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Mumbai: In what may be the first step towards building an identity of their own, Kishore Biyani’s younger first cousins have started a luxury retail company independent of the retail tycoon’s Future Group.

Rakesh Biyani, joint managing director of Pantaloon Retail (India) Ltd, India’s largest listed retailer by revenue, and Sunil Biyani, a director of Future Group, the parent of Pantaloon, have teamed up to launch Selangor Retail Pvt. Ltd. The two brothers, sons of Kishore Biyani’s paternal uncle, will still keep their roles in Future Group.

This is the first so-called brick-and-mortar retail venture of the brothers that’s not associated with Pantaloon Retail, which runs retail chains like Big Bazaar, Food Bazaar, KB’s FairPrice, Pantaloon and Central.

Kishore Biyani. Photo: Ashesh Shah/Hindustan Times

“We are in talks with a local Italian company which has a 200-year-old silver brand that we would bring to India next year," said Sunil Biyani who said the gifting and luxury market have huge potential and hence present an opportunity to “scale and grow differently" from Pantaloon Retail.

Following in Kishore Biyani’s footsteps, Rakesh Biyani and Sunil Biyani have roped a cousin from the maternal side, Shirish Jhawar, as chief executive officer to head daily operations of the new venture.

“This is a significant development as after being successful in the mass to mid-market segments, this venture gives the brothers a chance to come out on their own in a new segment," said Rahul Kundnani, a sector analyst at Mumbai-based brokerage SBICap Securities Ltd.

Selangor Retail has been formed at a time when Future Group is trying to reduce debt and has sold a majority stake in some of its core retail and non-retail ventures.

In a surprise move in May, the retailer announced the sale of a majority stake in its apparel department retail chain Pantaloons to Aditya Birla Nuvo Ltd, an Aditya Birla enterprise. In June, the company announced a deal with Warburg Pincus LLC, the private-equity firm with more than $35 billion in assets, for Future Capital Holdings Ltd. Warburg Pincus may spend as much as 800 crore ($144 million) to buy a controlling stake in Future Capital, according to Bloomberg.

“They might be hiving off more core retail business divisions as they still would have a substantial debt even after the completion of the deals announced so far. New ventures like this with no conflict with the existing retail business is a good way to test new waters," said Prashant Agarwal, joint managing director, Wazir Advisors Pvt. Ltd, a retail and textiles consultancy firm. In the June quarter, Pantaloon Retail missed analyst expectations as lower growth and much higher capital costs saw the retail businesses of Food Bazaar, Big Bazaar, Pantaloon, Home Town and other retail chains register a 92.12% decline in net profit to 5.79 crore. Revenues for the core retail business grew by 4.81% to 2,962.68 crore.

Pantaloon Retail, which passed a resolution extending its financial year by six months from 30 June to 31 December, saw its interest costs during the June quarter increase by 53% to 180 crore because of higher debt levels. “The gross debt levels during the end of fourth quarter for financial year 2012 stood at 6,000 crore, which was higher by about 1,800 crore over the previous corresponding period debt of 4,200 crore," said a 10 August brokerage report by Antique Stock Broking Ltd.

By December, the company hopes to reduce its debt by over 50%. To be sure, business conditions are unlikely to improve in the short term for retailers. Earlier this month, ratings agency Fitch downgraded the retail sector to negative from stable due to worsening business conditions in a slowing economy and the decline in discretionary spending by consumers.

For Rakesh and Sunil Biyani, SBICap’s Kundnani had a word of caution about venturing into luxury retail. “The luxury segment is still very nascent and will be challenging," he said.

Pantaloon Retail’s shares rose 0.98% to 139.70 on BSE, while the benchmark Sensex index gained 0.29% to 17,541.64 points.

sapna.a@livemint.com

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