Once India’s ‘retail king’, Future Retail promoter Kishore Biyani is straddling high debt, coronavirus and negative ratings⁠⁠— and nearly his entire stake is already pledged

Kishore BiyaniBCCL
  • Kishore Biyani, founder of Future Group, has many problems at hand.
  • His rising debt problem has only been further battered by the coronavirus pandemic.
  • Ratings agencies have all downgraded Future Retail, while its stock has crashed by 79% since December 2019.
There was a time when Kishore Biyani was called the king of retail in India. The chain of Big Bazaar stores was the country’s first hypermarket retail outlet and rose to prominence with its “Sabse Sasta, Sabse Acha” (the cheapest and the best) philosophy.

But today, Biyani is in trouble. Ratings agencies have downgraded Future Retail as the company’s piling debt is only set to get worse during the coronavirus pandemic.

His family net worth has fallen from $1.8 billion to $400 million, according to Forbes.

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In the third quarter of FY20 ending December 2019, Future Retail posted a 15% fall in profit and a 3% fall in revenue. The disruptions due to COVID-19 pandemic will only make it worse. But that’s only a part of Biyani’s problems.

Piling debt and no investors

By March 2020, ratings agency ICRA had already placed a negative rating on Biyani’s company. “Icra notes the increase in debt is mainly on account of an increase in debt of the operating companies, with the total debt at the group’s listed companies increased to ₹12,778 crore as on 30 September 2019 from ₹10,951 crore as on March 31, 2019," the rating agency said.

Biyani and his family hold a 33.5% stake in Future Group, but almost all of it has been pledged to lenders.
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CompanyPercentage of pledged stake
Future Lifestyle99.78%
Future Supply (FSCL) 97.62%
Future Consumer92.97%


And Biyani is now struggling to find investors. According to reports, Biyani has given the mandate to Ambit – the investment bank, to find buyers for Future Supply Chain.

Future Consumer is currently looking to raise ₹300 crore through a rights issue.
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Reports also say that Biyani is looking to sell a major stake in Future Retail to Amazon and Blackstone. In January 2020, Amazon had already signed a long-term business agreement with Kishore Biyani’s Future Group. As per the deal, Amazon will become Future Retail’s authorized online sales channel.

Future Retail’s share price has also been battered.


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Coronavirus shatters retail

For over two months now, malls are shut in India owing to the coronavirus lockdown. Credit rating agency CARE ratings has given the retail sector in India a ‘Negative’ outlook. “The impact on demand, which is expected to remain muted at least for the next three or four quarters, will be more in case of players with presence in non-essential items and luxury segments,” said the ratings agency in its report.

Big Bazaar, which finds its outlets in malls too, has taken a big hit. The chain of stores don’t just sell grocery but a major source of its revenue comes from its apparel section which saw no sales for the lockdown period. ““Future Retail is only able to sell its lower-margin essential items, which has led to monthly sales declining by around 75% in March and April 2020 from normal levels, and continues to limit Future Retail’s ability to generate cash to meet working capital requirements,” Fitch reportedly said citing ‘substantial risk’ to its rating.

And even after stores open, the precautions for coronavirus won’t come cheap at retail stores. “Operating costs will go up by 30-35% easily for small stores, larger stores will see costs going up by 10-15%,” Rakesh Biyani, Future Retail’s Managing Director, said in an interview. He also spoke about how maintaining social distancing at physical stores will also inch up costs.
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Even before the Covid-19 pandemic struck, the brick and mortar retail major has been under the throes of an economic slowdown last year, which has affected consumption and also taken a toll on consumer confidence, which slipped to a six-year low.

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