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Downfall of Kishore Biyani: from Retail King to Bankruptcy


Kishore Biyani, the man who is still synonymous with India’s organized retail industry. The Marwari businessman is widely credited for bringing the modern retail revolution in India. With his celebrated chain of retail stores like Pantaloon and Big Bazaar, Biyani singlehandedly revolutionized the concept of supermarket and organized retail in India.

Thanks to his revolutionary impact on India’s retail industry, he proudly earned the title of being India’s retail king. At one point he and his company Future Groupe looked absolutely unstoppable.

But Flash-forward to 2020, Biyani’s sprawling retail empire had collapsed. In August 2020, Future Group agreed to sell the company to Mukesh Ambani’s Reliance Retail for INR 24,713.

What really caused the spectacular downfall of this celebrated entrepreneur – from being an undisputed retail king to bankruptcy. In this special story, we’ll shed light on some costly mistakes committed by Biyani during his long tenure in the retail industry.

Biyani became the victim of his own overambition 

Biyani’s downfall was caused by his own over-ambition, which eventually trapped his retail company in a monstrous debt problem. His overambitious expansion and diversification, largely fueled by huge debt, proved fatal for the company. Biyani’s overwhelming urge to grow faster than all his competitors often defied logic.

Let’s take for instance the Future Group’s flagship retail store Big Bazaar, which had grown beyond 100 stores in 2008 itself. This was an exponential growth for a supermarket retail chain store that had opened its first retail store barely seven years back, i.e. 2001. However, Future Group’s overzealous expansion was not restricted to Big Bazaar store alone. The company made costly experimentation of targeting different retail niche by opening standalone stores. This not only increased Future Group’s overall liability but also its operational cost, which actually weakened the company’s balance sheet in the long run.

Some of these standalone store included Ezone stores that sold electronic goods, Food Bazaar & Foodhall that sold premium food products, Central Mall, FBB stores & Brand Factory for selling fashion products.

These rapid diversification in various retail businesses certainly appeared risky on paper but it still made some sense. However, Biyani’s rapid diversification into multiple non-core businesses took many people by surprise. Barely few years before 2008’s financial crisis, Future Groups rapidly expanded into non-core businesses like insurance, financial services, stock broking & wealth management, logistics and real estate business. In fact, Biyani was so obsessed about expanding his business that he even ventured into film business and ended up producing two flop movies – Na tum Jaano Na Hum and Chura Liya Hai Tume.

Future Groups getting into so many businesses so quickly had many business analysts worried. They were worried how Biyani will payback these loans if his new businesses fail to click. Their concerns were eventually proven right when 2008’s financial crisis turned Future Groups ambitious expansion plan upside down. The 2008’s global meltdown created an unprecedented financial crisis in India’s banking sector, forcing banks to go after their potential defaulters  with vengeance. And Big Bazaar’s parent company immediately felt the heat from the creditors. But back then Biyani somehow managed to steamroll over the debt crisis. This after he agreed to sell one of his flagship companies – Pantloon Retail – to Aditya Birla Group for nearly INR 1,600 crore. Biyani also sold his finance business Future Capital to Warburg Pincus for almost 800 crore.

Both these sell offs managed to improve Future Group’s debt-to-equity ratio but the company was still left with Rs 6000 debt on its balance sheet. Talking specifically about Future Capital then this financial services business alone accounted for nearly 25% of Future Group’s overall debt of Rs 8000 as of 2012. This fact alone is enough to prove that Biyani’s decision to diversify into non-core businesses proved to be disastrous for the company.

Conventionally, one would have thought after bringing his company’s debt to manageable level, Biyani will tame his risk appetite. But the Marwari businessman believed in defying the conventions and continued to take bold risks. This time his strategy was to make acquisitions in the retail space in a bid to rapidly grow his retail empire. From 2012 to 2020, Future Group made five big acquisitions:

  • Niligiris Group for nearly INR 300 crore
  • Sunil Mittal’s retail company Easyday in all stock deal
  • Online furniture store FabFurnish in all cash deal
  • Heritage food in all stock deal
  • Hypercity in cash and stock deal for INR 655 crore

Back then, nobody quite knew whether these companies will add any value to Future’s balance sheet. But these newly acquired companies certainly added to Future Group’s operational and inventory costs. Worse, Biyani’s company had supposedly taken over the debt of few of these companies, which further increased the debt problems. Not surprisingly, Future Group’s balance sheet wasn’t looking all that strong.

Biyani finally sought to streamline his balance sheet in December 2019 when he sold 49% stake in the promoter group entity of Future Retail for Rs 1,500 crore to Amazon. Much of the Amazon infused fund was supposedly used for bringing down the debt level of the company. After again bringing the Future Group’s debt to manageable level, Biyani was now gearing up to put his retail business back on the growth trajectory. He was especially banking on his newly acquired companies, strongly believing that they will help Future Group in consolidating its position in the retail industry.

Biyani had all the reasons to be optimistic about his plans. After all, India was still the fastest growing economy and its consumerism story was still going strong. However, the shrewd businessman was not prepared for the catastrophe that was not only going to struck his retail empire but the entire global economy. We’re, of course, talking about Coronavirus here. In the aftermath of COVID-19 outbreak during the early months of 2020, India imposed one of the strictest lockdowns in the world.

The strict lockdown forced the Future Group to temporarily pull down the shutters on all its retail stores. From March 2020 to August 2020, the operation of Future Group’s almost 1,500 retail stores remained completely closed, completely squeezing the company’s cash flow and revenue. This made it almost impossible for Biyani’s company to serve the interest over the huge loan that it had accumulated over the years. As a  result, the company’s interest kept piling up and its debt problem went from bad to worse. In fact, Future Group had started defaulting on loan repayments barely few months after the lockdown. This sent panic and shockwaves across banks and creditors who were now desperately scrambling to recover loans from Biyani’s company. As of April 2012, the company’s total debt stood at nearly Rs 12,000 crore. With the debt ballooning and surging to new levels, rating agencies downgraded Future Group’s ratings, pushing the company to the junk category. This simply meant the company was now almost flirting with bankruptcy.

By July 2020, news had started circulating that Biyani was searching for a buyer to sell off his company Future Group. And he eventually found the buyer after Mukesh Ambani’s Reliance Retail agreed to buy the Future Group. The deal brought much needed respite for the creditors,  who were now hopeful of recovering their loans. However, it is a different matter that this high profile deal later got caught in a legal dispute, after Amazon sued Future Group. While the legal battle between Amazon and Reliance Retail still continues, this deal ended Biyani’s long innings in the retail industry.

In the hindsight, Biyani might pin the blame on the COVID pandemic as it spiraled his company’s debt problem way beyond his control. But the retail czar will have to equally blame himself for putting his company in a great jeopardy. Despite investors and analysts continuously raising red flags, Biyani continued to play the risky game of debt-fueled expansion and diversification for way too long.

Biyani was a shrewd businessman but probably he wasn’t smart enough to understand that business is not a sprint but a marathon. He wanted to run way too fast and ended up faltering very badly.

Biyani perhaps could have taken some inspiration from DMart. Unlike Future Group, DMart strictly believed in organic growth, stayed away from costly acquisitions and diversifications. Besides, DMart always made sure that its balance sheet remains healthy by keeping its operations and inventory cost under control. All these simple strategies paid off handsomely. Today DMart along with Reliance Retail is among the most dominant players in India’s retail industry while Future Group has been reduced into a bankrupt company.

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