With the Kishore Biyani-promoted Future Retail announcing a 23.6 per cent decline in revenue for its core retail business at Rs 2,217 crore for the June quarter, the maharaja of retail has lost the number one slot in Indian retail, a position he enjoyed for over a decade, to Mukesh Ambani.
Ambani-promoted Reliance Retail announced a revenue of Rs 3,474 crore for the quarter, a 53 per cent jump from a year ago, growing his cash-and-carry business, Reliance Market, rapidly. The company reported an operating profit of Rs 70 crore. It did not report net numbers.
Late Wednesday evening, Future Retail reported a net loss of Rs 12 crore for the core business during the June quarter. This business includes its home and electronics retailing business under the stand-alone company and value retailing business under subsidiary Future Value Retail. Operating profit for the core business was Rs 196 crore.
The results were impacted by two crucial demergers of the lifestyle fashion retailing businesses. The Pantaloon fashion retail chain business, sold to billionaire Kumar Mangalam Birla-promoted Aditya Birla Nuvo for Rs 1,600 crore in April 2012 to deleverage the balance sheet, was finally demerged in the June quarter. Also demerged was the fashion retail business — Central, Brand Factory, Planet Sports and aLL — under under Future Lifestyle Fashion, yet to be listed separately. The numbers for this business aren’t available in the public domain. Analysts estimate it garners Rs 1,000 crore of revenue a quarter. Speaking to the media earlier, Biyani had shared a Rs 4,000-crore annual turnover plan for this business in the first year of its operations.
But the quarterly gap between Future Retail’s core business and Ambani’s rapidly growing retail business is over Rs 1,250 crore.
Even with a Rs 1,000-crore turnover from Future Lifestyle Fashion, Biyani’s retail empire fails to attain the number one position.
Reliance Retail achieved the pole position in the industry in a short span of less than eight years since its inception. The company — in strategic phases internally referred to as Reliance Retail 1.0, 2.0 and 3.0 — has established businesses in value, digital, lifestyle, jewellery and brands formats.
“Reliance Retail’s faster growth is attributed to its presence in a large number of formats and its ability to scale fast,” said Dhvani Bavishi, analyst at domestic brokerage ICICI Securities. “Future Retail is expected to get its focus for growth back after the reorganisation it is undergoing.”
At the end of 2012-13, 56 per cent of Reliance Retail’s revenue of Rs 10,800 crore came from its ‘value and other’ segment that operates grocery chains Reliance Fresh, Reliance Super and Reliance Hyper, under Chief Executive Rob Cissell. In this segment, ‘other’ primarily represented the cash-and-carry Reliance Market, which opened its first store in Ahmedabad in September 2011.
After successfully testing it in 2012-13, the company is rapidly expanding Reliance Market under Reliance Retail 4.0. It opened six stores in the June quarter, which helped the company register a 53 per cent growth in revenue. Reliance Retail is the first Indian retailer to get into the cash-and-carry business, dominated by Walmart, Metro and Carrefour.
Reliance Retail’s successful growth is largely supported by its cash-rich parent Reliance Industries, which had Rs 50,456 crore in cash and bank balances and Rs 28,869 crore in current investments on its consolidated balance sheet at the end of 2012-13.
On the other hand, Biyani’s Future Retail, erstwhile Pantaloon Retail, has been under a debt burden that compelled it to sell a part of its business to deleverage the balance sheet. The company had a net debt of Rs 7,327 crore at the end of 2012 when it reported its financial results for 18 months. As the company is going through reorganisation, it would announce another set of 18-month financial results before it returns to a 12-month format.
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