50% growth in HyperCity possible: Rakesh Biyani

Interview with Rakesh Biyani, joint managing director of Future Retail

Future Retail announced the acquisition of Shoppers Stop-owned HyperCity on Thursday for an enterprise valuation of Rs 911 crore, of which Rs 655 crore would be paid in stock and cash. This is the fifth acquisition of the company in the past five years. In an interview, Rakesh Biyani, joint managing director of Future Retail, tells Raghavendra Kamath the strategy behind the acquisition and the way ahead. Edited excerpts:

When do you expect HyperCity to break even?

We will take the decision to shareholders and the CCI (Competition Commission of India) and then acquire the chain. It will take three to four months. We believe there are synergies in operations and with rebranding (as Big Bazaar Gen Nxt), it should behave like a Big Bazaar. Within six months, it would be evolved to the next level.

What is the reason behind buying a loss-making, low-margin business?

There are synergies which make sense. We have turned around and added a lot of value in our previous acquisitions. Retail is all about sourcing and back-end operations. We have demonstrated that in the past.

You have been talking about building a large network of small stores. Then why did you acquire a hypermarket business?

In a large-store model, only a few have succeeded, but in small stores, there is a lot of activity. In large stores, scale is needed. We are keen to build small stores and are working on that direction. But we will grow both the formats. Small format will focus on food and large format will focus on multi products that require good sourcing and stronger distribution.

Will there be any financial burden on the company with the new acquisition?

There is a case of margin and sales expansion. Average sales per square feet at HyperCity is 33 per cent lower than Big Bazaar. There is 50 per cent growth possibility in HyperCity. If the business growth goes 50 per cent, profits will grow automatically.