Decoding what the Reliance Retail & Future Group deal means to us as Entrepreneurs in India!
What does the “Future” hold for us?
For starters this was the biggest moment in history of India’s modern retail that spans a few decades by the way of the largest consolidation deal in this sector. Reliance Group acquired Future Retail Business for a combined value of Rs 24,713 Crores whereby all the portfolio of your favourite retail brands of Future group like Big Bazaar, FBB, Central, Brand Factory will move to the kitty of Reliance Industries.
About Reliance Retail -
Founded in 2006, Reliance Retail has grown organically to a revenue of Rs 1.62 Lakh Crores. Reliance Retail is the largest and most profitable retailer in India and has also achieved the tag of being the fastest growing retailer in the world with a footprint of 11,000 plus stores across 7,000 cities in India with 28 Million sq.ft of retail space.
About Future Retail -
Starting off as a trouser brand in 1987 to grow to become the largest retailer in Indian at a point of time, Future Group has been the market leader admired and looked up-to by many. Big bazaar retail format is a household name in India with presence across 1000s of cities. Future Retail is a consolidated Group of Retail formats, Supply chain company, Sourcing firms which constitutes a business turnover of Rs 20,000 crores and is controlled by Mr.Kishore Biyani. They own successful formats like Big Bazaar, FBB, Hypercity, Brand Factory, Central , Easy Day etc which are market leaders in their segment.
Why does this deal have so much significance for the Indian retail and business ecosystem?
- Consolidation is a sign that the retail industry is maturing and this deal is truly a reflection of maturity that has set in at the highest levels in the Indian Retail Industry.
- Availability of M&A and PE opportunities for entrepreneurs is a good sign during these bad times when support and cash flow are hard to come by. Unfortunately Jet Airways India’s leading airline brand couldn’t survive but Future group surviving and moving forward is a huge hope for stakeholders associated in business.
- When the going gets tough, dreams are also sometimes sold and Yes it is applicable for big boys too and there is nothing wrong in it. It’s good to find an exit to let your business survive rather than hold on and kill the business.
- It is a defining moment for RIL with its consolidation from a being Petrochemical business leader to become consumer business and retail sector leader. With a turnover of 1.6 Lakh Crores, Reliance retail — is twice as large as all the other organised retail competitors PUT together — yes ALL put together. An access to mobile and retail footprint firmly places RIL to rule Indian retail both offline and online in years to come and mark these words — This Omnichannel strategy of Reliance is probably the largest such case anywhere to happen globally
Self Reliance, being Atma Nirbar and building value for India -
China has been able to defend its turf, be it in Physical retail or eCommerce space to within Chinese players, which we as Indian ecosystem have failed to do.
The only player who looks to put in a challenge to the global giants like Amazon, Alibaba, Tencent, Soft Bank etc seems to be Reliance Group. Its time Indian business ecosystem builds “MOATS” so that the value created within India stays largely in India. This cannot be done at entrepreneur level alone but needs to be looked at industry level, policy level.
Is it possible? — Yes! How can we do this? It’s definitely a topic of thought and discussion for another day.
Some of the industry observers and leaders have shared their thoughts on the deal as well -
Speaking to us Mr.Kumar Rajagopalan, CEO of Retailers Association of India (the industry body that represents over 5 lakh organised retailers) has a positive perspective to this deal. He observes that “consolidation and new creation keeps an industry interesting and healthy. Covid has also got retailers focussed on collaborations and omni-channel retail play. Various category retailers find ability to grow thanks to collaborations and mergers”. He adds “When a large company like Future Group is assured of business continuity, it ensures that thousands of jobs, payments to suppliers and customer fulfilment happens. All involved have to keep these stakeholders in mind. The company represents retail industry and the potential of Indian Retail”.
Mr.Pankaj Jaju, CEO of Metta Capital (a boutique Investment Banking firm) remarks that “This marks the largest consolidation exercise in the Indian retail sector, with Reliance Retail further strengthening its unassailable sector leadership, across both fashion and food & grocery retail. This provides continuity to the business in strong hands, and protects the interest of various stakeholders including lenders, shareholders, creditors, vendors and employees. Future Enterprises retains the FMCG and Fashion Sourcing businesses and the Insurance JVs with Generali which can provide for value unlocking for its shareholders”. Metta Capital advised the Future Group on this transaction.
Mr.Suhail Sattar, Co-founder Basics and Chairman Retailers Association of India — Chennai Chapter has a word of caution though for regional retailers — “The retail Ecosystem in India is largely becoming an organised playing field with the number of players becoming fewer and stronger. It is Shape up or Ship out time for regional retailers who in-order to survive have no option but to professionalize operations and get ready for the competition from both Corporates and Global players”.
What the Future holds -
Personally, having seen Future Group and Mr.Kishore Biyani grow in the industry and be successful, its a sad moment to see value that could have been achieved, getting eroded and having had to shortchange for something that doesn’t do justice to 30 years of hard work, risk taking and entrepreneurship. But I guess that is the business lesson for all of us — there are no permanent successes and no permanent failures in business. Entrepreneurship is a journey that has to be cherished for its ups and downs. We are sure Mr.Biyani will do a larger and unique innings next time and we will be cheering him all over again — wishing him all the best for his “Future” ahead.
But for the employees, vendors, customers and stakeholders of Future Group — This deal means business continuity and continuity of many jobs, SMEs, contracts, etc. Considering the size of Future Group, this means a lot to the economy and the retail industry as a whole.