On January 5, 2018, Future Group CEO Kishore Biyani walked into the Four Seasons Hotel in Mumbai with daughters Ashni and Avni to speak at the Wharton India Economic Forum. They would be interviewed on stage for a panel discussion on family businesses.Asked about what business lessons were passed on to him by his father, Biyani let on how the senior Biyani did not approve of some of his ways. “;My father always cursed me because I came into the business and started borrowing. He said we were always lenders and we never borrowed.”; The Biyanis are marwaris, a community known for moneylending, with an accompanying aversion to debt. “;You”;ve done okay, with borrowing,”; the interviewer remarked, understating Biyani”;s accomplishments for effect. “;I”;ve learned how to borrow,”; said Biyani. Everyone laughed.Without borrowing, Biyani could never have created the sprawling retail empire that is Future Group –; with 1,700-plus outlets catering to India”;s insatiable consumer appetite, and 70,000 employees –; in little over three decades. 77041107But borrowing, and furious expansion at the cost of financial stability, is also what tripped up Biyani, who is in talks for a deal with Mukesh Ambani”;s Reliance Retail, for the ultimate sale of his life –; the fruit of his life”;s labour. His businesses have a consolidated debt of Rs 12,989 crore. After group companies defaulted on repayments in March, the stock price crashed, triggering margin calls from lenders holding promoter shareholding as security, exacerbating the crisis.If the debt position pushed Biyani into a corner, the pandemic sealed his fate. Any potential buyer will drive a hard bargain, knowing the group will find itself in a crisis when the loan moratorium ceases at the end of August. The man who hooked India on to retail bargains will have to negotiate hard for a good deal for himself. How did Biyani end up in this situation?Interviews with a number of his current and former colleagues and associates reveal a picture of a complex entrepreneur at the heart of it all. Biyani declined to be interviewed for the story. 77041117Move Fast and Break ThingsNobody can fault Biyani for lacking in ambition. A few years ago, he was talking up his long-term vision for the group. With a plan called “;New Retail 3.0″;, he aimed to make his companies rank among Asia”;s top consumer businesses by 2047.It wasn”;t empty talk. He had the numbers. He was selling 30 crore units of garments with in-house design and manufacturing annually (meaning high margins). The group had a store within a 5 km radius of 8,000 pin codes in the country (there are about 20,000 pin codes in all). His target was to reach within 2 km of every consuming Indian and have at least 10,000 retail doors. By the end of 2019, his store network nearly quadrupled to 1,840 from 450 in 2012. 77041510″;If we talk about mind-to-market, he is very fast. Anything he wanted to do he could deliver very quickly. I remember the time when malls were coming to India and Kishore said he wanted to have 100 malls. At that time, he had Shishir Baijal heading his real estate investment firm, and within a year they had signed up 100 malls,”; says BS Nagesh, non-executive chairman of Shoppers Stop. Although heads of rival retail businesses, Nagesh says he has known Biyani since 1995, and competition has never come in the way of their friendship.”;This ability to do things fast was a strength that also became Kishore”;s weakness, as most of it was not backed by financial resources or people and processes, but ran more on passion, energy and entrepreneurship,”; Nagesh adds. For a retail chain, expansion is a seductive proposition. Greater footprint and sale volumes mean economies of scale and better bargaining leverage in nearly everything, and especially so in high-margin categories such as garments and private labels.So while debt can aid the pursuit of growth, it can also take your company down unless properly managed. That was the situation Biyani found himself in 2012, when he was forced to sell his fashion retail business Pantaloons to the Aditya Birla Group to pare debt that had breached Rs 8,000 crore.In 2014, Biyani lost the position as India”;s top retailer by revenue to Reliance Retail. People who worked with him at the time say the retailer was determined to claw back pole position. This triggered an expansion spree and a string of acquisitions. In five deals worth about Rs 2,000 crore (in share swap), Future Group snapped up smaller rivals such as EasyDay, Nilgiri”;s, HyperCity, FoodWorld and Heritage. He was chasing the 10,000-store milestone.Growth ManiaThis, however, came at a cost –; debt burgeoned and shares were being pledged almost every month. In the middle of September 2019, 14% of the promoter holding in Future Lifestyle, which runs the Central and Brand Factory formats, was pledged. By the end of that month, or within two weeks, the figure rose to 97%.In the case of the group”;s flagship Future Retail, promoter holding that had been pledged rose from 51% in June last year to 67% by September and about 75% now. Promoters who borrow against their shareholding in a company do so believing that share price will go up. The problem is, if the stock price drops, the lender demands more collateral or cash to make up the difference. 