See lower finance cost; focus on same store growth: Biyani

Future Group, which owns retails chains like Pantaloon and Big Bazaar, is confident of bringing down interest cost following recent consolidation and restructuring initiatives and is also focused on increasing same-store growth, says Rakesh Biyani, joint MD of the company.

The group witnessed 8 percent growth in same store sales in March quarter and is expecting it to improve it going forward.

"The first two months that is April and May have been on the higher side, we are hoping that whole of June will also go on the same basis and that would give us a foundation in the promotion quarter of July to September and then finally the festive quarter we could only grow further on the hard work that we have done over the last 12 months," Biyani said.

The group had proposed to sell 22.5 percent stake in Future Generali India Life Insurance Company it held through Future Retail to Industrial Investment Trust in March. The group hopes to complete this transaction by Sepetmeber. Biyani said that the company intends to liquidate many such other investments at right time going ahead.

Below is the verbatim transcript of his interview

Q: High leverage has been a problem area for the company for sometime now. In the quarter gone by your interest costs continue to remain very high despite reporting a sequential dip. By when can we see a material decline in finance costs?

A: In the previous quarter the entire consolidation piece and the restructuring piece related to Pantaloon had not got completed and that process got completed only on the 8th of April. As compared to projection some of that cost was still part of the numbers that we delivered in the quarter. Now that the entire consolidation piece has been completed you are going to see a much lower interest costs this quarter onwards. So I think it is just more of a timing issue and the small delay that we had in completing the transaction and that is the reason there is a difference from the projection.

Q: Same-store sales growth this quarter at 8 percent plus was encouraging. We did see a rebound not just for the quarter but for FY13 as well. Given the kind of slowdown that we have seen in discretionary spending and so many of your peers pointing out that start of FY14 looks to be very tough do you think this 8 percent growth is sustainable?

A: We have mentioned previously also that quite a lot of changes that we carried out in our business over the last one year have had some amount of impact on our numbers all through. What we had to do was to rebuild our assortment strategy and now that the assortment strategy is in stores we are clearly seeing better traction from the consumers. So the work that has happened and the quality of new assortment that we have delivered, and the availability at the stores, all of these are adding up to the growth that we are seeing in the same-store sales. It is a process. There is still some work happening. As the consumer sees the new assortment at the stores we are finding that more customers are walking into the stores and the same-store sales growth have continued to move forward from where we ended in March. It is looking much higher right now. The first two months that is April and May have been on the higher side, we are hoping that whole of June will also go on the same basis and that would give us a foundation in the promotion quarter of July to September and then finally the festive quarter we could only grow further on the hard work that we have done over the last 12 months.

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Q: Your cash flows have been under pressure. Analysts often comment that the current situation will require a very delicate balancing act with effectively managing space addition and improving operating cash flows. Any steps that you all are contemplating to stabilize the cash flow?

A: We are aware of it. As I said lot of the work that we have done is to ensure the fact that costs are on the lower side and we have the least amount of increase on cost. But our prime focus is on driving more same-store sales growth. Retail is fixed cost business and as the sales per square foot keeps growing up on the existing cost base you find that the EBITDA is generating higher and so the cash flow starts coming through. Plus also programs like Big Bazaar Profit Club (BBPC) which were launched in earlier part of this year are also seeing good traction and that also supports some part of our cash flow requirements. So I think overall we are quite well covered for this particular year, we do not see a challenge. The lifestyle business also settles in. We do not see too much of a challenge on that front. Future Retail both eZone as well as Big Bazaar seems to be in the right direction. Home Town is the only concern which is a much smaller business but again attention to cost has already happened and the costs are looking much lower than what they were in the past.

Q: Can you give us some timeline on the next set of stake sales? When will you complete the divestment of the insurance business?

A: The first priority for us is to close the announcement that has already happened. We are hoping the fact that at least the insurance transaction should get completed by September subject to all the approvals being in place. We have completed all the other announcement that we have done in the past. As new companies have emerged both Future Retail Limited as well as Future Lifestyle Fashion Limited, there is a clear direction in terms of what we want to monetise from the assets out there. That is a process which is on. We continue to hold shares of many investments - all for purpose of sales and raise money out of those. All of those would ultimately happen. As of right now there are no dates attached to some of those exits. The intent is there. As and when the timing is right, the value that we will realise is right, we would be the first ones to sell those.

Q: After the significant restructuring and signs of improving financials could you give us any kind of guidance on what the margins or the profitability could look like as we head into FY14?

A: As we go through this particular quarter onwards we will find that the numbers of lifestyle business would be on one side which will be Future Lifestyle Fashion and there will be Future Retail which is largely going to be the value retail. The numbers overall on these core concepts would now become measurable and they will be related to concepts which are easy to understand, easy to consolidate together. So the simplification has happened. The direction for us is focus on growing the same-store sales growth. We are moving forward. The results that we are getting are positive. We still have a lot more work to do. I am quite confident that this year looks like a positive year to end with.