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April 24, 2022
Written By Suvashree Ghosh, Bijou George, and Sankalp Phartiyal
It was a contentious plan to repay overseas bondholders in full that brought what would have been India’s biggest retail deal to a grinding halt.
Debt-laden Future Retail Ltd.’s offshore bondholders — a relatively smaller part of the creditor pool — were promised 100% payment in the rescue offer from billionaire Mukesh Ambani, according to people with knowledge of the matter. Indian lenders were asked to take a haircut of as much as 66%, the people added, asking not to be identified discussing confidential information.
The unequal treatment led to the move last week, when the local banks rebuffed the $3.2 billion offer from Ambani’s conglomerate. Reliance Industries Ltd. announced the purchase plan in August 2020 but struggled to complete the transaction in the face of legal challenges mounted by Amazon.com Inc., which argued it had the first right of refusal contractually.
Bank of India and State Bank of India, the main bankers to Future Retail, didn’t immediately respond to emails seeking comment on reasons for voting down the deal. Representatives for Future Group and Reliance also didn’t immediately comment.
State-run lenders risked probes from federal agencies if they accepted these discriminatory terms, they said, explaining their preference now for a court-mediated insolvency process where bids are called in and there’s no risk of them being accused of cutting a bad deal. Bank of India has already requested an Indian court to initiate the process.
Hard-Nosed Decision
The hard-nosed decision by Indian banks has pushed the teetering Future Retail, which ran one of the nation’s largest retail grocery chains before the pandemic struck, one step closer to bankruptcy. Future Retail is almost certain to default on its $500 million bond coupon payment due July 22, S&P Global Ratings said Tuesday, while downgrading the company’s ratings deeper into junk territory.
The lenders’ action has also taken the wind out of a tortuous two-year-old litigation between Reliance and Jeff Bezos-owned Amazon — the e-tailer had started arbitration proceedings in Singapore to block the deal — but left the door open for Ambani to snag these retail assets, possibly at an even cheaper price, under the bankruptcy process.
“Reliance and other parties could be eligible to bid for its assets by submitting their resolution plans” even if Future Retail ends up in bankruptcy, according to Satwinder Singh, New Delhi-based partner at law firm Vaish Associates Advocates. “This would also lead to moratorium on any or all ongoing arbitration proceedings against Future.”
While the local lenders were agreeable to the deal when it was first announced, a lot changed in the past year or so, the people said. While the Amazon lawsuit dragged on, the asset value eroded and the pandemic worsened the cash crunch at Future Retail that began defaulting on its debt repayments.
Secured Indian lenders were promised recoveries ranging between 34% to 88% of the total $4 billion in dues and even those payouts were staggered over seven years, the people said.
Bloodless Coup
Reliance dealt a body blow to the Kishore Biyani-led Future Group in February when it quietly began poaching employees and taking over rental leases of hundreds of stores earlier run by Future Retail and Future Lifestyle Fashions Ltd. Ambani’s bloodless coup prompted Amazon to suggest settlement talks on the bitter dispute and alarmed Future’s investors and lenders who worried about asset-stripping.
Reliance’s unexpected takeover of Future’s stores eroded bankers’ confidence in the deal as it stripped off value from the chain and potentially could erode Reliance’s offer terms.
The out-of-court truce talks between Amazon, Future and Reliance collapsed soon after the store-purchases were initiated, the companies informed India’s top court on March 15. Amazon will continue with its arbitration proceedings against Future Group in Singapore, according to a person familiar with the matter, who asked not to be identified as the deliberations are private.
“A major turning point was when Reliance physically took over Future’s stores, which turned it into a no-holds barred situation,” said Devangshu Dutta, head of New Delhi-based retail consultancy Third Eyesight. “Before this the battle was being fought in courts and across the negotiating table. But at this point it moved over to the real business.”
Source: bloomberg
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March 29, 2022
Writankar Mukherjee & Sagar Malviya, Economic Times
Kolkata / Mumbai, March 28, 2022
The war for instant grocery delivery is going to intensify with Reliance Retail entering the segment with its JioMart platform. The company will start the trial in next 2-4 days in Navi Mumbai for ‘JioMart Express’ which will sell and deliver around 2,000 stock keeping units (SKUs) in a few hours, two senior industry executives aware of the plans said.
