ECONOMIC SURVEY & INDIAN RETAIL
Saving Lives and Livelihoods amidst a Once-in-a-Century Crisis
India focused on saving lives and livelihoods by its willingness to take short-term
pain for long-term gain, at the onset of the COVID-19 pandemic. An early, intense lockdown
provided a strategy to save lives and preserve livelihoods via economic recovery in the
medium to long-term. A public investment programme centered around the National
Infrastructure Pipeline to accelerate the demand push and further the recovery was rolled
out.
As per the Reserve Bank of Indias (RBI) estimates, Indias real GDP growth is
projected at 9.5% in FY22, which includes growth of 18.5% in the first quarter of FY22;
7.9% growth in the second quarter of FY22; 7.2% growth in the third quarter of FY22 and
6.6% growth in the fourth quarter of FY22. A V-shaped recovery is expected, and there has
been a resurgence in high frequency indicators such as power demand, e-way bills, GST
collection, steel consumption, etc.
Indian retail industry had emerged as one of the most dynamic and fast-paced industries
due to the entry of several new players. India is the fifth-largest and preferred retail
destination globally. Indias retail sector is expected to drive growth with retail
development taking place not just in major cities and metros, but also in tier II and III
cities. Healthy economic growth, changing demographic profile, increasing disposable
income, urbanisation, changing consumer tastes and preferences are some of the factors
driving growth in the organised retail market in India.
The pandemic, coupled with the lockdown impacted the operations of shopping malls and
retail stores across all states. Restrictions on movements of employees, customers and
goods - during the early stage of the lockdown-impacted the retail trade severely. As the
lockdown eased, the retail business has recovered and multi-category retailers expect some
more time before a full recovery is registered in the retail sector. The pandemic also
gave a tremendous push towards digitization, with retailers adopting omni-channels
capabilities at a rapid pace.
According to India Ratings and Research (Ind-Ra), domestic organised food and grocery
retailers are expected to increase by 10% YoY in FY22, with organised retailers and
e-commerce likely to benefit from the ongoing demand for essentials. By 2024, Indias
e-commerce industry is expected to increase by 84% to US$ 111 billion, driven by mobile
shopping, which is projected to grow at 21% annually over the next Three years.
India is expected to become the worlds third-largest consumer economy, reaching
Rs.27.95 lakh crore (US$ 400 billion) in consumption by 2025 by increasing participation
from foreign and private players has given a boost to Indian retail industry.
Future Retail Limiteds retail formats such as Big Bazaar, Foodhall, fbb, easyday and
Heritage make for some of the most loved brands in Indian retail. Between these brands,
the Company covers most income segments and communities living in hundreds of cities and
towns across the country.
LARGE FORMAT STORES
We added 8 new large stores during the year and closed 21 stores as a part of our
strategy of efficient store operations and expansion. Our focus on efficient store
expansion has led to the furtherance of a distribution network that is now present in
almost every state in the country.
During the financial year, Big Bazaar had launched an online shopping portal to cater
to customers who couldnt visit the stores due to lockdown and various restrictions. The
Company invested in learning and perfecting its online and omni-channel capabilities
during the first phase of its launch.
In March 2021, Big Bazaar expanded the proposition promising a 2-hour home delivery for
all orders placed on shop.bigbazaar.com and mobile apps available on Andriod and iOS. This
instant delivery service was a first of its kind proposition in the retail market in
India, offering the widest range of products - from food and grocery, to fashion,
homeware, electronics and much more. While some competitors offered same-day or next-day
home delivery, they are almost always restricted to food and grocery and available in a
few select cities. Big Bazaar was among the first retailers to offer this in over 120
cities and towns across India.
The omni-channel shopping initiative met with a very encouraging response from
customers and the Company expects that it drive frequency of purchase from loyal
customers, with online business contributing above 10% share through the year, even after
lockdown is eased.
