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Kishore Biyani’s stress test

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February 15, 2021

Written By MG Arun

From having to sell his business to facing legal challenges on his deal with Reliance and a one-year ban from the capital markets, retail icon Kishore Biyani finds himself indistinctly inglorious circumstances.

tail boom disrupted his business, compelling him to overhaul the group in 2015. More recently, the Covid pandemic played havoc with his offline business model. Forced to strike a deal with Reliance Retail to sell the family silver, Biyani now finds himself in a legal quagmire, with e-tail giant Amazon challenging the deal in a Singapore court. In a far cry from the accolades he won at the height of his career, he now faces a one-year ban from the bourses—market regulator Sebi (Securities and Exchange Board of India) has pressed insider trading charges in a 2017 case, an order he has challenged.

Big Bazaar made Biyani an icon in the retail business, but that was not his starting point. After dabbling in his family’s fabric trading business in Mumbai (his grandfather had moved there from Rajasthan’s Nimbi Jodha to open a textile shop), he ventured into making fashion-ready fabric in 1983. The Manz Wear brand he launched in 1987 would later become Pantaloons. In 1992, he listed Pantaloon Retail on the stock market to fund his expansion plans. In 2012, as the debt pile kept mounting, he sold his majority stake in Pantaloon Retail to Aditya Birla Nuvo for Rs 1,600 crore. What remained were Big Bazaar, Central, Ezone, Brand Factory and HomeTown brands. “What worked for him (in the early years) was that his group was willing to try out different [business] concepts and did not shy away from failure,” says Devangshu Dutta, CEO of Third Eyesight, a consultancy. This innovative spirit gave the Future Group a bigger footprint than many others. Balancing the raising of capital, deploying it into ventures and figuring out which ones worked and which didn’t was a tough juggling act, which Biyani managed well. But fresh trouble was in the offing.

The e-commerce challenge

After a decade of high growth, the Future Group’s business began to slow post 2010. The success of e-tailers such as Flipkart, Snapdeal and Amazon, on the back of discounts and doorstep-delivery convenience, was a big threat. So was the growth of rival Reliance Retail. Biyani had no option but to shake his firm out of slumber in 2015, with new initiatives he said would mark the group’s ‘rebirth’, white-label FMCG products under Future Consumer Enterprises, allowing shoppers to shop from anywhere and take deliveries anywhere, and so on. (Under the white label strategy, products made by one company would be packaged and sold by other companies under various brand names.)

Over the next few years, Biyani, who prefers to be spartan in his personal life and has a connect with his staff due to his accessibility, continued to increase his store count, taking the number to 1,800 across formats, from apparel and lifestyle to groceries. Flush with funds from banks, he acquired as many as six companies in the past seven years to expand his reach. By 2019-20, revenues from the business he ultimately sold to Reliance Retail stood at Rs 28,272 crore. But his debt was mounting too. Future Retail’s debt, which Reliance took over as part of the deal, stood at Rs 19,000 crore. The final blow came in the form of the pandemic, halting his business and pushing him closer to defaulting on his loans. The absence of an e-commerce arm closed all doors on his business.

The deal that Biyani stuck with Reliance Retail during the pandemic was just what the doctor ordered. Mukesh Ambani, 63, chairman of India’s largest private sector firm Reliance Industries, harboured big ambitions in e-tail but had little to boast of in offline retail except for electronics (comprising three-fourths of Reliance Retail’s stores and giving it Rs 45,000 crore in annual sales). He found in Future Group the perfect platform for his retail play. Many feel that at Rs 24,713 crore, the deal came cheap for Ambani, but Biyani could not have asked for better. While valuations have been soaring for e-commerce players and have attracted global giants such as Amazon and Walmart to the Indian market, there are not many takers for brick-and-mortar businesses, especially during a pandemic that caused almost total economic paralysis. In short, Ambani was nothing less than a saviour for Biyani. The deal was a steal for Ambani. When complete, it would create a Rs 1.2 lakh crore business for him, four times bigger than Reliance Retail’s nearest rival, Avenue Supermart, which runs the popular DMart stores.

right-of-first-refusal agreement and a non-compete clause it had signed with the Future Group in 2019. In October 2020, a single bench of the court of the SIAC barred Future Retail from taking any step to sell its assets to another party. On February 2 this year, a single bench of the Delhi High Court ordered a freeze on the Future-Reliance deal, but on February 8, a two-judge bench of the court stayed that order. The next hearing is slated for February 26.

