Biyani to buy HyperCity for ~911 crore

Eyeing its fifth acquisition over the last five years, Kishore Biyani-led Future Retail said it would buy Shoppers Stop owned HyperCity for ~911 crore. HyperCity racked up sales worth ~1,191 crore for the last financial year (FY17).

The takeover value of ~911 crore includes ~655 crore of stock and cash, remaining being debt.

The deal will be funded through share and cash as part of which the seller will get about two per cent stake (9.31 million shares) in Future Retail. The Future Retail stock ended at ~527.65 on Thursday, 0.81 per cent higher than Wednesday’s close.

“The acquisition would result in further consolidation in the business of Future Retail and increase its foothold in the hypermarket business,” Future Retail said in its communication to exchanges. The company runs 200-odd Big Bazaars, which fall in the hypermarket segment. It has also come out with a premium version of Big Bazaars called Big Bazaar Gen Next.

HyperCity racked up losses worth ~84.73 crore in FY17 on sales of ~1,191 crore. HyperCity operates 19 stores over an area of 1.24 million square feet. Future Retail said the deal would be completed in three to five months.

Abneesh Roy, senior vicepresident at Edelweiss Securities, said the move augurs well for Future Retail as the deal price is not very expensive and the consolidation will drive its profitability.

“They have been buying chains in the last couple of years and they have done well for them. HyperCity’s 19-20 stores in big cities will help them strengthen their foothold,” Roy said.

Roy added that since not many new malls are coming up, acquisition is a good way to add stores and run stores from day one.

After he sold his fashion chain Pantaloons in 2012 to pare debt, Biyani bought Big Apple chain of stores in north India, Nilgiris in South, merged Bharti Retail with his flagship Future Retail and bought the retail business of Heritage Foods, owned by Andhra Pradesh chief minister N Chandrababu Naidu.

Biyani has been focusing on key segments such as food and grocery, and fashion and home to drive growth. He has set a target of achieving ~1 lakh crore by 2021 through small stores, data analytics and other initiatives.

For Shoppers Stop, the divestment of loss-making HyperCity will be a boost. Also, recently Amazon bought five per cent in Shoppers Stop, providing online synergy.

The Shoppers Stop stock went up 2.54 per cent on Thursday.