Reliance has plans to take instant grocery sales to over 200 cities and towns where JioMart is currently operational by end of next quarter and double the reach in next few months to make it India’s largest instant grocer. The company will also tap its network of kirana stores for such fulfillment, apart from its own chain of grocery stores, the executives said. It is testing a separate app for express grocery deliveries as well as integrating it into the JioMart platform.
The plans of India’s largest brick-and-mortar retailer to enter quick commerce is to further grow its e-grocery business and Reliance will compete against Tata-owned Big Basket which will launch it in April, Zomato-funded Blinkit, Swiggy’s Instamart, Walmart-owned Flipkart Quick and Zepto. Earlier this year, Reliance had led a $240 million funding round in quick commerce hyperlocal firm Dunzo owning the largest 26% stake.
“JioMart Express will utilize Dunzo in the markets where it is strong like the metros as well as its own delivery fleet. JioMart Express can be quickly scaled up since Reliance has onboarded lakhs of kiranas under its B2B programme ‘JioMart Partner’ who buys the merchandise from Reliance and sells through the JioMart platform,” an executive said.
An email sent to Reliance Retail remained unanswered till Sunday press time.
Devangshu Dutta, chief executive of consulting firm Third Eyesight, said Reliance needs to ensure that it is in the right catchment which has a high concentration of demand, low competition and keep supply centres close to it to make instant grocery service profitable. “Margin contribution is low in grocery and hence apart from these there could be a higher focus on high margin products in the assortment,” he said.
To be sure, quick commerce is not new for Reliance Retail. It has been delivering orders in less than three hours placed through Reliance Digital online or app for smaller consumer electronics such as mobile phones and laptops. “However, order volumes are going to be much more frequent in grocery, and hence it would need a robust backend and delivery fleet,” an executive said.
While the pilot in Navi Mumbai will start with 1-3 hours delivery time, Reliance will progressively reduce the delivery time to match the industry standard of 45 minutes to an hour and will also expand the range. According to researcher RedSeer, India’s quick commerce market is all set to grow 15 times by 2025 reaching a market size of close to $5.5 billion. Online shoppers in the metros have been using quick commerce for their unplanned and top-up purchases.
(Published in Economic Times)
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March 24, 2022
Written By Aditya Kalra & Abhirup Roy
MUMBAI, March 6 (Reuters) – At a large Future Retail (FRTL.NS) supermarket in Mumbai last week, workers were unloading hundreds of bright blue grocery crates belonging to India’s biggest retailer Reliance.
Prospective customers were turned back by security, disappointed at the closed state of the store that still carries the signage of Future’s biggest brand, Big Bazaar, but which will likely soon be rebranded as a Reliance outlet.
Across India, similar scenes are being played out as Reliance Industries (RELI.NS), India’s biggest conglomerate run by Mukesh Ambani, the country’s richest man, presses ahead with a shock de facto takeover of prized retail real estate that Amazon.com Inc has been keen to take part-ownership of.
The high-profile bitter dispute between corporate titans in which Amazon has sought to block Reliance’s planned $3.4 billion purchase of Future Group’s retail assets is currently before India’s Supreme Court.
Reliance’s takeover began with utmost stealth on the night of Feb. 25 when its staff began arriving at Future stores. Many in Future’s management were in the dark about the plans as store employees from all over the country frantically began to call, according to people with direct knowledge of the matter.
“It was tense, everybody was panicking. We didn’t know who they were. They wanted access and seniors didn’t know about it,” a New Delhi Big Bazaar store employee said, describing what happened around 8 p.m. that day.
At a Future store in Sonipat town in northern Haryana state, announcements were made asking customers to leave as Reliance seized control, one source said. In Vadodara in western Gujarat, Future employees arriving for work the next morning were asked to go back home with no explanation, said another source.
Citing unpaid payments by Future, Reliance has taken control of operations of some 200 Big Bazaar stores and has plans to seize another 250 of Future’s retail outlets. Combined, they represent the crown jewels of Future’s retail network and around a third of all Future outlets. read more
Although Reliance had not played a large public role in the legal dispute, it had, according to sources, for some months assumed many of the leases held by cash-strapped Future, India’s No. 2 retailer and Amazon’s estranged business partner.
Reliance’s sudden possession of the stores appears to have landed what some analysts are calling a coup de grace that spoils Amazon’s chances of untangling the transfer of Future’s assets to Reliance. That’s despite a series of legal battles won by the U.S. e-commerce giant to date blocking the 2020 deal announced between the two Indian companies.