Most experts see the battle between the Future Group and Amazon over the Future-Reliance deal as a fight for control of the Indian e-tail landscape. While Covid-19 hit the retail segment badly, e-commerce has seen some traction with an increasing number of people ordering products and fresh goods online. A report by Deloitte and the Retailers Association of India said in 2019 that Indian e-commerce, valued at $24 billion (Rs 1.75 lakh crore) in 2017, would jump to $84 billion (Rs 6 lakh crore) by 2021. India is an attractive market for global e-tail giants such as Amazon and Walmart (which bought Flipkart in May 2018) as they eye growth in emerging markets. With China out of bounds for these players, India is the land of promise, but they need to invest big, deep and early, says Dutta. It is only natural, then, that an equally aggressive and cash-rich player like Reliance should lock horns with Amazon, he adds. In the recent past, brick-and-mortar retail players have found the going tough as e-tailers, with their deep discounts and aggressive advertising have stormed the market. Only corporates with deep pockets, such as the Tata Group, the Aditya Birla Group and Reliance Industries have been able to stand up to this challenge. Biyani’s aggression, which helped him grow in the initial years, boomeranged during his foray into FMCG, where he was pitted against established players such as Britannia, ITC and HUL.

Fresh trouble

If that weren’t enough trouble already for Biyani, on February 3, Sebi barred him, and several related entities, including his brother Anil, from trading in the securities market for one year, following an insider trading case dating back to 2017. Biyani has also been barred from transacting in securities of Future Retail for two years. As per the case, Future Retail consolidated its home retail business in April 2017, which benefitted the company’s stock. Sebi’s investigation found that while the consolidation became public knowledge on April 20, Biyani and his associates had been buying Future Retail shares from March onward that year. The funds to buy these shares were transferred from Future Corporate, a Biyani family-controlled entity. Biyani has moved the Securities Appellate Tribunal against the order.

According to Sonam Chandwani, managing partner at KS Legal & Associates, “it is evident that the Sebi order is unsustainable as it treats a publicly-known reorganisation of the Future Group business as unpublished price-sensitive information. However, whether Biyani’s trading in 2017 amounts to [exploiting] unpublished price-sensitive information remains a debatable issue in this case.” In a statement to the BSE, Future Retail said that the Sebi order barring Biyani from the capital market will have no impact on the Future-Reliance merger process.

A man who regularly made the headlines, Biyani is again in the spotlight, but for the wrong reasons. Now, as the retail world watches the unfolding battle in the e-commerce space, the big question is whether this is the end of the road for Biyani, or whether he has something else up his sleeve.

JOURNEY OF A RETAILER

1987: Biyani enters the apparel business by launching the Manz Wear brand, later renamed Pantaloons

1992: He lists Pantaloon Retail on the stock market

2001: Plans diversification, sets up Big Bazaar grocery stores

2012: Sells his majority stake in Pantaloon

Retail to Aditya Birla Nuvo, with the latter investing Rs 1,600 crore in the firm

2015: Launches white-label FMCG products under Future Consumer Enterprises, allowing shoppers to shop from anywhere and take deliveries anywhere

2016: Forays into consumer goods by launching 27 private labels in 64 categories

Dec 2019: Amazon acquires 49 per cent in Future Coupons, a promoter group entity of Future Retail, for around Rs 2,000 crore

Aug 2020: Future Retail sells its retail, wholesale, logistics and warehousing units to Reliance Retail for

Rs 24,713 crore

Oct 2020: Following an appeal by Amazon, a single bench of the Singapore International Arbitration Centre bars Future Retail from taking any step to sell its assets to another party

2021

Feb 2: A single bench of the Delhi High Court orders a freeze on the Future-Reliance deal

Feb 3: Sebi bars Biyani, his brother Anil, and a few others from the stock market for a year in an insider trading case dating back to 2017

Feb 8: A two-judge bench of the Delhi High Court stays the order of the single bench. The next hearing of the case is slated for February 26

Source: indiatoday

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Online grocery sales surged 65% to Rs 6,820 crore in FY20: Report

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February 11, 2021

Written By MONEYCONTROL NEWS

The biggest winner in terms of sales was BigBasket, which accounted for 50 percent of the sales growth followed by DMart, Grofers, Spencer’s Retail and StarQuick (Tata)

BigBasket owner Innovative Retail Concepts clocked a net sales growth of 43 percent, or Rs 3,418 crore, while losses rose to Rs 424 crore, as per data with the Registrar of Companies and business intelligence platform Tofler, the report said.

