The Future is bleak. Can Kishore Biyani revive it once again?

Not too long ago, Kishore Biyani was the poster boy of Indian retail. He was the classic success story of the post-liberalisation era that saw dozens of entrepreneurs becoming billionaires in a matter of just a few years.

And now, the empire he built over almost four decades has all but crumbled.

This, after two proposed deals, first with Jeff Bezos’ Amazon and then with Mukesh Ambani’s Reliance Retail both fell through and Biyani’s lenders decided to turn the heat on him.

Biyani got caught in a shadow boxing showdown between Bezos and Ambani who, along with Walmart-owned Flipkart, the Tata Group and dozens of other smaller players, are fighting to grab a share of India’s booming online and offline retail market.

Last week, the Mumbai bench of the National Company Law Tribunal (NCLT) allowed insolvency proceedings against Future Retail Ltd (FRL), the flagship arm of Biyani’s Future Group, on a plea moved by a state-owned bank that leads a consortium of lenders for the company.

In April, Bank of India had moved the tribunal seeking to initiate insolvency resolution proceedings against FRL, which has defaulted on loan repayments. FRL has defaulted on payment of Rs 5,322.32 crore to its lenders.

More importantly, the NCLT rejected an intervention plea filed by e-commerce giant Amazon’s India arm. The Indian arm of the US-based e-commerce major had said that FRL failed to honour an arbitration award given by a Singapore arbitrator in October 2020 and that lenders could not have entered into a framework agreement with FRL in breach of the same. Amazon had moved the arbitrator for alleged breach of contract by FRL.

Bank of India, on the other hand, argued that its plea was not connected to Amazon’s case. The lender said that the proceedings were in sync with the guidelines laid down by the central bank and those put in place under India’s Insolvency and Bankruptcy Code (IBC). This, the court has upheld.

In fact, a month before moving the NCLT, Bank of India claimed in a public notice its charge over the assets of FRL and warned people at large not to deal with the company.

The Amazon-Reliance tussle

In 2020, crushed under the weight of its debt, Future Group decided to combine all its listed and unlisted companies and offload them on a slump sale basis to Reliance Retail for close to Rs 25,000 crore.

At the group level, Future has an outstanding debt of roughly Rs 29,000 crore. Of this, FRL owes Rs 18,500 crore and FEL owes Rs 5,500 crore. Other group companies including Future Consumer, which owns brands like Desi Atta, Foodpark and CareMate, and the logistics arm Future Supply Chain have a debt of around Rs 1,700 crore on their books.

But before the Reliance deal, Biyani had struck another deal with Amazon. The Amazon-Future dispute had its beginnings in 2019 when the e-commerce company acquired a 49% stake in Biyani-owned Future Coupons Pvt Ltd (FCPL), which, in turn, owned about 10% of FRL.

Amazon later accused Future Group of breach of contract by agreeing to sell its assets to Reliance. Amazon said such a sale was not allowed under the 2019 investment agreements.

The lenders, who now effectively control what remains of the Future Group via pledged shares, were also against the deal with Reliance. In an April stock exchange filing, FRL said 69% of lenders voted against the Reliance deal while 30% supported it. As many as 83% of the secured creditors of Future Lifestyle Fashion, the group’s second-largest listed entity, also rejected the proposed sell-off to Reliance.

The entire case has since become mired in a legal mess, with Amazon and the Future Group filing petitions and counter-petitions against each other in Indian courts and outside the country.

Amazon contends that as per the terms of its 2019 investment agreement, it had the right of first refusal in any stake sale in the Future Group. This, Amazon said, barred Biyani’s group from selling stakes to any Reliance entity.

Meanwhile, Reliance has taken over a large number of Future stores by stealth. The debt-laden Future Group had run up outstanding rentals of Rs 4,800 crore, following which Reliance took possession of 835 of its stores.

Humble origins

The legal imbroglio and procedural details notwithstanding, this is, for all intents and purposes, curtains for what was once India’s biggest brick-and-mortar retail chain.

Biyani’s background though was rather humble. He was born into a middle-class Marwari family from Rajasthan that was into trading, among other things, dhoti-sarees.

In 1983, at the age of 22, he started off making trousers. He then also worked at his family’s fabric trading business and got into the business of “stone washed” fabric trousers. By 1987 his business had grown and he launched his own garment manufacturing business, with its own brand.

This later transformed into “Pantaloons”, a brand he became famous for in the decades to come. A few years later, the Future Group came into being. 

In 1992, he took his business public, and five years later opened his first departmental store in Kolkata.

He worked on the franchise model in garments for over a decade. In 2001, Biyani entered the grocery business with Big Bazaar and launched a slew of brands.

In the years to come, Biyani diversified his investments into other sectors like insurance, financial services, agri-retail and electronics.

Today, the Future Group listed entities include: Future Retail Ltd, Future Enterprises Ltd, Future Market Networks Ltd, Future Consumer Ltd, Future Supply Chain Solutions Ltd and Future Lifestyle Fashions Ltd.

A possible comeback?

To be sure, Biyani is unlikely to go down without a fight. In May this year, it was reported that he was planning a comeback in the retail sector by selling some assets and repaying a part of the outstanding debt.

A news report in The Times of India said that Biyani was looking to salvage several of the group companies including Future Enterprises, Future Lifestyle, Future Consumer and Future Supply Chain, via a combination of debt restructuring as well as sale of key assets.

Future Enterprises manufactures and supplies fashion garments to the Future Group’s outlets under Future Lifestyle, which owns brands such as Brand Factory and Central.

In fact, even after Reliance took over a majority of his stores, Biyani is still left with 290-odd outlets comprising brands such as Central, Brand Factory, and some others. He is reportedly looking to revive his business fortunes from there.

Interestingly, the collapse of the Future-Reliance deal in April could actually have been a blessing in disguise for Biyani, who, along with his family, is now free from any anti-competitive clauses that barred them from operating in the retail sector for 15 years, and can re-enter the retail sector.

The Future Group is reportedly planning to sell the ALL chain, which sells plus-sized clothing. A potential sale of the Cover Story brand could generate Rs 250 crore. This money will be used to pay Future Lifestyle’s debts.

Around Rs 3,000 crore will be generated by the sale of Future Generali Insurance, of which a part of the funds will be used to repay FEL’s dues. Biyani reportedly wants to hold on to group companies such as Future Consumer and Future Supply Chain.

Biyani was once hailed as the Sam Walton of India. But even three decades after the American billionaire died at 74, his retail enterprise Walmart remains the biggest retail company anywhere in the world.

At 60, Biyani still has a long way to go. But whether he will be able to rebuild his empire, only time will tell.