FUTURE RETAIL LIMITED IN EVERY NEIGHBOURHOOD ANNUAL REPORT 2019-20 Corporate Information BOARD OF DIRECTORS STATUTORY AUDITORS REGISTERED OFFICE Knowledge House, Shyam Nagar, Kishore Biyani NGS & CO. LLP. Off. Jogeshwari-Vikhroli Link Road, Chairman CHIEF FINANCIAL OFFICER Jogeshwari (East), DIN: 00005740 C. P. Toshniwal Mumbai - 400 060. Rakesh Biyani T + 91 22 6644 2200 COMPANY SECRETARY Managing Director F + 91 22 6644 2201 Virendra Samani DIN: 00005806 WEBSITE SHARE TRANSFER AGENT www.futureretail.co.in Gagan Singh Link Intime India Private Limited Non-Executive and C-101, Embassy 247, LBS Marg, INVESTOR E-MAIL ID Independent Director Vikhroli (West), [email protected] DIN: 01097014 Mumbai - 400 083. CORPORATE T + 91 22 4918 6270 IDENTITY NUMBER Ravindra Dhariwal F + 91 22 4918 6060 Non-Executive and W: www.linkintime.co.in L51909MH2007PLC268269 Independent Director DIN: 00003922 BANKERS Axis Bank Shailendra Bhandari Bank of Baroda Non-Executive and Bank of India Independent Director Central Bank of India DIN: 00317334 Cooperative Rabobank U.A IDBI Bank Sridevi Badiga Indian Bank Non-Executive and IndusInd Bank Independent Director IDFC First Bank DIN: 02362997 Punjab National Bank State Bank of India Rahul Garg UCO Bank Non-Executive Director Union Bank of India DIN: 06939695 Yes Bank Contents Management Discussion and Analysis 03 Directors' Report 06 Corporate Governance Report 39 Business Responsibility Report 62 Financial Summary 94 Independent Auditors' Report on Standalone Financial Statements 95 Balance Sheet 102 Statement of Profit & Loss 103 Statement of Changes In Equity 104 Statement of Cash Flow 105 Notes Forming Financial Statements 106 Independent Auditors' Report on Consolidated Financial Statements 136 Consolidated Balance Sheet 144 Consolidated Statement of Profit & Loss 145 Consolidated Statement of Changes In Equity 146 Consolidated Statement of Cash Flow 147 Consolidated Notes Forming Financial Statements 148 MANAGEMENT DISCUSSION AND ANALYSIS Indian Retail Overview: Operational, Customer and Marketing Indian retail continues to be one of the largest contributors Through the two store formats, large format and small to our economy, a mass employer and a systemically format stores, the Company retains its focus on the core important sector. Retail industry, estimated at US$1 categories of Food, Fashion and Home. A common thread trillion, continues to be one of the fastest growing markets across these categories is the advantage of scale to in the world. support our quest & delivery of improved quality, better value, higher availability and differentiated products in Organized retail contributed about 11-12% of the overall retail industry in FY20. This share is expected to increase our stores. Pan-India reach continues to yield strategic to ~16% over the next 5-6 years, with the organized retail edge to the business at large and all incremental space market growing at a CAGR of ~20%. Interestingly, over additions make the back-end operations more cost the last five years, the organized retail market grew at effective. ~19%, increasing its penetration from 7% to around 11%. On marketing, in continuation to previous year’s All of the FRL formats make for the most loved brands partnerships, the Company was a sponsor to some of in Indian retail. Across the states in India and income- India’s most coveted events – IPL, fbb Miss India pageant classes, brands of Big Bazaar and fbb continue to be the and Kabbaddi in 2019. most recalled retail brands and have maintained their leadership for the last decade or so. Fiscal year 2020 Awards and Recognitions continued the journey of these brands providing top of The Company and its formats received awards in the industry customer experience. More & more members categories like: signed up for the small formats while Foodhall continued Big Bazaar to be the best gourmet retail brand in India. Big Bazaar ranked among the most valuable brand by Large Format Stores Interbrand; We added 26 new large stores during the year and closed Big Bazaar ranked as one of India’s top 50 Brands in 37 stores as a part of our strategy of focused execution. ninth edition of Pitch Top 50 brands exchange4media; Our focus on efficient store expansion has led to the furtherance of a distribution network that is unparalleled Big Bazaar’s Cook Along Won Gold in Exchange4Media: in the country. Maddies of the Year 2019 for the use of rich media and interactive content; Small Format Stores Big Bazaar’s Food YouTube Channel Won : Silver Play On Small format stores this year, we maintained dual Button; strategic focus - (a) making the format efficient by Big Bazaar Profit Club wins accolades at the Customer rationalizaing the loss-making markets & stores (b) Fest Leadership