Most executives and experts credit the growth jump to the COVID-19 pandemic and lockdowns, which pushed consumers towards online options for grocery and other purchases, it added.

Follow our LIVE Updates on the coronavirus pandemic here

A spokesperson for Grofers told the newspaper that the value of goods the company sold in FY20 vaulted 88 percent to Rs 3,000 crore, with losses at Rs 637 crore, largely due to investments for strengthening delivery services and building awareness.

Among offline retail chains, DMart’s e-commerce business saw sales zoom to Rs 345 crore, with losses at Rs 79 crore. StarQuick operator Fiora Online saw revenue of Rs 33 crore against a loss of Rs 21 crore and Spencer’s owner Omnipresent Retail reported Rs 15 crore sales with a loss at Rs 14 crore.

Devangshu Dutta, CEO of consulting firm Third Eyesight, said that the customer shift to online propelled investments to enhance capabilities in the space, while a concurrent rise in the average order values would likely benefit companies with a “healthier bottom line”.

Nielsen noted that online sales in the FMCG segment were notable, accounting for 3.1 percent of the India market value–in metros this surged to 8.6 percent as of the September quarter.

Source: moneycontrol

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What’s In Store For India After Jeff Bezos Steps Down As Amazon CEO? Find Out!

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February 4, 2021

Written By Amaan Khanna

That being said, since early 2020, there has emerged a series of problems for Amazon in terms of the ease of doing business in India which needs to be taken note of.

Devangshu Dutta, Chief Executive at Third Eyesight, a consulting firm said that the switch in position will not really have a drastic impact on India as the U.S. based e-commerce giant has committed themselves to the Indian market as a ‘market for the future’.

And now, as most are very well aware, Bezos’ transition from power comes at a time when Amazon is tangled in a host of legal battles with Kishore Biyani’s Future Group in order to prevent the latter from selling its assets to India’s largest business conglomerate Reliance Industries aka RIL.

What more? Recent reports have suggested that it might get even tougher for Amazon to operate in India as talks of further tightening the rules of Foreign Direct Investment aka FDI norms are currently in motion. Thus, it can very well mean more trouble for Amazon to conduct business in the country.

To this, Third Eyesight’s Dutta said, even though how Amazon perceives the various regulatory barriers present in India is an issue, it is not individual driven and therefore the change at the top management will not create an immediate impact of any sort which might result in the e-commerce giant to pull back from India.

What more? Recent reports have suggested that it might get even tougher for Amazon to operate in India as talks of further tightening the rules of Foreign Direct Investment aka FDI norms are currently in motion. Thus, it can very well mean more trouble for Amazon to conduct business in the country.

As for Bezos, he will still be managing the reigns of the company’s broader vision, albeit from a distance. Bryan Olsavsky, Chief Financial Officer at Amazon, in a call with various analysts post the company’s announcement of its December quarterly results mentioned that

Bezos will continue to be involved in many ‘one-way door issues’ or important decisions such as acquisitions, strategies and venturing into grocery as a market space.

Now, it remains to be seen what does the future hold for the current strained relationship between Indian regulations and Amazon. As of now, the Delhi High Court has ruled in favour of the e-commerce behemoth for the dispute over RIL-Future deal and blocked the sale. We will keep you updated on all future developments. Until then, stay tuned.

Source: dazeinfo

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The tenets of building a luxury brand versus a mass market brand…

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February 1, 2021

Written By Aishwarya Ramesh

A press release mentions that the partnership will add significant weight to ABFRL’s growing ethnic wear portfolio. It is an attempt to accelerate the company’s strategy to capture a large share of ethnic wear market through a comprehensive and attractive portfolio of brands across key consumer segments, usage occasions and geographies.

The release also mentions the company’s ambition of building a large ethnic wear business over the next few years to complement its portfolio in western wear segment of the Indian apparel market.

Commenting on the partnership, Ashish Dikshit, managing director, ABFRL, said: “We believe that over the next few years, ethnic wear is going to be an increasingly important category as young Indians rediscover their culture and heritage. The Sabyasachi brand, through its emphasis on design and craftsmanship – has set new benchmarks and captivated the imagination of the sophisticated global Indian consumer.”

