Kishore Biyani. Over the past few years, Future Retail has driven consolidation in supermarkets with the acquisition of HyperCity, Nilgiris, Heritage, Sangam Direct, Big Apple and WH Smith. Photo: Abhijit Bhatlekar/Mint
Mumbai: India’s retail sector is set to further consolidate with the Kishore Biyani-led Future Group seeking to cement its pole position through collaborations and partnerships.
The options open to India’s largest listed retailer, with listed retail companies such as Future Retail Ltd, Future Consumer Ltd and Future Lifestyle Fashions Ltd, include pursuing acquisition of an e-commerce platform, potential partnerships and even equity investments for forming a joint venture, said Kishore Biyani, group chief executive officer, Future Group, in a meeting with Mint on Friday.
Possible partners include some of the biggest retailers, technology companies and strategic investors, including Amazon.com Inc., the Walmart-Flipkart combine, Alphabet Inc.’s Google, Chinese firms such as Tencent Holdings Ltd and Alibaba Group Holding Ltd, and even Japan’s SoftBank Group Corp., as it looks at pursuing growth, Biyani said.
Investment options open to the company also include forming a 51:49 joint venture for its small stores business.
As of March 2018, the company has 832 small stores across the Easyday and Heritage brands, which account for 12% of Future Retail’s revenue.
The company could also look at strategic minority investments in a Future Group holding company with select institutional investors, sovereign wealth funds and family offices. The strategic investor can get 20-49% stake in the holding company and get rights for direct stake in the operating company after a pre-defined period of five to seven years, added Biyani.
“We have been driving consolidation in the past few years and you can expect to see a lot more happening from us,” said Biyani, who did not want to speak on specifics until plans materialized.
Over the past few years, Future Retail has driven consolidation in supermarkets with the acquisition of HyperCity, Nilgiris, Heritage, Sangam Direct, Big Apple and WH Smith.
Earlier this week, the sector saw one of India’s largest deals after Walmart paid $16 billion for a 77% stake in Flipkart.
Doug McMillon, president and chief executive officer of the world’s largest retailer, had said that India is one of the most attractive retail markets in the world, given its size and growth rate.
With India’s GDP expected to grow at 7-8%, nominal consumption is expected to grow at a higher rate of 15-20% after taking into account inflation. “There is enough opportunity for the market to accommodate multiple large companies given the high growth,” said Pankaj Jaju, founder and chief executive officer, Metta Capital Advisors LLP, a boutique investment banking firm. However Indian, players have an advantage as they understand the consumer and have won the trust of consumer, he added.
Shares of Future group companies gained in the last two trading sessions following the Walmart-Flipkart deal, riding hopes that the deal will spur more online-offline partnerships in India’s retail sector. Shares of Future Lifestyle Ltd lost 1.91%, Future Retail Ltd gained 2.38%, Future Consumer Ltd gained 1.14% and Future Enterprises Ltd gained 6.62% in the last two trading sessions on the BSE.