry experts see Amazon’s 7.3% stake in Future Retail is a roadblock to the entire deal.
As the experts say, RIL wants complete buyout of the company, which is not possible with Amazon’s present stake in it.
However, there is a general consensus about the fact that the matter is very minuscule to ponder. With the might that RIL keeps, the company will sort out Amazon’s 7.3% stake ownership in Future Group easily.
(Written by Sharmila Das. Author is a Delhi-based freelance journalist.)
