Debt Sorted- Biyani Focuses On Big Bazaar

This year the Pantaloon India Retail, Big Bazaar’s holding company is expected to bring in Rs15,000 crore in revenue with a profit of about Rs900 crore.

Samar Srivastava
Published: 11, Jun 2012

After studying law I vectored towards journalism by accident and its the only job I've done since. It's a job that has taken me on a private jet to Jaisalmer - where I wrote India's first feature on fractional ownership of business jets - to the badlands of west UP where India's sugar economy is inextricably new tied to politics. I'm a big fan of new business models and crafty entrepreneurs. Fortunately for me there are plenty of those in Asia at the moment. Bouquets and brickbats are welcome at


Fixing Big Bazaar is top priority for India's retail king. But first let’s rewind a bit. As we explain in our current cover story, Kishore Biyani’s empire had tacked on an incredible amount of debt. The Future Group with Rs14,000 crore in sales had accumulated Rs9,000 crore in debt resulting in interest payments that nearly wiped out profits. This was fine when times were good but once consumer spending slowed down and interest rates rose, Biyani realized something had to be done. And so he went about selling assets with the stated aim of getting his debt down to a manageable level. In April, he sold Pantaloons while last week Future Capital Holdings left his stable.

Now, that he’s down to about Rs2,000 crore in debt he reckons he’d be able to make interest payments and still have some cash for expansion.

This process of hawking his assets around afforded him one important insight – discovering the true worth of Big Bazaar.  At 165 stores spread over 90 cities, Big Bazaar is definitely the most successful hypermarket format in the country. It is also one that the likes of Walmart or Carrefour would love to get their hands on.  But in the absence of foreign direct investment being permitted by the government both are loath to do a deal.

Now, what emerges is that Biyani is equally loath to do a deal as he realizes that in the absence of FDI he is unlikely to get the valuation the business deserves. He is recently said to have avoided a meeting with former Walmart CEO Lee Scott. Instead he’s now spending time in small workshops with Big Bazaar employees telling them that he’s here to grow the business. People in business say that there had been a serious loss of morale among Big Bazaar employees due to regular rumours of the business being sold.

For now Biyani has decided to expand Big Bazaar and work on fixing the back end. And he has the capital needed for expansion. This year the Pantaloon India Retail, Big Bazaar’s holding company is expected to bring in Rs15,000 crore in revenue with a profit of about Rs900 crore. (Last year Pantaloon India made a profit of Rs1,200 crore and paid half that in interest payments. With a slowdown in sales this year Rs900 crore may seem a stretch but it is a target that may just be achievable.) Now, set aside Rs350 crore for interest payments and Biyani is still left with over Rs500 crore for expanding. Biyani plans to add 2 million square feet of retail space every year. This fits in neatly with the Rs2000 he needs per square feet to expand. So in all he needs Rs400 crore a year to expand the Big Bazaar franchise. Money that he now has.

What will be more of a challenge for him will be fixing the back end and making Big Bazaar profitable. During the last slow down in 2008-09 Rakesh Biyani had been given the task of getting this part of the business in shape. Warehouses were set up and inventory tracking systems (standard operating procedure at other retailers) were set up.

We now know that Rakesh was removed from the job before his task was complete. While he cooled his heals things went awry and Big Bazaar is now saddled with as much as three months of inventory. Fixing these operational issues will be key.

The good news is that Rakesh is back in the saddle and is working hard at fixing the operations. Meanwhile, Biyani is now rallying his troops for what promises to be the mother of all retail battles. This time he’ll be going head to head with Reliance, Aditya Birla and Bharti’s Easyday format. It’ll be tough going but don’t count Biyani out. As we say in our story “It is only when he’s pushed to the wall that it brings out the best in him.”

  • retailworm

    I guess KB needs to revise the discount model, His discount model is event or date based which itsself has resistance on revenues on usual days....365 Days on a Discount will help him in this scenario, Apart from that He needs to align widely spread offers into CASH BENEFIT for consumer purchase, BB offers discounts at various levels like 2% talktime on T24, Sugar and other goodies free when purchase of X amount (Rs.2000) is made which disappoints his profits at some levels. Luring the customer for NET DISCOUNTS can help him to bag some more revenue and profit.

    on Jun 13, 2012
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