SMALL FORMAT STORES
The Companys small format chains- easyday in Northern India and Heritage Fresh in
Southern India are established brands offering high-frequency items in food and grocery
products within urban neighborhoods. These brands focus on building a membership base for
every store, ensuring high engagement with customers and higher frequency of purchase.
Being focused purely on food and grocery items, these stores were somewhat less impacted
by the lockdown and pandemic restrictions.
Through the year, the Company focused on optimizing the network with a focus on
efficiency and profitability of the stores, customizing the merchandise mix for the
members in each of the neighborhood it caters to and increasing the membership base of
customers. The Company also strengthened its online ordering system through easyday
members app, thus contributing to increase in frequency of customers.
The membership initiative remains one of our key pillars of growth and we continue to
focus on understanding our member - customers needs based on the data collected and
customizing our assortment and merchandise mix based on analyzing the purchase data of our
frequent shoppers.
OVERVIEW : OPERATIONAL, CUSTOMER AND MARKETING
The Company continues to focus on the three large categories of food, fashion and
homeware and leveraging its pan-India scale and reach to develop, as well as popular
retail brands to build a long-term, strategic edge for the business. Over the years, the
Company has also sharpened its focus on leveraging technology to process and use the large
amount of consumer data that it generates as well as develop omni-channel capabilities.
Many of the capabilities thus developed proved to be useful during the pandemic conditions
to retain customers and attract business during the lockdown.
While the Company continues to invest in building its brands, during the year, the
Company built new capabilities for brand building and customer engagement on digital
platforms and social media. A substantial portion of brand development activities now
focus on the digital space, earning new and existing customers to engage with our brands
on the Companys online portals and mobile apps.
HUMAN RESOURCE INITIATIVES
Human Resource is one of the key interfaces the Company has with its customers and
hence it is very critical to ensure continuous learning and development of its people
resources. FRL employs 21,839 employees located at Head Office, Zonal Offices, Retail
Stores, Design houses and Data-Centers across the Country. The Company has attracted best
talents from the industry as well as successful in retaining its core team, which has rich
experience of last 20 years leading the Companys core retail business.
BUSINESS OUTLOOK
The key business outlook for the current year, FY2021-22 seems will be a challenging
year with the second wave of COVID-19 impacting almost every aspect of human lives. This
pandemic has led to huge uncertainties including in the consumption space. Retail has been
severely impacted with stores remaining largely shut in the 1st quarter of FY2020-22 and
consumers werent being able to come to the store. Incomes have been affected, leading to
deferral of discretionary consumption.
There is going to be significant challenges in the short to medium term as the country
is slowly recovering from the second wave of COVID-19 and the government taking measures
to bring back life to normalcy in a phased manner.
Future Retail has an unparalleled network of stores under core two formats, spread
across pan India covering most of the income segments and communities. We believe that the
network is strategically well placed to capture the consumer spend at an accelerated pace
as the country recovers from the pandemic.
The long-term growth factors of the economy remain intact and are projected to drive
the India growth story in the long term.
RISKS AND THREATS
External environment factors like second wave of COVID-19, impeding threat of
resurgence of the third wave, spread of the delta variant of Covid-19 and economic factors
such as interest rates, inflation, liquidity, rationalisation of tax structure, job
creation continue to be the biggest threats as well as opportunities for the Company.
Continued slowdown in the economic activity in the country, no respite from the job losses
or challenged income-levels & hence consumption can severely impact Indian retail and
therefore growth of the Company.
INTERNAL CONTROLs AND THEIR ADEQuACY
The Company continues the process of Enterprise Risk Management, in order to identify
various new risks and also to define and create the control process to mitigate the
identified risks. Further, the Internal Control Framework for organization structure,
financial reporting, documented authorities and procedures and internal controls are being
reviewed by internal audit team on continuous basis and any issues arising out of the said
audit are addressed appropriately.
The Audit Committee, comprising of Independent Directors is involved in regular review
of financial and risk management policies, significant audit findings, the adequacy of
internal controls and compliance with the applicable accounting standards.