“We are proud to partner Sabyasachi in its journey to become the only global luxury brand from India. We see a ‘Made in India’ global brand like Sabyasachi occupying the pinnacle of our ethnic wear portfolio. Over the next few years, ABFRL intends to craft a portfolio that addresses the entire gamut of ethnic wear segments: value, premium and luxury.”

Sabyasachi Mukherjee, CEO and founder, Sabyasachi (brand), added: “Over the course of the last couple of years, as my brand evolved and matured, I began searching for the right partner in order to ensure continuity and long-term sustainable growth. I am excited to have found that partner in Kumar Mangalam Birla and ABFRL.”

Devangshu Dutta, chief executive, Third Eyesight, points out that mainstream brands target a set of customers who make up the middle to upper-middle market.

“When you look at Sabyasachi as a brand (and most other designers in the country too), they tend to target a much smaller group of people who are typically wealthier. A brand has to be relevant to the lifestyle of their specific target customer, and the lifestyles of the upper class tend to be very different from the lifestyles of the middle class,” he says.

Dutta adds that this isn’t to say that top-tier customers may not buy a mass-style product, but they demand a difference in the product quality and in the retail buying experience too. “Too often, we look at a product as just a physical product, but the reality is, a brand is much more than that.”

Dutta points out that Aditya Birla has been building a portfolio that has a retail footprint across the country, and there is a certain scale-related efficiency to its business. He adds that ABFRL is much more process-oriented than most designer businesses operating in the country right now.

“There is always the danger of the brand being diluted, but I don’t see that happening right now. With this investment, the brand can potentially reach a much wider segment. It would get more capital and help create a footprint to reach wider into the market.”

Dutta adds that the acquisition will not change the brand’s image in the core target consumers’ minds in the short term, provided the product and experience isn’t watered down. On the other hand, he also theorises, it’s not necessary that Sabyasachi would have a positive rub-off on the other brands in Aditya Birla’s portfolio.

Hamsini Shivakumar, founder of LeapFrog Strategy Consulting, opines that its possible that Sabyasachi brand’s prospective customers, viz the wealthy elite of India would know that ownership has changed hands.

“However, as long as the product and shopping experience don’t change for the worse (as perceived by them) and the branding stays the same (there is no effort to add the Aditya Birla name to the Sabyasachi name), the merger may have no effect at all on the brand’s TG.”

Talking about the tenets of luxury brand building, she explains that said luxury brand has to be elitist and exclusive. It is meant for the few and not for the masses.

“Luxury brands build more ‘exclusive’ narratives that appeal to the discerning and privileged few. They leverage platforms such as craftsmanship, rarity, one-of-a-kind experiences, total personalization etc. Luxury brands don’t sell ‘benefits’, they sell membership into a ‘way of life’, a sub-culture,” she explains.

Whereas mass brands sell features and benefits and value for money. The brands may also leverage stereotypes and use celebrities to enhance their appeal. “They tap into the everyday lived culture of the people. They aim for an ‘aam-aadmi’ image, something that is relatable to the large majority of people. Mass premium and mass-stige brands anchor themselves in the signs, symbols and narratives of the mass and try to borrow a few of the symbolisms of luxury to give themselves a more upscale or upmarket image,” she concludes.

Vishwajeet Singh Rana, a former adman who has started his own designer label, says that it (big companies acquiring designer brands) is becoming a common occurrence these days.

Rana adds that it’s important that the designers are passionate about their work when creating their brand. “It’s important that you know who you’re talking to and how to communicate with them. Always remember what the brand stands for in all forms of communication.”

Source: afaqs

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The showstopper deal

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January 28, 2021

Written By DEBOJYOTI GHOSH

Circa 2021: On Wednesday evening, Mumbai-based fashion retailer Aditya Birla Fashion and Retail Limited (ABFRL) announced an infusion of ₹398 crore for a 51% stake in the designer’s fashion company Sabyasachi Couture which sells garments, accessories, and fine jewellery under his eponymous label. Reason: To ensure continuity and long-term sustainable growth, the designer said in a statement.

“Sabyasachi’s is among the most successful designer businesses to have emerged in the last two decades. While most designers have struggled to scale their business, Sabyasachi Mukherjee has successfully scaled his product offer as well as brand portfolio over the years. However, the business has been hit hard during the pandemic like all fashion and retail businesses, and a significant injection of money is needed to maintain the business momentum, and to scale it further,” said Devangshu Dutta, chief executive of retail consultancy Third Eyesight.

