Kishore Biyani’s stress test


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.

Kishore Biyani

By MG Arun: Kishore Biyani, 59, CEO of the Future Group, whose name became a byword for corporate innovation, is also a close observer of human psychology, a street-smart entrepreneur who often ignored PowerPoint presentations and instead backed his business instincts. Often called the pioneer of organised retail in India, Biyani consistently bet on the Indian consumer’s penchant for physical shopping before the onslaught of online retail shook up his business empire. The Republic Day sales of Big Bazaar, his grocery retail chain, regularly attracted tens of thousands, to the point that in some cases, as he wrote in his 2007 memoir It Happened in India, the fear was not running low on stocks but the safety of shoppers. In time, Big Bazaar became a hugely popular one-stop shop for the Indian middle class. As the popularity of Big Bazaar soared, Biyani’s ambitions took wing, too. However, the e-

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.

Amazon, Reliance at war

But e-tail giant Amazon threw a spanner in the works. In 2019, Amazon had acquired a 49 per cent stake in Future Coupons, a promoter group entity of Future Retail, for around Rs 2,000 crore. The deal would help place Future Retail’s products on Amazon’s online market, and also gave Amazon a ‘call’ option, it could acquire all or part of Future Coupon’s promoter, Future Retail’s shareholding in the company, in three to 10 years of the agreement. Amazon challenged Biyani’s sale to Ambani at the Singapore International Arbitration Centre (SIAC), arguing that the Future-Reliance deal violated its

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.


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


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