77041525Future Retail”;s stock plummeted from Rs 377 a piece in mid-February to Rs 64 a month later, just when the lockdown started. Future Lifestyle”;s stock crashed too –; from Rs 354 in March to Rs 96 in April. With consistent decline in share price, lenders had to be paid margin money, either through cash or additional shares. In recent months, Zee”;s Subhash Chandra, Yes Bank”;s Rana Kapoor, Reliance-ADAG”;s Anil Ambani and Cafe Coffee Day”;s late MD VG Siddhartha have all tripped up in similar fashion.In March, Future Corporate Resources Pvt Ltd (FCPRL), a promoter holding firm, defaulted payment to IDBI Trusteeship Services Ltd, which in turn threatened to invoke promoter pledged shares worth 8%.At the end of March 2020, promoter pledging stood at 87.5% for Future Enterprises, 92.9% for Future Consumer, 97.6% for Future Supply Chain,97.9% for Future Market Networks, 99.7% for Future Lifestyle Fashion and 80.29% for Future Retail. The total market capitalisation of Future Group companies dropped by 71% between February and April, the degree of decline suggesting accentuated selling pressure on the stock when promoter pledging is high. 77041532March onwards things started turning worse as the nationwide lockdown left most of Future Group”;s outlets shuttered. The company as a whole didn”;t even generate sufficient cash flow to run basic operations which also have high fixed cost. Half its supermarkets were shut and the other half saw sluggish sales. Market watchers and people who know him said Biyani would have weathered the current debt crisis but for the Covid-19 pandemic. One industry executive, who is familiar with the inner workings of Future Group, says Biyani only has himself to blame for pursuing his ambition, riding the debt tiger.”;When the CEO of the company does not show diligence in reviewing performance, down to the nuts and bolts, then that is the first sign (of trouble),”; he says, on the condition of anonymity. “;That was his way of doing things. He trusted others to do things right. But KB had the authority without the accountability. This is dangerous.”; He says if the shares of a retail company are hypothecated to a bank, from where you borrow money to buy stock of goods, then it is already in deep trouble. “;Grocery retail must run on negative working capital. KB was good at making brands but not in running a business,”; the person adds. There are other criticisms of Biyani”;s working style.Present and past senior executives who worked with KB, as Biyani is known among friends and employees, say that he operates in a dictatorial fashion, with little accountability to other members of the promoter family.”;Some members of the family didn”;t want Future Group to expand into unrelated areas like insurance and take on so much debt. They wanted the group to focus on the core area of retail. But Kishoreji was a patriarch and overconfident. So, he always overruled them. Rapid expansion was like a drug to him,”; says a former CEO of a group business, on condition of anonymity.The RiseBiyani was born in 1961 in Mumbai in a family that was into fabric trading business. In 1987, at the age of 26, Biyani diversified his family business into ready-to-wear apparels with a newly formed firm, Manz Wear Pvt Ltd, and launched Pantaloons formal trousers brand. After changing the name to Pantaloon Fashions (India) Ltd, he took the company public in 1992.For years, Biyani hawked his ready-made trousers to various retailers and persuaded them to stock Pantaloons with limited success. By then he had learned that if you wanted to strike it big you must be a retailer yourself as it was the front-end outlets that actually showcased and sold products to end-consumers. In 1997, he entered retail by launching an 8,000 sq ft Pantaloons outlet in Kolkata.The success of Pantaloons prompted Biyani to set his sights on the larger pie of Indian retailing, at a time when India was reaping the benefits of the economic reforms of 1991. A large middle class of consumers were lapping up everything from mobile phones to cars. He rolled out Big Bazaar stores in quick succession. The Big Bazaar stores, typically 20,000 sq ft, sold not just garments but also home products. During visits to the UK and the US, Biyani studied the gigantic Walmart stores operated by his idol Sam Walton. He saw a Tesco Extra in London that sprawled over more than 180,000 sq ft –; or more than three times the size of a football field –; that sold everything from food to furniture and from general merchandise to general insurance. 