Future Group’s complex business trajectory a reason for its end

13 September 2022, Mumbai:

First-generation entrepreneur Kishore Biyani became the ultimate superstar in India’s retail sector when he went big in 1992. Having launched Manzwear in 1987, he converted this into the now famous Pantaloons retail chain that has its footprint across the length and breadth of India. Acknowledged as the pioneer of organized retail in India, in 2001, Biyani went on to launch the department store-like Big Bazaar to provide affordability and access to the masses.

Rise, rise, and then a fall

Whilst Kishore Biyani was on the trajectory of enormous success, insidious situations came to the fore, bringing his parade to a crashing end. Financial pundits attributed the end of this glorious journey typical to first-time entrepreneurs with unrealistic ambitions.

Unquestioned and endless bank credit can falsely goad an entrepreneur into believing pumping in money can ensure success but in reality, unplanned growth often leads to debt and subsequent bankruptcy. Many say that the frantic scaling, excessive dependence on bank loans, and a blind eye toward the growth of e-commerce led to the floundering and subsequent demolition of Biyani’s empire.

An instance of unbridled ambition is Big Bazaar. Within seven years of being launched in 2008, it counted more than 100 stores across India.

The expansion program was not restricted to Big Bazaar and also included E-Zone electronics and white goods stores, premium-food retailers Food Hall and Food Bazaar as well as fashion outlets like FBB, Brand Factory, and Central. These expensive forays without feasibility tests proved to not only sharply increase operational costs but also weakened the group’s balance sheet which destabilized the organization.

Fatal diversification from core business

The business community was taken by surprise when Biyani entered non-core sectors like insurance, financial services, stock brokerage, asset management, logistics, and real estate. This was compounded by the fact that Biyani also started film production. From what looked like a risky diversification, emerged to be a chaotic mess. Predictions that the writing was on the wall started circulating.

The rumors didn’t pull Biyani down as the convention-defying entrepreneur continued his acquisition spree. Between 2012 and 2020, he acquired Nilgiris Group, Easyday, online furniture store FabFurnish, Heritage Foods, and Hypercity, debt and all. The balance sheet was growing weaker with each acquisition and the final blow was the strict Covid lockdown.

From March 2020 to August 2020, the operation of Future Group’s almost 1,500 retail stores remained completely closed, squeezing the company’s cash flow and revenue. With no revenue, paying off the large sums of interest became a challenge and within weeks of the lockdown, Future Group defaulted.

Creditors and financial institutions panicked and set in motion stringent recovery plans from the group. Rating agencies dealt another huge blow by severely downgrading Future Group to junk status, pushing it to the brink of bankruptcy.

Perhaps Biyani was aware of the disaster to come. In December 2019, he sold a 49 percent stake of Future Group’s shares to Amazon for Rs 1,500 crores, in a bid to streamline the group’s balance sheet. In August 2020, Reliance Retail stepped in as the much-needed savior. It bought off the Future Group, lock, stock, and barrel and eased the superstar of Indian retail out of business.

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