Experts say that the overall luxury market has suffered from a Coronavirus-induced shutdown in global travel since March last year. The pandemic has slowed over a decade of growth across luxury categories including fashion.

According to a December report by consulting firm McKinsey and The Business of Fashion, the global fashion industry’s profit is expected to fall by 93% in 2020. “Many fashion companies have taken time during the crisis to reshape their business models, streamline their operations, and sharpen their customer propositions,” the report added.

Dutta feels corporate partnerships and acquisitions allow a designer-entrepreneur and his/her investor partners to unlock some of the value that is being built.

Mukherjee has built arguably the biggest couture wear brand in the country, collaborated with global brands such as Christian Louboutin, the French king of luxury footwear, American upscale home furnishing chain Pottery Barn, Hong Kong-based luxury retail store Lane Crawford, Forevermark Diamonds and even Indian brands like Asian Paints. The designer brand also has a strong export business and ships garments, accessories, and fine jewellery to countries such as the U.S., the U.K., Hong Kong and the Middle East.

In the 20 years since he started out, Mukherjee has dressed heiresses, Bollywood actors, models, and hundreds of brides across the world. In 2018, he didn’t just design for the Deepika Padukone-Ranveer Singh wedding, but also other high-profile weddings including those of Priyanka Chopra-Nick Jonas and Isha Ambani-Anand Piramal.

Over the last few years, the Sabyasachi label has grown slowly but steadily. In FY18, Sabyasachi Couture posted a revenue of ₹209 crore followed by ₹253 crore in FY19 and ₹274 crore in FY20.

Indian fashion is predominantly sold in India, with wedding clothing comprising more than 90% of the market. The Sabyasachi brand is associated with opulent traditional wedding lehengas and sherwanis that start at about ₹1 lakh but can go above ₹10 lakh. In an earlier interview to Fortune India, Mukherjee expressed his desire to go beyond being just a wedding apparel designer and create a global luxury lifestyle brand that includes everything from undergarments and perfume to cosmetics and home furnishings.

“If you look at the model of Chanel, there’s nothing minimalistic about the clothes. The clothes are the trophy of their business, but the main money comes from cosmetics, shoes, accessories, and jewellery,” the 47-year-old designer had said then, adding that he wanted to grow the business into products that people can afford, such as cosmetics and perfumes. “You go mass without diluting the sensibilities of the brand,” Mukherjee had noted.

ABFRL expects the deal to accelerate the company’s strategy to capture a large share of the ethnic wear market through a comprehensive and attractive portfolio of brands, across key consumer segments, usage occasions and geographies, the company said in a statement adding that it plans to build a large ethnic wear business over the next few years.

ABFRL, which owns fashion brands such as Peter England, Louis Philippe, and Van Heusen, has made two key acquisitions in the Indian ethnic wear and lifestyle space in the past. In 2019, ABFRL picked up a 51% stake in fashion designers Shantanu & Nikhil’s Finesse International Design which makes bespoke apparel, footwear and accessories for men and women reportedly for ₹60 crore. The same year it also acquired ethnic wear and lifestyle retailer Jaypore for ₹110 crore.

“Over the next few years, ABFRL intends to craft a portfolio that addresses the entire gamut of ethnic wear segments: value, premium, and luxury,” Ashish Dikshit, managing director, ABFRL noted in a statement.

In October last year, Walmart-owned Flipkart Group, which owns fashion portal Myntra, acquired a 7.8% stake in ABFRL at an investment of ₹1,500 crore. For ABFRL, which operates a network of more than 3,000 stores and has over 6,700 points of sale across India, the deal will lead to a significant reduction in its debt.

Industry experts point out that ABFRL would have acquired a majority in a business with an eye towards scaling Sabyasachi into a larger brand, available at more accessible price points to a much larger audience, both in India and internationally. This may happen using the much larger retail platform that is available to ABFRL. Dutta feels it is quite likely that, in due course, ABFRL will wish to own the business in its entirety.

“There may be benefits from operational and systems disciplines, sourcing strengths, the financial muscle of a larger partner, but the brand and its intrinsic identity must not be diluted. If the brand has to maintain its cachet, its distinctiveness, it would need to be allowed to run with significant independence on the product and the customer experience side,” he adds.

Source: fortuneindia