Mumbai: When Kishore Biyani built India’s largest listed retail chain, the expansion was marked by aggression. As his Future Group enters the online space, the watchword is caution.

Earlier this month, Biyani, chief executive officer of Future Group, bought online furniture seller, his first acquisition of an Internet store. The acquisition may not be a sign of things to come.

Sure, he is looking at more online acquisitions and has also experimented with the medium since the start of this decade, but Biyani is unsure how much e-commerce will contribute to his business. His listed retail companies, Future Retail Ltd, Future Lifestyle Fashions Ltd and Future Consumer Enterprise Ltd, come under the Future Group umbrella.

For now, Biyani has even stepped back on the expansion of bigbazaardirect, as the venture continues to lose money. Introduced on a franchise model, bigbazaardirect armed sales executives with tablets to secure orders at doorsteps for home delivery. At the time of its launch, Biyani had said that the model had the potential of becoming bigger than Big Bazaar, Future Group’s supermarket chain. All that has changed now.

“I have been a very good student of e-commerce business," Biyani said in an interview on 12 April. “I have been watching it by doing it myself with Futurebazaar(.com) and by meeting a lot of people who have been in this business. I have met everybody in this business. I have experimented with exclusive tie-ups with particular e-tailers and have also worked with the father of multi-channel retail (Love Goel, chairman of global investment firm GVG Capital Group) to understand global trends," he said.

He explained that this was done as a part of six-month immersion programme last year, and it led to the realization that “it’s not very important to be online".

To be sure, Biyani is not writing off e-commerce either. He is interested in more acquisitions in the online space, but he will only buy sites which need help. “We have made it very clear to our teams; we don’t have to lose money. We have to be cautious. If we can make money, we will go in."

For Biyani, who is known for his audacious plans, caution on e-commerce is rooted in experience. He had to sell his Pantaloons retail chain business to the Aditya Birla Group company Aditya Birla Nuvo Ltd in 2012 in an attempt to reduce debt and survive.

“We might sound very curt and a little negative. But it’s coming with a lot of wisdom," said Biyani. He claimed that the existing e-commerce marketplace model is not sustainable but adds that will change with the new government policy, announced on 29 March.

As for, it will be profitable in the next 3-4 months, Biyani said. “This category has always been discount-driven, even in retail stores. If I do even 5 crore of business online per month, I will be profitable," said Biyani, who is relaunching the online furniture marketplace later this month along with offerings from Future Group’s own furniture retail chain HomeTown.

Online retail in India is expected to increase to $48-60 billion by 2020 from $4.47 billion in 2014, according to UBS AG.

But the recent policy announcement on foreign direct investment (FDI) in e-commerce marketplaces has generated uncertainty about the future of e-tail in India in its present format.

The government allowed 100% FDI in online retail of goods and services under the so-called marketplace model, but imposed three conditions that could either hurt e-commerce companies or force them to find new ways to get around them.

One, the government said no group company or seller on a marketplace can contribute more than 25% of the sales generated. Two, marketplaces cannot influence product prices, meaning an end to the era of steep discounts that has led to exponential online sales growth. Three, small sellers will now have to take responsibility for the quality of goods and after-sales support.

Investments in start-ups have declined for the second quarter in a row on a sequential basis and discounts have also been tempered, as e-tailers look at profitability.

Some of the biggest beneficiaries of the changing fortunes of e-commerce may be Indian brick-and-mortar retailers—such as Future Group—that were hurt by the steep discounts offered by marketplaces and are now experimenting with their own online ventures.

For instance, Reliance Industries Ltd, the oil-to-yarn and retail conglomerate, launched its online fashion portal on 2 April. On 16 October, Aditya Birla Group launched an online fashion store,, which offers shoppers brands of the group and as well as other companies.

Meanwhile, Biyani is stepping up on expansion on the brick-and-mortar front. In 2016-17, Biyani will add 35-40 Big Bazaar stores, making it the largest expansion in a single year since inception for the hypermarket chain, which had 200 stores as of December 2015.

The company will add 200 small stores under the Easyday brand and double the number of stores under its discount retail chain Brand Factory in the next two years from the current 46 outlets. However, unlike in the past, when the company borrowed for growth, the expansion this time will be funded by internal accruals, Biyani said.

As India’s economy grows, Biyani is also evolving all his retail formats to cater to the aspirational needs of Indians. Later this quarter, Future Group will relaunch a new variant of its Central department store at Aerocity in Delhi, which will be about double the size of an average Central store, at 150,000-200,000 sq ft. A new-generation Big Bazaar store was launched in the December quarter.

Another area of focus will be fast fashion, with retail brands such as H&M and Forever 21 rapidly making inroads into India. Earlier this month, the company launched Cover Story, India’s first fast-fashion brand, which will see new products introduced every week.

“The idea is to build a brand like that of H&M and Zara (for Cover Story)," says Biyani.

Also, consolidation is high on the agenda. In May last year, Biyani combined Future Retail’s operations with Bharti Retail Ltd. Prior to that, he bought southern grocery chain Nilgiris in November 2014. “We will look at consolidation in retail businesses wherever possible," says Biyani, who is looking at acquisitions of physical food and grocery chains that have at least 100 stores.

Meanwhile, monetization by divesting brands under Future Lifestyle and non-core assets and restructuring, which has been under way for the better part of this decade, continues. Earlier this month, Future Retail sold a 40% stake in Future Supply Chain Solutions Ltd for 580 crore.

Later in the quarter, the merger of Bharti Retail Ltd will see Future Retail split into two companies. One will house all the front-end operations and the second will be a back-end, investments and infrastructure company and will be listed separately as Future Enterprises Ltd.

According to Biyani, the current financial year will be a defining year for the company—the culmination of all the work done over the previous years to create separate organizations and cash flows.

“It will take us to another orbit. So many things have come together," said Biyani.

He has been tracking the business, margins and earnings of various formats almost on a weekly basis in the new financial year. They have met targets so far, he said.

“One thing about him (Biyani) is that he is street-smart and reacts very fast. He has done that and has set up his businesses for a long-term play," said Sanjiv Bhasin, executive vice-president, IIFL Holdings Ltd. Biyani is now better placed as his debt burden has also reduced, Bhasin added.

Future Retail’s debt-equity ratio, which touched a peak of 2.45 in 2011-12, fell to 0.88 in fiscal 2014-15, according to data from financial services provider Capitaline.

Investors have taken notice.

In the year ended 31 March, Future Retail’s shares rose 30.48%, while those of Future Lifestyle and Future Consumer Enterprise rose 16.74% and 69.69% each respectively, outperforming the BSE Sensex, which fell 9.36%. Shoppers Stop Ltd fell 10.98% while Trent Ltd rose 8.02% in the same period.