NO MORE BIG BAZAAR?!

Authored by Sai Sreeja Nainala | Club Executive Member

Future Retail has been closing Big Bazaar locations since February 25, 2022. Not only are the stores closed, but the website is also unavailable due to unpaid leasing payments to Reliance Industries (RIL). In the next days, RIL plans to open roughly 200 Future Retail locations as Reliance stores. Reliance SMSL's rebranding, stock preparation, transfer, and staffing may just take a few days because RIL is already in the same line of business.

Why Future Retail failed?

Future Retail's incompetent management was one of the primary factors in the company's demise and subsequent sale. As we all know, Amazon and Reliance fought for the right to buy Future Retail. In the end, Reliance won the rights and purchased Future Retail from Kishore Biyani. This has sparked a flurry of inquiries from the general public, marketers, and researchers.

Why has Future Retail failed?

What are the reasons for the downfall of Future Retail?

Why Reliance and Amazon fought over Future Retail?

We all know that Future Retail has had a significant impact on India's retail market. Big Bazaar, FBB, E Zone, Food Bazaar, Brand Factory, and other well-known stores belongs to Future retail. We've all gone to these stores and are familiar with them. Future Retails has been experiencing business operations issues since February 2020. Starting from February 2020 to February 2021, the share values have dropped dramatically. Because the company was unable to repay its loans and debts, CEO Kishore Biyani decided to sell the company to RIL.

STORY OF FUTURE RETAIL:

Kishore Biyani, a graduate of Mumbai's H.R. College wants to start something different. He didn't take part in his family's business. In 1987, he founded Manz Wear, a garment manufacturing company that sold men's clothing. After the liberalization, he established brands like BARE and John Miller to conquer the market. Biyani first entered the retail business in 1997, when he opened the first Pantaloons store in Kolkata.

Initially the brands and the stores were working well and Biyani had benefited with huge profits. In 2001, he started Big Bazaar, which was a successful ventures and started launching series of stores all over India. The store was loved by Indians and he opened more than hundred stores. He expanded his business from retail to electronic stores, apparel brands, furniture stores and multi-brand retail chains. He has bought many labels and brands as well such as FBB, Brand factory, Central. In the process of establishing many stores were in vain due to financial pressures and other factors.

Later, UPA government was interested on getting global players to India, Biyani was not at all happy about this and even opposed the idea but eventually global players entered the market and there was a significant rise in the competition.

During economic crisis 2008, the company was able to cope up in the market by borrowing funds and spending more to remain in the market. This goes on the debt got increased up to INR 12,778 Crores in 2019 and the shares were sold to lenders. Covid-19 also had a huge impact on the financial sector of the company and had to pay INR 100 Crores of interest on its foreign bonds on August 24, 2020, to avoid getting default.

In 2020 August, RIL announced that it is buying Futures Group’s retail and logistics business for INR 24, 713 Crores.

MAJOR REASONS FOR THE DOWNFALL:

• Expanding the business by buying more retail and grocery stores. Failed in managing those stores and losing investments on them.

• Biyani spent his cash on producing Bollywood movies which were remained as a flopped ones.

• Company failed to understand the diversification of the retail stores.

• Borrowing debts in time of economic crisis and failed to cope with the pressure in order to call off the debts Biyani had sold off his first retail success Pantaloons to K.M. Birla's Aditya Birla Group for INR 1600 Crore , in 2012.

• Covid-19 Pandemic is also one of the biggest reason on losing the grip of the business. There were many financial struggles during pandemic which led to a downfall in the share price from INR 303.85 on March 2, 2020, to INR 64.25 on April 8, 2020. The stock price plunged by over 80 per cent in just a matter of a few months.

What is the fight between Amazon and Reliance?

In the month of August 2020, RIL and Future Retail came to an agreement and decided to sell off the Big Bazaar to RIL for INR 24,713 Crores. At first the share price was escalated to INR 160 and came down. The reason for the fluctuation of share prices is because institutional investors were selling off the assets and the Amazon made an objection on Future-Reliance Deal.

Amazon objected to the acquisition because of its 2019 investment in Future Coupons, in which it purchased a 49 percent share. Future Coupons' investment equated to a 3.5 percent ownership in Future Retail. The agreement, according to Amazon, includes a condition that forbids the Future from selling off its listed firms without Amazon's approval, as well as a list of investors that included Mukesh Ambani.

Amazon petitioned the Singapore International Arbitration Centre to suspend the acquisition, and SIAC issued an interim suspension order in October 2020. Following that, Amazon went to the Delhi High Court. The deal was approved by the CCI (Competition Commission of India) on November 19, 2020.

The deal is compliant with Indian law, according to the High Court's judgement on December 21, 2020. The arrangement was then decided by the statutory authorities, according to the High Court.

SEBI authorized the deal on January 20, 2021, stating that it complied with the rules.

However, on January 25, 2021, Amazon filed a new petition with the Delhi High Court, this time seeking the arrest of Amazon CEO Kishore Biyani for violating the Amazon-Future Coupon agreement.

Future Retail was sold to RIL after all of these setbacks and lawsuits. There are now high expectations for the clubbed collage's success. Because reliance has demonstrated its desire for success, it will be able to establish and run the business successfully.