“What will Amazon fight for now?” said a source close to the U.S. company with knowledge of the legal dispute. “The shops are gone.”
Representatives for Reliance, Amazon and Future did not respond to Reuters queries for this article. Sources asked not to be identified due to the sensitive nature of the dispute.
AFTER THE TAKEOVER, TALKS
Future Retail said on Feb. 26 it was “scaling down its operations” to cut losses although it made no mention of Reliance in its statement. Future Group as a whole has more than $4 billion in debt.
Reliance plans to retain Future’s employees at the stores it takes over, sources have said.
Amazon, which has a stake in a separate Future Group unit that it argues prevents Future from selling retail assets without its permission, has called the supermarkets and other stores an “irreplaceable” network in a sector worth $900 billion in revenues annually.
The legal wrangles had over time become increasingly high-stakes and marked by ugly rhetoric. At one point, Amazon sought for Future Chief Executive Kishore Biyani to be detained in prison for disobeying a legal order. And Future once likened Amazon to Alexander the Great and his “ruthless ambition to scorch the earth”.
But on Thursday, six days after Reliance’s move, Amazon at a Supreme Court hearing unexpectedly called for cordial talks to end the dispute – a proposal Future agreed to.
“People have taken over shops … let’s at least have a conversation,” Amazon’s lawyer Gopal Subramanium said.
Discussions are expected to begin soon. read more
Whatever the outcome of the talks, analysts say Amazon had gravely underestimated Reliance.
“If anybody should have seen this coming, it should have been Amazon and they should have prepared against it,” said Devangshu Dutta of retail consultancy Third Eyesight.
“Clearly, they didn’t.”
Source: reuters
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January 17, 2022
Financial Express, 17 January 2022
The e-grocery market has seen the emergence of new-age, hyperlocal players, each outmaneuvering the other in terms of delivery timelines. Vaishnavi Gupta asks experts if online and offline grocery retailers ought to worry as quick commerce companies like Dunzo, Zepto and Blinkit, which promise delivery in a matter of minutes, get in the fast lane.
‘Knowing your customer’s needs is key’ – Devangshu Dutta, Founder, Third Eyesight
The answer to various questions around the e-grocery space in India lies in how you respond to this one question: if grocery is delivered tomorrow instead of in 10 minutes or even on the same day, who cares? Knowing the customer you are targeting, and what they need, is what helps in crystallising a unique value proposition. The online grocery market is made up of diverse customers with diverse needs/ wants. There’s a whole spectrum from digital natives to those for whom shopping online is an add-on for specific products or specific needs. Figuratively speaking, most customers won’t put all their grocery eggs in one basket.
If ‘authoritative selection’ is the value proposition you want to play off, a hyperlocal infrastructure is virtually impossible to create. On the other hand, if hyperfast, hyperlocality is what your customer is after, then product selection must be strictly narrow. Time-criticality is also determined by the nature of the product. Fresh produce that is ordered regularly and frequently won’t shift en masse to a hyperfast website.
‘Impulse purchases small fraction of total purchases’ – Alagu Balaraman, CEO, Augmented SCM
Customers normally plan bulk purchases and prefer to get them out of the way. So, fewer orders are more convenient. Customers also like to browse for new brands and packs. So, it is likely that a 10-minute delivery will be useful for impulse purchases or emergencies. This accounts for a small fraction of the total purchase basket of the customer. Servicing small orders will raise the unit delivery cost per item. Initially, this might be funded by investors, but eventually, the customer will pay. Or will they?
From a sustainability perspective, the “oops I forgot” or “I want it now” style of purchase is counter to the green style of the new generation. Having small orders transported to doorsteps will substantially damage our collective carbon footprint and aggravate climate change issues. We have seen this excitement over hyperlocal delivery companies before — first in 2015 and again in 2018. Most have retreated on plans or have allowed themselves to be acquired at presumably modest valuations.
‘E-grocery profitability a major challenge’ – Rajat Wahi, Partner, Deloitte India
The majority (around 85%) of the grocery sales are done through the 10-12 million kirana/ mom-and-pop stores spread across India; 8-10% sales happen through modern retail chains; while online sales account for less than 3% of the total grocery sales today. Online grocers need to surpass the services that end customers demand — such as products to suit local tastes, sales credit, instant delivery on orders via phone or WhatsApp, small orders with no minimums, personal touch, returns and exchange — which is being done at a very low cost and margin by the kirana stores.
