HYDERABAD: The decks have been cleared for the sale of Heritage Foods' retail and bakery divisions, owned by Andhra Pradesh Chief Minister Chandrababu Naidu's family, to Kishore Biyani's Future Retail which runs the popular supermarket chain Big Bazaar.
The retail giant on Monday announced that its board of directors has approved the proposed consolidation of Heritage Foods' retail and allied businesses owned by the Naidu family. Heritage has several divisions -- dairy, renewable energy, retail, agri, and bakery -- which for the year financial year ending 2015-16 recorded a total revenue of Rs 2380.6 crore to which the retail and allied businesses contributed Rs 629.74 crore.
As part of the deal, Heritage Foods will get a 3.65 per cent stake -- in the form of fresh shares -- in Future Retail. Preparatory to a merger with Future Retail, it will spin off the retail, bakery, agri-sourcing and veterinary care businesses into a fully-owned subsidiary.
This means that the retail business of Heritage Foods, which includes 124 Heritage stores in Hyderabad, Bengaluru and Chennai, will be gradually transferred to Future Retail, for which the latter will issue 1.78 crore equity shares to Heritage Foods retail shareholders.
Sources said the Naidu family decided to go in for the sale as a majority of Heritage stores are located in Telangana, mainly Hyderabad. Apart from this, the outlets in cities like Bengaluru and Chennai have not been earning much of a profit. "These two reasons forced the Heritage management to gradually withdraw from the retail business," a source said.
The retail business reported revenue of Rs 582.9 crore for 2015-16, up 18 per cent from last year. It employees 2,689 people, compared with the 5077 on roll for the entire company.
Kishore Biyani, chairman and managing director of Future Retail, and Nara Lokesh, director of Heritage Foods and son of Chandrababu Naidu, announced Monday that the "proposed consolidation" has been approved.
Biyani said, "It is a meeting of minds and a consolidation in the retail sector. We want to grow our stores from 700 currently to 4000 by 2021. We have acquired Aadhar, Nilgiris and merged with Easy Day. This consolidation with Heritage will help us serve customers in a much better way, specifically in south India."
Lokesh, who is a general secretary in his father's Telugu Desam Party, said, "We recently acquired Reliance's dairy business. In a similar format, consolidation of retail is now happening with Future Retail. We believe that this journey will enable us to bring greater synergies by which our farmers and consumers can benefit in the long run."
He added that with this deal Heritage Foods would become the third largest, public non-promoter family holding a stake in the Future Group. "We have a strong working relationship that will enable us to sell our products across India. Future Retail promotes a lot of home brands and we also plan to sell Future products in our parlours," he added.
Biyani said the Heritage retail outlets will continue as they are. "They will still be called Heritage Fresh stores. We have a number of brands and we will introduce them in the Heritage chain," he added.
Chandrababu Naidu has no direct role in the management of Heritage. His wife and N T Rama Rao's daughter Bhuvaneswari, who owns shares worth Rs 19.9 crore in Heritage Foods, is the vice-president of Heritage Foods. Naidu's daughter-in-law Brahmani is the executive director of Heritage Foods and owns shares worth Rs 78 lakh. Naidu’s son Lokesh, a non-executive director, has investments worth Rs 2.52 crore in the company.
Heritage Foods services 11.35 lakh households on a daily basis. The company has gross fixed assets of Rs 5,184 million and an export turnover of Rs 14.6 crore.