From Pantaloons to Big Bazaar: How Kishore Biyani built, and sold, his iconic brands

Over the years, Biyani expanded his business too wide and too fast, and missed the e-commerce boom that he very openly dismissed.
Kishore Biyani of Future Group
Kishore Biyani of Future Group

After months of negotiation, Reliance Retail acquired Future Group’s retail and logistics business in a slump sale for Rs 24,713 crore on Saturday. With this deal, one of India’s most iconic hypermarket chains Big Bazaar, with 292 stores nationwide, will now be owned by Reliance. The deal also includes its other brands such as FBB, Foodhall, Easyday, Nilgiris, Central and Brand Factory.

Kishore Biyani is known as the pioneer of modern retail, having started an apparel business in 1987 by launching Manz Wear, which then changed its name to Pantaloon. Over the past three decades, Biyani built a retail empire that today spans across 1,550 stores including Big Bazaar, FBB and Foodhall, Easyday, Heritage Fresh and WHSmith. However, he has had to sell a major part of this to pare down debt.

But Future Retail’s debt troubles aren’t new. Over the years, Biyani expanded his business too wide and too fast, and yet missed the e-commerce boom that he very openly dismissed. 

Having started out with an apparel business, Biyani capitalised on the country’s move from unbranded to branded clothing through Pantaloon. Back in 1992, he had listed Pantaloon on the bourses to raise funds for expansion, store improvements and marketing. From then on, he never looked back, as he created an entire ecosystem for retail including logistics and also mentored many other entrepreneurs and brands.

In 2001, Biyani began diversifying beyond apparel with the launch of Big Bazaar, which was a pioneer in how Indians shopped. It sought to replicate the chaotic surroundings of an Indian marketplace with everything in one place but packaged in the format of a hypermarket. This was also Biyani’s foray into grocery. Soon after launching, Big Bazaar expanded quickly, adding 100 stores in rapid succession over the next six years, while Pantaloon grew to 65 stores and 21 factory outlet stores across 35 cities by 2012.

As Biyani added stores, he also added newer formats, diversifying into different retail formats. Fifteen years later, by 2012, the company had Pantaloon, Big Bazaar, Central, Ezone, Brand Factory and HomeTown. But with rapid expansion came massive debt. In 2012, Future Group had a consolidated debt of Rs 8,000 crore, of which the retail business debt was around Rs 6,000 crore.

In a bid to pare down debt, Biyani sold his majority stake in Pantaloons Retail to Aditya Birla Nuvo for Rs 1,600 crore, which included Rs 800 crore of debt transfer.

Again in 2012, Biyani had also sold a majority stake in his non banking finance company Future Capital Holdings to US-based private equity Warburg Pincus to raise funds and exited from a stationery joint venture with US-based Staples by selling its entire stake to the partner.

At that point in time, his group was laden with a debt of around Rs 5,000 crore.

However, Biyani continued to diversify and sink money into a variety of retail formats through acquisitions, particularly grocery — such as the Easyday club, Heritage and Nilgiris — to connect consumers. These retail formats, especially Big Bazaar, offered consumers what an Amazon or Flipkart today offers – everything you need, under one roof, with massive discounts. Big Bazaar’s Wednesday discounts saw a massive rush at the stores, and in no time, Big Bazaar gained popularity.

While Biyani built a massive retail presence through these stores, fashion and apparel was still his forte. So around 2016-17, he began ramping up his fashion portfolio. He revamped and expanded FBB, Brand Factory and Central stores in a major way. In 2017, Fashion, along with home furnishing, made up 65% of the Future Group’s revenue.

In 2016 he decided to turn Future Group, which was so far a retail-led company, into a full-fledged consumer goods major. He then forayed into the consumer goods space with the launch of 27 private labels across 64 categories including staples, pulses, snacks, sauces etc, creating an entire FMCG portfolio.

He said at the time that he aimed to grow food and FMCG business to a turnover of Rs 20,000 crore by 2021.

And all this while, Biyani maintained that he wasn’t sold on the e-commerce story. “It's stupid to be in the online space,” he said in 2017.

But with rapid expansion and several turns in strategies, Biyani had spread himself too thin as the need for capital increased to expand his retail business amid increasing competition from new players like Reliance Retail as well as the advent of e-commerce. Even though the company aimed to build an omni-channel presence, it didn’t work.

In 2019, Biyani even admitted that the diversification and getting into so many categories of business was a mistake. “Now I have decided not to move out of food, fashion and home. Earlier we were into multiple categories. I think we have made enough mistakes. We didn't have that kind of bandwidth and we didn't have that kind of resources and we have done too many things," he had said. He also admitted that the retail major missed the opportunity in the online space.

But it was too late. 

As of September 29, the company’s debts had mounted to nearly Rs 12,800 crore and the company has had to sell assets to pare debt. Murmurs about the company’s financial state and inability to pay debt have been growing since the beginning of the year. Adding to its woes, the COVID-19 pandemic resulted in the retail industry coming to a standstill for nearly two months.

It defaulted on debt repayment and lenders invoked pledged shares. Soon, ratings agencies downgraded Future Retail’s credit ratings. 

On Saturday, Biyani agreed to a deal under which Reliance Retail Ventures Limited (RRVL), a step-down subsidiary of Reliance Industries, will acquire popular Future brand stores such as Big Bazaar, fbb, Foodhall, Easyday, Nilgiris, Central and Brand Factory.

In order to consummate the deal, key group companies including Future Retail, Future Lifestyle Fashions, Future Consumer, Future Supply Chains and Future Market Networks will merge into FEL and will pass on the ownership of retail and wholesale business along with that of logistics and warehousing business to RRVL.

After this transaction, FEL will retain the manufacturing and distribution of FMCG goods and integrated fashion sourcing and manufacturing business and its insurance JVs with Generali and JVs with NTC Mills.

With the current deal, Reliance Retail now takes on DMart, as well as has stiff competition from the e-commerce giants. Amazon has already pledged to invest $5.5 billion in the country, while Walmart bought local e-commerce giant Flipkart in 2018 for $16 billion. Flipkart recently raised $1.2 billion. 

It is important to note, however, that Amazon indirectly holds a 1.3% stake indirectly in Future Retail, and can buy into Future Retail after a period of between 3 and 10 years. According to Business Standard, Amazon will continue to stay on as a shareholder. 

"All existing Future investors including Amazon will have a stake in Future Enterprises on the basis of the swap ratio that has been determined for the merger," a source told Business Standard. 

However, sources tell TNM that the brand names, especially that of Big Bazaar is likely to remain unchanged due to its popularity. 

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