Saturday, May 9, 2009

Unhappy times for Indiabulls’ retail chain Happy Store?

Turning happy doesn’t seem to have worked for the retail business of the India-bulls Group, which also has interests in financial services, real estate and power.

The retail unit of Indiabulls recently repositioned its outlets as Happy Store with a new logo that comprised a smiley transposed on a cheerful yellow shopping bag, but according to a senior manager who recently quit the company and two senior company executives, Indiabulls Retail Services Ltd, the company that houses the retail business, has closed all but four of its 42 outlets.

These outlets had been inherited from Piramyd Retail Ltd, the firm that the group acquired in 2007 for Rs208 crore. In the process, Indiabulls has completely exited some cities such as Ludhiana and Jaipur.

The company, however, opened a new store in March in Destination Mall, situated in Faridabad in the National Capital Region. It also runs a multiplex and a food court in this mall.

Indiabull’s website, however, still says the group is “one of the fastest growing retailers having broad national brand presence with 47 stores located in seven cities”.

“Instead of opening five stores and firefighting on loss-making stores where the business deal is not making sense, it is better to do what we are doing,” said Anil Lepps, chief executive of Indiabulls Retail, in response to why the company has shut most of the stores.

An executive, who recently quit, said the company has also retrenched employees from the stores that have been closed and laid off at least 60 more people in the buying and merchandising team in existing stores in the past three-four months. He did not want to be identified. One of the two company executives mentioned in the first instance confirmed that dozens of people across stores and divisions have either quit or been fired in the past three months. “We are working on a very limited team. We are short-staffed,” he said, asking not to be named.

Lepps, however, said the company has only laid off around 10 people in the merchandising and buying team and is currently trying to rebuild the team with new hires.

Meanwhile, the landlord of one of the closed stores in Jaipur has moved a winding up petition against Indiabulls Retail in the Delhi high court. According to Sanjay Jhanwar, the lawyer representing the landlord in the case, the landlord has sought recovery of Rs1.5 crore against unpaid rent for several months.

In recent months, several retail firms here have either gone bust or have been closing down some stores, scaling back expansion plans, even laying off employees in an attempt to cut costs and to beat the acute downturn in the business that began with the slowdown in the economy.

Subhiksha Trading Services Ltd, the country’s largest discount retail chain, for in stance, has completely halted its operations amid mounting debt and a severe cash crunch.

Other retailers such as Pantaloon Retail (India) Ltd, Reliance Retail Ltd, Aditya Birla Retail Ltd and Spencer’s Retail Ltd have also closed stores and shelved expansion plans in the past year or so.

Indiabulls Retail’s Lepps, however, said the firm was still in a better condition than many of its rivals. “While others are bleeding hundreds of crores, our bleed is over because we have shut down all unprofitable stores,” he said, adding that he is currently focusing on the revival strategy.

“My idea is to get perfect with one store and once we get our model right...then we will plan to open a flagship property in Mumbai in one year and that’s when the new beginning of Indiabulls Retail happens,” Lepps said. “We are trying to figure out a differentiator...”

A March report by audit and consulting firm KPMG International said the slowdown in the retail business is expected to last for another 12-18 months. The firm said the sales growth in modern retail stores in December slowed to 11%, from 35% a year ago.

Indiabulls Retail has been plagued by problems, mainly financial, ever since it entered the business by acquiring Pyramid Retail from the Mumbai-based Ashok Piramal Group. Indiabulls officials privately say they inherited a “mess” from Piramal.

Piramyd was making losses at the time of its acquisition. Many investors expected cash-rich Indiabulls to turn around the company, but it has not happened thus far. On the contrary, the company has had to close down a majority of the inherited stores.

Indiabulls Retail’s stock sank nearly 90% to Rs14 on Thursday, from a peak of at least Rs200 in December 2007. It, however, rose 10% to end at Rs16.30 on the Bombay Stock Exchange on Friday. The firm has also been under fire from vendors in various cities who have accused it of not paying their dues for months together.

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