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Photograph by Soumik Kar

Secret Diary of an Entrepreneur 2018

"One should not get attached to what one creates"
Secret Dairy of Kishore Biyani — Part 2

Krishna Gopalan

Kishore Biyani, founder, Future Group

I distinctly remember the premiere of Na Tum Jaano Na Hum at New Excelsior, Mumbai. Just seeing my name up there as a producer in the end credits was an incredible high. Mazaa aa gaya. It was not a feeling that lasted too long though. Suddenly, that effort of having made a film over a year with a good star cast seemed futile given the rejection at the box office. The fate of the movie was sealed in just three hours. In comparison to the FMCG business, cinema felt like the fastest moving consumer goods business. I felt really low after the failure and even more so because I did not know what went wrong.

That night I sat by myself and did some serious thinking. It dawned upon me that I may never understand why the film failed. As a team we liked it but the power to deliver the verdict was with the viewer. He not only rejected it but did not even bother to say why. And that really hurt. It must have been almost dawn when I reached out for pen and paper. It was not to write a script for my next film but to put down my business mantra going forward. “One should not get attached to what one creates. It creates an unnecessary problem.” I read it a couple of times before I felt a lot lighter and then let myself go to sleep. 

In business, being attached to something means you are not in touch with the present. It is important to look ahead after having learnt from the past. That thinking triggered the process of calling my entity, Future Group. And I followed my mantra all the way through. I make it a point to walk into Pantaloons regularly. There are occasions when something I see brings back a memory from the first store opened 20 years ago. I smile to myself and quickly allow my mind to return to the present. And to this day, I write to myself and encourage my colleagues to do it as well. 

I mean it when I say there is no attachment. Future Capital was created with a lot of fanfare and we thought we were on the right track. However, things did not work out and today it is a bank. I have created and sold many businesses. Learning and destruction are part of the process. One has to be mature to spot the mistake and move ahead with time. Earlier, people used to call me KB. They still do, though I am told it stands for kharido becho today. I know it’s a left-handed compliment and I happily accept it.

In addition to detachment, not missing out on a great opportunity is another invaluable nugget of advice that I got years ago from Anil Agarwal. We were in the middle of a discussion on things ranging from spirituality to business. He said to me in all seriousness, “Good assets are very hard to get. Never ignore them when they are available.” I heard him in all earnestness and knew that I was ready for the next big change. 

I still remember that evening in 1997, when I was driving towards Kolkata airport along with a close friend, Sudhir Bhandari. I had a little over an hour to catch my flight to Mumbai when he mentioned something about a 10,000 sq ft property that was under construction. I promptly asked the driver to take us there. 

It was close to 8 pm when we reached the spot in Gariahat market, everything around was shut. One of the construction site workers informed us that the building was supposed to be a marriage hall. I took 10 minutes to survey the surrounding area and soon discovered what a killer plot it was. It was located on the main road right in the middle of a busy shopping district. I had already begun imagining how the place would bustle with customers and I wasted no time in telling Sudhir, “Yeh property mujhe chahiye”. 

The owners presented us with terms and conditions that were nothing short of interesting. For instance, we had to pay rent on a daily basis, which is unheard of today. Since that deal, I have not missed a single flight from the city though this instance always reminds me that missing that flight was probably worth it.

Even in the case of other deals, be it Heritage or Nilgiri’s, I did not allow one decent asset to go by. These were all good companies but the real clincher was the Easyday buyout in 2015. It took us a little more than an hour to close it. Sunil and Rajan Mittal met me just once and drew up the structure. It was ironical that the meeting took place in Agarwal’s home in London. The man watched me as I executed the advice he had given me. From the corner of my eye, I could make out he approved of how I went about the whole thing. Obviously, I was very pleased since I managed to top that up with my own skill — building relationships.

There was very little opportunity to do that with Nilgiri’s since it was a transaction with a private equity fund. In such a situation, I leave it to my investment bankers to work out a price. I step in when there is room to build a relationship. I have given this my own management jargon called emotional account. Both the Mittal brothers were clear that the Easyday sale went beyond money. “We want this business to be carried forward and our people must be taken care of,” Rajan said. That kind of clarity is not easy to find and it made me extremely comfortable. Because I knew that would be my own approach. The deal was eventually structured in a very fair manner — whenever they wanted to exit, they would gain and so would we. It calls for a lot of maturity to draw up something like this. Just the other day, Rajan met me at the board meeting. It brought me immense joy when he told me how happy he was with the way the entire process was being handled. 