REVIEW OF FINANCIAL PERFORMANCE OF THE COMPANY FOR THE YEAR UNDER REVIEW
Key Ratios
| Debtors Turnover |
15 |
| Inventory Turnover |
2 |
| Interest Coverage Ratio |
(0.27) |
| Current Ratio |
0.81 |
| Debt Equity Ratio |
9.34 |
| Gross Margin |
20.11% |
| Net Margin |
(50.79%) |
| Return on Net Worth |
(116.10%) |
Details of significant changes in the key financial ratios:
• Debtors Turnover and Inventory Turnover: It has been adversely affected due to
decline in revenue on account of COVID-19.
• Interest coverage ratio: It has been adversely affected due to decline in
profitability on account of COVID-19.
• Debt*-Equity ratio and Return on Net Worth: Ratios have been adversely impacted
due to decline in profitability on account of COVID-19 and increase in borrowings.
• Net Profit Margin: It has been adversely affected due to decline in
profitability on account of COVID-19.
• Debt = Borrowings (excluding Lease Liabilities accounted as per Ind AS 116)
Sales: The Companys Sales and Operating Income has reduced from Rs.20,118.32 crore in
previous financial year to Rs.6,261.04 crore with Y-o-Y degrowth of 68.88% for the
financial year ended March 31, 2021. The Covid-19 pandemic has had a significant impact on
business. Operational challenges mounted due to restricted movement and disrupted supply
lines.
Loss Before tax: Loss Before Tax of the Company for financial year ended March 31, 2021
stood at Rs.3,159.93 crore as compared to profit of Rs.33.84 crore during the previous
financial year.
Interest: Interest & Financial charges outflow has increased from Rs.440.30 crore
incurred in previous financial year to Rs.1,218.36 crore (without Impact of INDAS116) for
financial year ended March 31, 2021 due to increase in debt.
Net Loss: Net Loss of the Company for financial year ended March 31, 2021 stood at
Rs.3,180.04 crore as compared to profit of Rs.33.84 crore in the previous financial year
due to due to Covid 19 pandemic which had significant impact on business of the Company.
Dividend: While considering the Companys dividend distribution policy, the
uncertainties created by COVID-19 and in view of Loss during the year under review, the
Board has not recommended any dividend for the financial year ended March 31, 2021.
Capital employed: The capital employed of the Company was Rs.12,394.65 crore as at
March 31, 2021.
Surplus management: The Company have cash loss of Rs.2,567.41 crore (without Impact of
IND AS116) for financial year ended March 31, 2021 as compared to cash profit of Rs.160.20
crore in the previous financial year.
Equity share Capital: The equity share capital of the Company has increased from
Rs.105.48 crore to Rs.108.46 crore due to Rs.2.96 crore worth of shares issued against
conversion of warrants and Rs.0.02 crore worth of shares issued under employee stock
option scheme during the financial year under review.
Debt-Equity: Debt-Equity ratio of the Company has increased to 9.34 as at March 31,
2021 as compared to 2.08 in the previous financial year. This ratio has increased due to
increase in debt and decrease in Net Worth.
Net Worth (excluding Capital Reserve): The Net worth of the Company has decreased from
Rs.4,403.06 crore to Rs.1,323.35 crore due to loss for the current year and shares issued
during the financial year.
Cash Earnings per share (CEps): The Companys CEPS (before exceptional items) has
decreased to Rs. (47.52) (without Impact of IND AS116) in current financial year in
comparison to Rs.3.15 in the previous financial year. The Company CEPS has decreased due
to decline in revenue and profitability on account of Covid-19 pandemic.
Earnings per share (Eps): The Companys EPS (before exceptional items) has decreased
from Rs.0.67 in previous financial year to Rs (58.86) per share for the financial year
ended March 31, 2021. The Company EPS has decreased due to decline in revenue and
profitability on account of Covid-19 pandemic.
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