Kishore Biyani-led Future Group has completed its buyout of FabFurnish, as it looks to take on the threat posed by Swedish furniture retailing giant IKEA, which is expected to make its entry next year, and in the process, also marking the first exit of Rocket Internet in India.
The all-cash transaction will see Future Group bring its entire portfolio of home furnishings and decor business under the FabFurnish brand, making it the largest home furnishings and decor business in the country.
Also read: German incubator Rocket Internet likely to sell online furniture retailer FabFurnish to Future Group
“Today I operate in only 20 cities (through Home Town). Now I can operate all over India,” Biyani told ET. He, however, declined to disclose the exact amount paid by Future Group to acquire the online furniture retail venture.
The move, according to Biyani, will also act as bulwark against IKEA, which is scheduled to open its first store in the country in 2017, and which has identified India as one of the key growth markets globally.
“We are creating the largest home furnishings company in the country. Ikea is coming in, and it will take them at least two to three years to become an Rs 1,000 crore company, and we are already there,” he said.
According to Biyani, the new combined entity will look at achieving EBITDA of Rs 40 crore-Rs 50 crore in the current fiscal. The retail giant, which currently operates over 40 Home Town stores across the country, will open more during the course of the year.
While the entire FabFurnish team has been retained for the time being, Future Group senior executive Mahesh Shah and chief executive of Home Town, the home furnishings business owned by Future Retail, will head the new entity.
The FabFurnish team, according to Biyani, will continue to look after the online retail part of the business.
The acquisition comes less than two months after ET had reported that the Berlin-based incubator and Future Group, the country’s largest brick-and-mortar retail company, had entered into negotiations, for the latter to acquire FabFurnish, an early player in online furniture retailing segment in India, but which had not been able to withstand competition from rivals, such as Pepperfry and Urban Ladder.
Over the past 12 months FabFurnish had seen co-founders Vikram Chopra and Mehul Agrawal stepping down from the day-to-day running of the business, and replaced by senior directors Ashish Garg and Ankita Dabas.
The company had also downsized its workforce, vacated warehouses, and shifted to a marketplace model in a bid to cut losses and arrest its shrinking market share to larger and better-funded rivals, Sequoia Capital and Steadview Capital-backed Urban Ladder and Goldman Sachs-funded Pepperfry.
The buyout also marks the first exit by Rocket Internet in India, raising questions about the suitability of its business model in India. The internet-focused incubator is also believed to scouting for buyers for its online fashion retail company Jabong.
This is also the first acquisition of an online retail venture by Biyani, who has shared a fractious relationship with India’s rising consumer internet companies, which have grown at a rapid pace and continue to command billions in valuations.
Separately, a high-profile, exclusive partnership between Amazon and Future Group, once touted as a grand offline and online marriage that would usher in a new era of retailing in India, also hit the rocks after differences cropped up over funding of discounts. Colby Rasmus JerseyShare This