Future Group lost Rs 7,000 Cr revenue in first 3-4 months of COVID-19 pandemic: Biyani
Future Group founder Kishore Biyani on Wednesday said the homegrown retail major lost nearly Rs 7,000 crore revenue in first three-four months of the COVID-19 pandemic due to closing of stores, which led him to sell his business to Reliance Industries.
In August this year, billionaire Mukesh Ambani's Reliance Industries announced acquisition of retail and wholesale business and the logistics and warehousing business from the Future Group as going concerns on a slump sale basis for Rs 24,713 crore.
"We got into a trap to be very honest with COVID-19. In the first 3-4 months, we lost nearly Rs 7,000 crore of revenue, Biyani said at the Phygital Retail Convention.
There was no way the company could have survived losing such an amount, he said, adding the problem is rent doesn't stop, interest (on debt) doesn't stop .
"We did too many acquisitions in the last six-seven years... I thought there was no other answer but to exit," he stated.
He said for retailers the worst is yet to come.
"We have designed business to be profitable at 90 percent of our targets. In any scenario... we will not be able to touch 70-80 percent (of target)... If you look at long-term planning 5 to 10 years -- it will not be easy for physical stores," he said.
Through the deal made in August with Reliance Industries, the Ambani led firm will acquire Future Retail, which owns BigBazaar that sells everything from groceries to cosmetics and apparel, and Future Lifestyle Fashions Ltd that operates fashion discount chain Brand Factory.
While Reliance will take over Future Consumer, which sells food, home, and personal care products, Future Group's financial and insurance business is not part of the deal.
Future Retail operated 1,550 stores. Its flagship brands BigBazaar, FBB and Foodhall, Easyday, Heritage Fresh and WHSmith. Future Lifestyle Fashion operates 354 stores.
Investment from Reliance would help Future's founder Biyani pare debt.
Last week, US online retailer Amazon slapped a legal notice on Future Group, alleging that the retailer's Rs 24,713 crore asset sale to Reliance Industries violated an agreement with the ecommerce giant.
"We have initiated steps to enforce our contractual rights," a spokesperson for the Seattle-based ecommerce giant said. "As the matter is sub-judice, we can't provide details."
Amazon last year bought a 49 percent stake in one of Future's unlisted firms, Future Coupons Ltd, with the right to buy into flagship Future Retail after a period between 3 and 10 years. Future Coupons owns a 7.3 percent stake in Future Retail.
In August this year, Future reached an agreement to sell its retail, wholesale, logistics and warehousing units to Reliance.
The deal is awaiting regulatory approvals.