Among the more interesting dealings I have had, the one with real estate developers have been memorable ones. Just the nature of their business means that they want the best deal from you with the objective being to continuously keep on taking. Regardless of the size of the business or which part of India they come from, they are all the same. You just have to know how to deal with them.

I rarely look at business through the lens of numbers, but I make an exception when it comes to developers. Through the years, I have observed that no more than a handful can be called givers. We have done at least a 1,000 large real estate deals and only 15-20 have been givers. With time, I have come up with a way of dealing with them and that is to give more. It is more than what he will expect and always an offer he cannot refuse. 

For instance, in the early days of Big Bazaar, we were looking at properties across India. That meant extensive travel and I looked at a countless number of malls at various stages of construction. I was in Indore on a blistering hot summer afternoon meeting Manish Kalani, who was developing the Treasure Island Mall. His cousin, Atul Ruia, of Phoenix Mills, introduced the two of us. 

I liked Manish’s Mall and decided to go for it. After some basic discussions over the phone, we met in Mumbai for a cup of coffee at the Taj Mahal Palace Hotel. The table had a few writing pads and I reached out for one as the conversation progressed. I drew a small table with four points — terms, escalation, rate and infrastructure. The row under rate was left blank and I asked Atul to fill it in. “I trust your judgment,” is all I said to him and left. The cup of coffee remained untouched and I am sure the two of them must have been startled. The deal was signed and that Taj writing pad became the term sheet. It was basic accounting at its best without any complications. Even with Atul, the deal to sign up for High Street Phoenix took exactly two-and-a-half minutes on a Hyderabad-Mumbai flight. He was in Hyderabad to see Big Bazaar and when he quoted a price, I said, “yes”. The rest of the time was spent on talking everything but business.

My skill lies in guessing how much the other person expects. That is an art and it goes beyond numbers. It is impossible to do a calculation when it comes to human relationships. Everything is first about emotion and then as human beings, we pride ourselves in rationalising it. Just give anyone a price more than what they want and it always gets balanced out during the lifetime value of the deal. It gives them a huge kick and often, they have had huge parties after signing a deal with us. All this is quite amusing when I get to hear of it. In my mind, it is a very effective tactic that has always worked for me.

I have never had a keen interest in numbers and paid for it eventually. The excuse I give people is that I am more of a right brain person than a left brain one. Luckily, most people believe it! Right after college, I cleared the entrance examination to pursue chartered accountancy. For some reason, I never went ahead with it. Eventually, the textile course at the Synthetic and Art Silk Mills’ Research Association directed me towards my profession. I can read balance sheets and P&L accounts, but there is no great level of interest in doing all that, nor do I consider it my area of strength. 

For me business was about visualising how trends in fashion would play out. Numbers did not necessarily fit into that mindset. I had to learn that the hard way when we began exploring options on what to do with the Pantaloons business in 2012. The first meeting with Kumar Mangalam Birla itself was an eye-opener. It was well past 8 pm and his office was buzzing with activity. I went with a colleague, who looked at me with that “you know we don’t work that late” look. I could barely manage a smile. Sitting across the table with Mr Birla was an experience and a funny ordeal at the same time. In less than 10 minutes, it was clear that I had a lot to learn on how money should be looked at. Over the next few weeks, we had to dig deep into issues like what the debt-equity ratio should be or the need to constantly look at margins. It showed me a new way of doing business and that was ironical since I was already in the financial services business. In terms of diving deep into numbers, that Pantaloons deal was a tipping point for me.

As a group, we did discuss financials, but we saw it in real action with the Birlas. It was apparent that we had some distance to travel. They also must have gone through the process of learning before they perfected their skills over time. It was time to write to myself once again. Soon, we were in fashion again with food as well. While my enthusiasm remained, it came with a more cautious approach to the business. Consciously, I now delve into numbers and ask myself a lot of probing questions on cash flow and debt-equity. Now, I look at each proposal from my colleagues with a different lens (one of caution probably), and that has definitely surprised them. They are not familiar with this version of me. This is just a new me with a different approach to business.

This is the second of a two-part series. You can read part 1 here.

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