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Kishore Biyani, touted as India's retail king, wants to take his group's revenues from Rs 18,000 crore now to Rs 1 lakh crore by 2021, eyeing a jump of almost six times. Biyani is looking at a compounded growth rate (CAGR) of 33 per cent in the next six years across three key areas - foods, fashion and home.
The 53-year-old calls the strategy a 'rebirth' that would stand on four legs - becoming a Rs 20,000-crore fast moving consumer goods (FMCG) giant, setting up 4,000 small stores, data analytics, and a multi-channel plan. He believes even if 10 million people shop for Rs 100,000 each every year at his stores, it can get him to Rs 100,000 crore.
But isn't it too ambitious given the group's past growth record?
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It has grown a CAGR of 10.18 per cent between FY11 and FY15. Biyani has also kept his ambitions higher than the growth of Indian modern trade. The organised retail segment, which is eight per cent of $550 billion Indian retail, has grown about 25 per cent CAGR in the past five years and expected to grow at a similar clip in the next four years, according to Technopak estimates.
"It a tough task. It is very difficult to achieve such a target without a disciplined store expansion. If disciplined expansion is not there, stores will suffer and business will face challenges," said Abneesh Roy, associate director, Edelweiss Securities.
Roy is right. In the past, Biyani expanded stores aggressively across different formats and ventured into unrelated areas such as insurance and non-banking financial services. All this pushed up his group's debt to Rs 8,000 crore and he was forced to sell Pantaloons to cut debt.
But this time, Biyani wants to fund the growth through internal cashflows and not through debt. "Unlike in the past when we were chasing mindless growth, what we want now is profitable growth," he said at an event last Friday.
Biyani, it appears, is aiming to grow faster than the largest retailer - Mukesh Ambani's Reliance Industries - which has grown at a clip of 54 per cent CAGR over the past five years and overtaken Future Retail as the country's largest retailer. Reliance Retail, which had set a target of Rs 50,000 crore by 2016, posted a turnover of Rs 17,640 crore in FY15.
Another rival, Aditya Birla Retail, promoted by Aditya Birla Group, has grown at a clip of 15 per cent between FY11 and FY14. "2021 is a short span and achieving Rs 1 lakh crore is not easy. We do not have any Rs 20,000 crore retailer in the country as of today," said a Reliance Retail executive who did not want to be quoted.
However, Biyani has many backers in the industry. "Mr Biyani must have thought about the numbers and has a definitive plan to achieve his strategy. Having passed the high base, they will add a lot of new customers to consumer base," said a senior executive at Spencer's Retail, who did not want to be quoted.
Arvind Singhal, chairman of retail consultant Technopak Advisors, termed Biyani's targets "ambitious but not undoable". "To achieve this, many things have to be done perfectly," he added.
Singhal said Biyani's biggest growth will come from FMCG and Biyani's food park will help him the tap the potential of processed foods which is a big category.
Biyani has already said that his group is looking to take FMCG revenues from Rs 1,800 crore to Rs 20,000 crore by 2021 and 70 per cent of FMCG sales will come from his own brands that would fetch him higher margins. Future is also launching a noodles brand, 100 varieties of floor, sauces and dips apart from having planned to sign joint ventures with global firms to produce ice creams, chocolates and so on.
