On Wednesday, Future Group founder Kishore Biyani said the homegrown retail major lost nearly Rs 7,000 crore revenue due to the closure of stores in the first three-four months of the COVID-19 pandemic, which led him to sell his business to Reliance Industries.
“To be quite frank with COVID-19, we got into a trap. We lost almost Rs 7,000 crore of revenue in the first 3-4 months,” said Biyani at the Phygital Retail Convention.
He said that there was no way the company could have survived losing such a sum, adding “the issue is that rent does not stop, interest (on debt) does not stop.”
“In the past six-seven years, we’ve made too many acquisitions … I thought there was no other answer except to leave,” he said.
He said the worst has yet to come for retailers.
At 90 percent of our targets, we have planned business to be profitable. In every case … we would not be able to hit 70-80 percent (of target) … If you look at long-term planning-5 to 10 years — it’s not going to be easy for physical stores, “he said.”
Biyani also said that the behaviour of consumers is changing, which could make it difficult for retail stores to bring back shoppers.
He added that due to restrictions on travel, most large format stores have been made obsolete, as a result of which customers now choose to purchase from stores closer to them.
In August this year, Reliance Industries billionaire Mukesh Ambani announced the acquisition of the Future Group’s retail and wholesale business and logistics and warehousing business as a concern on a recession selling basis for lumpsum aggregate consideration of Rs 24,713 crore.
The Ambani-led company will acquire Future Retail, which owns the BigBazaar that sells everything from groceries to cosmetics and apparel, via the deal made with Reliance Industries in August, and Future Lifestyle Fashions Ltd, which runs the Brand Factory fashion discount chain.
While Reliance will take over Future Consumer, which sells products for food, home and personal care, the financial and insurance business of Future Group is not part of the deal.
There were 1,550 stores operated by Future Retail. BigBazaar, FBB, Foodhall, Easyday, Heritage Fresh and WHSmith are its flagship brands. 354 shops are operated by Future Lifestyle Fashion.
Reliance ‘s investment would help Future ‘s founder Biyani pay off the debt. The transaction is pending approval from the regulatory authorities.
A legal notice on Future Group was slapped last week by US online retailer Amazon, claiming that the retailer’s Rs 24,713 crore asset sale to Reliance Industries breached an arrangement with the e-commerce giant.
A spokesman for the Seattle-based e-commerce giant said, “We have taken measures to enforce our contractual rights.” “We can’t include information as the problem is sub-judice.”
Last year, Amazon acquired a 49 percent stake in one of Future’s unlisted companies, Future Coupons Ltd, with the right to purchase Future Retail after a period of 3 to 10 years. In Future Retail, Future Coupons owns a 7.3 per cent interest.