Will India�s retail king sell everything he�s built?
IT’s not about what’s the right thing to do. It’s about what’s the first thing you can do.”
Nobody had looked Kishore Biyani in the eye before and told him that. But Sameer Sain, the founder of Everstone Capital, had to do it. His words made Biyani squirm. It’s not the kind of thing you tell a man who’s demonstrated to the world you can build an empire worth $2.5 billion (Rs 13,800 crore) in 15 years. But that said, his debts were in the region of a back breaking Rs 9,000 crore, roughly $1.66 billion at today’s exchange rates.
Biyani knew it was the kind of number which could swamp all the Future Group companies he had meticulously built over the years to earn himself the title of “India’s Retail King”. To rid himself of the burden, he was negotiating with prospective lenders and suitors of all kinds. But Biyani’s problem was this: How do you make a considered decision when you’re running out of time? More importantly, how do you know what is the right thing and what can possibly go awry?
Biyani and Sain had known each other for a long time. When Biyani was starting out, Sain’s father was one of his most trusted partners. That is how, when he was just 18, Sain got to intern at Pantaloon, one of Biyani’s earliest ventures. He recalls those times in the mid-90s when Biyani placed him at his trouser manufacturing facility in a run-down part of Andheri, a Mumbai suburb, to iron trousers with three pleats. Sain was pretty damn sure the trousers would bomb. Another matter altogether that the trousers went on to become a rage and he got a glimpse of Biyani’s genius. The man knew what the market wanted.
And then, in 1997, Pantaloon made its retail debut with a store in Kolkata that catered to men. It was the start of Biyani’s incredible run. On Sain’s part, soon after his internship was done, he went off to the US to pursue a degree in finance and ended up at Goldman Sachs. But he stayed in touch with Biyani and they bounced ideas off each other regularly.
In 2007, when Biyani thought up of creating a financial services firm that could piggyback on his fast-growing retail empire, he asked Sain to come back and set up Future Capital Holdings (FCH). Three years later, after an acrimonious parting, Sain took the investment banking and private equity portfolios of FCH to set up Everstone Capital.
But it didn’t stop Biyani from calling up Sain for advice. “When you have people out to kill you, you don’t wait to think what the best move to strike back probably is,” Sain told him.
But staying ahead will get increasingly difficult. As newer entrants like Reliance, More and Star India Bazaar expand their footprint, it will begin to put pressure on Big Bazaar’s volumes. Biyani is aware that unless he fixes his business model and makes the chain profitable on a standalone basis, valuations will tend to be depressed. That explains why he is now focussing on more profitable businesses like fashion wear instead of general merchandise.
(This story appears in the 22 June, 2012 issue of Forbes India. To visit our Archives, click here.)