77041554He tried to replicate that model in India by rolling out larger Big Bazaar stores stuffed with food, general merchandise, fashion, home products, stationery, toys and much more. The idea was simple –; draw footfalls to the stores frequently, on a weekly basis, rather than customers visiting his stores once in two-three months to buy apparel or home products. But, at the same time, the stores tried to imbibe the chaotic elements of an Indian bazaar, with garments strewn around on racks and the constant blaring of announcements from loudspeakers on deals so that the customers don”;t feel out of place or get intimidated shopping in his outlets.Even as Biyani was rolling out Big Bazaar outlets, he branched into specialised outlets for shoes, electronics, home products and various formats of supermarkets and grocery stores. “;Big Bazaar actually drove the whole mall-creation story in India. All mall owners wanted Big Bazaar to drive footfall and overall business as an anchor,”; says the former CEO.By that time, Biyani had a finger on the pulse of Indian consumers and introduced many initiatives like a campaign where customers could trade their household junks into redeemable points at his stores. His discount sale called Sabse Saste Din, launched in 2006, was an instant hit and created crowdcontrol problems at malls.”;In many ways, Kishore Biyani is the face of modern retail in India. He is a brilliant and astute strategist with a warm heart who genuinely cares about his people and partners,”; says Anuj Puri, chairman, ANAROCK Property Consultants, who has worked with Biyani for over 20 years and has been part of his store expansion plan since the beginning of last decade.But the man who demonstrated how to scale modern retail in India never managed to crack ecommerce, even as Flipkart built a business worth over $22 billion in just about a decade right in front of his eyes. It wasn”;t for lack of trying, though. Biyani launched ecommerce store FutureBazaar. com even before Flipkart in 2007, followed by Big Bazaar Direct in 2013, which enabled customers to directly place orders with appointed Big Bazaar franchisees. By 2016, both formats were shut and the company said these were unviable and loss-making business models.Eventually Biyani might have pinned his hopes on partnering with Amazon, a combination that could become a counter weight to RIL”;s hybrid model, combining Reliance Retail and JioMart.Biyani first met Amazon”;s founder Jeff Bezos at Amazon”;s Seattle headquarters in January 2018. Bezos was sufficiently impressed with the ecommerce giant to want to acquire a minority stake in Future Retail through the FPI (foreign portfolio investor) route by January 2019. But Amazon”;s plan to invest Rs 3,000 crore in Future Retail was jeopardised when the government revised foreign investment guidelines in December 2018, saying ecommerce entities cannot own shares in companies that sell on its platform. In August last year, Amazon finally agreed to acquire an indirect minority stake of 4% in Future Retail, by purchasing a 49% stake in Future Coupons, but the investment of Rs 1,500 crore was half of the envisaged amount, somewhat derailing Biyani”;s calculations.Personal TouchThose who have worked closely with him vouch for two things –; he doesn”;t suffer fools and he treats his employees and associates well.If Biyani is in office, it is certain that at least 15 tiffin boxes filled with home-made food will arrive –; for him, executives whom he would be meeting before and during lunch hours and for others. “;We don”;t hire people, we hire families”; was a Future Group motto that all employees, present and past, say reflected Biyani”;s approach to human resources. He would remember names of each of his store managers, despite having hundreds of them. 77041570A current employee, who has foregone his salary currently as part of a voluntary initiative, says Biyani has his support. “;The man has paid my salary for 10 years. I”;ll happily support him for six months without salary,”; he says. When Future Group shifted to their new headquarters in Mumbai”;s Vikhroli suburb a decade ago, his staff allocated two elevators just for top management and promoters. Biyani, on the first day itself, personally removed the poster and barricade. He didn”;t stand for such disparity.Santosh Desai, MD of Future Brands, a brand consulting unit at the group, says Biyani’s fastmoving, take-no-prisoners approach is part of who he is. “Critics have their own perspectives and I think that is not an entirely unfair thing to say. My sense is that this is what he loves doing. This is the game he played knowing that he was playing that game. He is not the kind of person who wants to do things by plodding on and continuing to perfect and chisel it bit by bit….That is not the person he is.”Nagesh says Biyani would walk the streets to glean consumer insights. He says while other retailers hired expat managers, Biyani believed Indian executives could deliver as well as their expat counterparts. Nagesh recalls interviewing Biyani on stage several times. “I remember asking him once in such an interview how he gets his consumer insights so easily while I have to depend on research. His instant reply was: ‘It’s because you are an MBA while I am a non-MBA.'”(Additional reporting by Writankar Mukherjee and Suman Layak)

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