This is a tall order for e-grocery players. They are tying up with kiranas for last mile order fulfilment and delivery, offering a differentiated range of products, and better value using their EDLP (every day, low price) model, focussing on fresh meats through a better cold chain, offering credit and discounts, and more. Unless we see a major consolidation of retail in the coming years, building a successful and profitable e-grocery business will continue to be a major challenge.
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December 23, 2021
Devika Singh, Moneycontrol
December 23, 2021
Male grooming products startup The Man Company, known for its online-first strategy, is looking at offline expansion for its next leg of growth. The company, which operates 28 exclusive brand outlets in the country, plans to launch 60-70 more stores by the end of this fiscal to gain presence across at least 100 locations.
“A lot of growth will come from the offline channel for the next one year at least, especially in Tier II and III cities where launching exclusive stores is a good way to introduce the brand to the consumer as shopping malls are weekend destinations there,” co-founder Hitesh Dhingra told Moneycontrol.
The company, backed by fast-moving consumer goods (FMCG) major Emami which holds a 48.49 percent stake in it, is also looking at introducing its products in more multi-brand outlets. The Man Company is present in 1,200 multi-brand outlets which include lifestyle stores such as Shoppers Stop, Central and Lifestyle as well as hypermarkets, supermarkets and pharmacies. The company plans to be in 2,500 multi-brand outlets by the end of financial year 2022-23.
It currently draws about 70 percent of its sales from online channels including its own direct-to-consumer (D2C) platform and online marketplaces and 30 percent from offline channels. The startup’s strategy is focused on expanding its base in Tier II cities and beyond, which account for 50-55 percent of its sales even on online marketplaces.
“Out of our 28 exclusive brand outlets, only five to six are in top 10 cities and the rest in Tier II and smaller towns. For the new store openings also, we are going to adopt a similar strategy and only 10 percent of the new outlets will be in large cities,” said Dhingra.
The offline way
Several D2C brands have been eyeing the physical retail channel as they try to scale up and tap a wider set of consumers. Brands in the women’s beauty and personal care segment such as Mamaearth, Sugar Cosmetics and Plum Goodness are expanding their presence in the offline retail format. Plum, for instance, is looking to launch 50 exclusive brand outlets in the next two years.
Male grooming startups, too, are following a similar trajectory. For instance, Bombay Shaving Company and Baeardo are launching their products in more and more offline stores.
Devangshu Dutta, chief executive of retail consultancy Third Eyesight, said it makes sense for digitally-native companies that have achieved some brand recognition to launch in offline format for the next phase of growth. Brands in the 1990s for example, he said, who wanted to establish an identity, entered new formats or channels besides the existing ones. Similarly, digitally-native brands need not restrict themselves to online platforms alone, he added.
But he pointed out that these brands will have to address challenges such as ensuring availability of their products in offline channels. “In the online segment, companies can cater to customers with limited stocks. However, in the offline channel, they need to ensure availability of products across stores,” he said.
New categories
Apart from new retail categories, The Man Company has plans to enter categories such as sexual wellness and personal appliances. It has tied up with a marketplace for the launch of personal appliances such as beard trimmers and shavers and the category will be launched exclusively on the platform. The sexual wellness products, too, will be introduced on its D2C platform and later to other marketplaces and offline stores.
“We always launch a product on our platform to test it and get consumer feedback and, based on the response, we introduce the product to the wider market,” said Dhingra.
Launched in 2015, The Man Company caters to the men’s grooming segment and claims to have developed more than 65 stock keeping units. According to Dhingra, the company which competes with Beardo, Bombay Shaving Company and Ustraa will double its sales to Rs 100 crore by the end of this financial year.
Male grooming startups have of late attracted attention from FMCG companies. Marico last year completed the acquisition of Ahmedabad-based Beardo by buying an additional 55 percent stake in the company. It had acquired an initial 45 percent stake in 2019. British consumer goods giant Reckitt Benckiser Group invested Rs 45 crore in Bombay Shaving in February 2021. LetsShave and Ustraa are backed by Wipro Consumer Care.
According to industry estimates, the male grooming market in India was valued at Rs 15,806 crore in 2019 and is expected to cross Rs 36,402 crore by 2025, growing at a compound annual rate of 15-14 percent. Though growth was hit by the pandemic, experts are still bullish about the segment.
(Published in Moneycontrol)