Awards 2020 for: faster membership drive with reduced or no freebies thus recruiting higher spenders as members (c) costs Best Card based loyalty program in India; rationalization through the second-half of FY 2020. Best use of contents / promotions in a loyalty As an outcome of all these execution focused efforts, program. the Small Formats achieved break-even in the month of Big Bazaar Wins The Universal Design Award For March, 2020. The journey of achieving break-even at this Making Its Stores Accessible For Shoppers With scale, of 858 stores, involved humongous efforts from Disability; acquisition integration to fast-paced new stores’ opening and large scale membership drive. Big Bazaar Wins the most admired VM of the year (food) at Coca Cola Golden Spoon Awards 2020; For our customers, we continue to drive their experiences to better & higher levels. Services like faster checkouts, sit- Big Bazaar won the most inclusive retail brand of the down lounges, digital shelf talkers and experience zones year for its “Sub Ke Liye Initiative” at ET Now Awards with multi sensorial food products giving a world class for Global Retail Excellence. shopping experience are just some of them. Our stores are designed to be smarter and experiential through use fbb (Fashion @ Big Bazaar) of technology, innovation in services, layouts and filled Social Samosa – Sammie Award for: with digital interfaces. These stores redefine the retailing National Jeans Day (Best Use of SM to generate experience and set new benchmarks for retailing in India. leads or drive revenues); Customer loyalty remains one of our key pillars of 500 Festive Stories (Best Use of Influencers). growth and we continue to focus on understanding our customers based on the data collected and analyzed of Afaqs! Foxglove Award for 500 Festive Stories (Best our frequent shoppers. Use of Influencer Marketing); FRL | ANNUAL REPORT 2019-20 | 3 Adgully Digixx Award for: • Inventories have built up, orders cancelled impacting the entire retail ecosystem; 500 Festive Stories (Best Use of Content Marketing: Retail Sector); • Retailers have started running out of cash as revenues World Shorts Day (Best Use of Social Media). have declined and losses mounted; IAMAI’s IDA Award for National Jeans Day (Best Lead • Several large and marquee brands have announced Generation Campaign Through Mobile); bankruptcies with many more announcing store closures and large losses. #PujoPerfect Love Story First brand in the world to create a unique interactive web series on Instagram Risks and Threats Stories by Facebook Case Study. External environment factors like COVID-19, resurgence Easyday of the second wave, delay in vaccine solution and Easyday Club Wins the following awards at Coca Cola economics factors such as interest rates, inflation, Golden Spoon Awards 2020: liquidity, rationalisation of tax structure, job creation continue to be the biggest threats as well as opportunities Most admired small / mid format retailer of the for the Company. Continued slowdown in the economic year; activity in the Country, no respite from the job losses Most admired innovation of the year. or challenged income-levels & hence consumption can severely impact Indian retail and therefore growth of the Foodhall Company. Foodhall @ Linking Road won the award for best store in the food groceries & general merchandise category Internal controls and their adequacy at ET Now Awards for Global Retail Excellence. The Company had identified the key risks and control Human Resource initiatives process to mitigate the same. Further, the Company Human Resource is one of the key interfaces the continues this process of Enterprise Risk Management in Company has with its customers and hence it is very order to identify the new risks and to define and establish critical to ensure continuous learning and development the control process to mitigate the identified risks. Further, of its people resources. FRL employs 31,221 employees the Internal Control Framework for financial reporting, located at Head Office, Zonal Offices, Retail Stores, organization structure, documented authorities and Design houses and Data-Centers across the Country. The procedures and internal controls are being reviewed by Company has attracted best talents from the industry as internal audit team on continuous basis and any issues well as successful in retaining its core team, which has arising out of the said audit are addressed appropriately. rich experience of last 20 years leading the Company’s The Company is continuously upgrading its internal core retail business. This year we intend to work on control systems by measuring state of controls at various two key pillars to transform our People Office, first by locations.