Kishore Biyani has just inked a mega deal with Mukesh Ambani, in a move that will finally enable him to shake off the dark cloud of debt that has been looming over him for some years now. But what will the entrepreneur, who transformed India’s organised retail sphere, do next?
After its deal with Ambani’s Reliance Retail, announced over the weekend, Biyani’s Future Enterprises Ltd (FEL) will retain the following businesses: manufacturing and distribution of FMCG goods, integrated fashion sourcing and manufacturing businesses, its insurance JVs with Generali and a joint venture with NTC Mills.
The deal was crucial for the Biyani-led Future Group, which was under immense pressure from a lenders’ consortium led by SBI to address its rising debt, which stood at Rs 12,778 crore as of September 2019. It will help the Group pare debt and strengthen its remaining businesses.
“We are pleased that our strong retail franchise and brands, that we have created over time, are going in stronger hands and will continue to grow and delight Indian shoppers,” Biyani said in an official statement.
What next for Biyani?
Those who are close to Biyani say he will never stop experimenting and is quite capable of launching a new format in the retail business all over again.
“If Biyani does not have ‘no-compete’ clauses, he will start a new format in the retail space itself. In the past, too, he has experimented with multiple formats, multiple partnerships within retail. He is not someone who will run away from the competition. I think he will not stop and will continue his journey as a retailer,” said Govind Shrikhande, Former Managing Director of Shoppers Stop.
Speaking to Moneycontrol, VMart Retail CMD Lalit Agarwal said: “He is not someone who will take a pause; he is a creator and an entrepreneur, and he will continue his journey.”
Another old friend and competitor of Biyani, who did not wish to be named, said: “Biyani is known for his ‘let's try’ concept. If not retail, he will definitely try his hand at new businesses. But he will not stop."
Future Consumer’s business is worth Rs 4,000 crore and is headed by Biyani’s elder daughter Ashni Biyani.
In its official statement, Future Group said: “Post this exercise, FEL will emerge strong with businesses in manufacturing and distribution of FMCG products and integrated fashion sourcing and merchandising. These businesses will further benefit from the supply agreement with RRFLL. This deal will also enable FEL to focus on the creation of new-age brands in the FMCG and fashion space and expand its reach. The transaction will help FEL to expand with a focussed business model and a stronger balance sheet.”
“As a result of this reorganisation and transaction, Future Group will achieve a holistic solution to the challenges that have been caused by COVID and the macro-economic environment. This transaction takes into account the interest of all its stakeholders, including lenders, shareholders, creditors, suppliers and employees giving continuity to all its businesses,” said Biyani.
So, what exactly did the deal with Reliance Retail entail?
The mega transaction, which also includes the wholesale, logistics and warehousing business of the Future Group, has a combined value of Rs 24,713 crore and cements Reliance Retail’s position as the undisputed leader in the organised retail segment.
The deal also gives the Ambani company firepower in its ongoing battle with Amazon for command over the Indian e-commerce market.
The Future Group houses leading retail formats, including supermarket chain Big Bazaar, upmarket food stores Foodhall, and bargain clothing chain Brand Factory. The acquisition is part of a scheme in which Future Group will merge some of the companies handling these businesses into Future Enterprises Limited (FEL).
Under this deal, key Future Group entities, including Future Retail (FRL), Future Lifestyle Fashions (FLFL), Future Supply Chain (FSC), Future Consumer and Future Market Networks would first be merged into Future Enterprise (FEL), following which Reliance Retail Ventures Limited (RRVL) will acquire the relevant business segments from FEL on a slump-sale basis for an enterprise value of Rs 24,713 crore. This transaction is subject to statutory approvals.
Reliance Retail and Fashion Lifestyle Limited (RRFLL) also proposes to invest Rs 1,200 crore in the preferential issue of equity shares by FEL to acquire 6.09 percent of post-merger equity and Rs 400 crore to acquire warrants convertible into equity shares of FEL, which will result in RRFLL acquiring a further 7.05 percent in FEL.