FDI will bring in new formats, drive M&As: Biyani

The government’s decision to allow 51 per cent foreign direct investment (FDI) in multi-brand retailing will make Indian retail “mature” and a lot of merger and acquisitions will happen in the segment, according to Kishore Biyani, founder and group chief executive officer of Future Group, India’s largest retailer.

Many private equity funds and retailers, who have long-term vision, will come to India, Biyani told the Indian Retail Forum here. “Retailers need money to expand. A lot of mergers and acquisitions will happen and balance sheets will change.”

The government, in a bid to revive economic growth, last month announced a host of reform measures, including allowing FDI in multi-brand retail and civil aviation. Earlier this month, the government had also cleared FDI in insurance and pension.

Biyani said there would be convergence of digital and physical formats to capture consumption in the next couple of years. “In seven-to-eight years, the total consumption will grow from $400 million (Rs 2,120 crore) now to $1 trillion. India does not have the retail space to capture $600 million of consumption.”

The cost of penetration of modern trade is becoming expensive in big cities, Biyani said. “In the top 10 cities, modern trade has already captured 20 to 30 per cent in many categories. In cities such as Bangalore, it’s 40 per cent. The cost of penetration of modern trade is becoming expensive once it touches a certain point. It’s expensive to get customers to buy.”

He added Future Group was looking at various options to bring investors to its various ventures and forge partnerships. “We need money and we are on the drawing board. We are looking at aligning our business or bring strategic partnerships in our ventures.”

The group had earlier sold a majority stake in its fashion business to the Aditya Birla Group and sold a stake in its financial services company Future Capital Holdings to reduce its mounting debt of around Rs 7,000 crore.