Monday, November 30, 2009

Aditya Birla Retail mulls IPO

Aditya Birla Retail, the country’s second biggest supermarket operator, is considering an initial public offer (IPO) and will time it as soon as the company starts spinning profits.

“We will definitely be open to an IPO but it will be closer to the time of profitabillity... Around 2012 or maybe even before that, when we sight profitability,” Aditya Birla Retail Ltd (ABRL) CEO Thomas Varghese told PTI here.

He said the company had still not determined the amount of equity it would dilute.

“We want to get the maximum value for the equity we have and that we will get only when we are able to show profitability and demonstrate long-term growth potential,” Varghese said.

The company, which operates over 650 supermarkets and three hypermarkets across the country, is also open to bringing financial investors on board.

“We are not opposed to diluting our stake marginally to give it to a private equity player, as long as his background profile meets our own aspirations. We want a passive financial investor,” he said.

Varghese has charted an ambitious growth plan for the company over the next five-six years and plans to make Aditya Birla Retail a $2-billion entity by 2015-16.

“We are resizing the supermarket business. Our network will have 1,600 or 1,700 supermarkets by 2015-2016, hopefully. And, we should have 80-100 hypermarkets by then,” Varghese said.

The mom-and-pop store chain is present in 14 Indian states with major operations in the south — Karnataka, Andhra Pradesh, Tamil Nadu and Kerala.

“Our strategy at this point in time is to deepen our cluster. We are hoping that most of our supermarket networks will become Ebitda-positive this year and that as a retail company, we will become Ebitda-positive in 2012, which will be our fifth year of operation,” Varghese said.

ABRL has a whopping count of 160 supermarkets in Andhra Pradesh alone, while the Karnataka network boasts of 107 outlets. The company recently rolled out a hypermarket in Indore, in addition to the existing ones at Baroda and Mysore.

“We will probably close the year with 680-690 stores. Not more than that, because we are planning to wind up quite a large number of stores even now, as part of our cleaning up process,” he said.

“We are already careful and not putting up stores which we think will not turn profitable within a year’s time,” Varghese added.

ABRL is eyeing a sales turnover of about Rs 1,600-1,700-crore in FY10, a 45 per cent jump in growth compared to the previous year.

Indian retail market to reach $535 bn by 2013: Report

India's retail market is expected to reach $535 billion by 2013, says a report on fashion and lifestyle franchises released here on Thursday.

"With anticipated $30 billion fresh investment over the next five years, modern retail will show impressive compound annual growth rate of 40 percent," said the Fashion and Lifestyle Franchise Report 2009-10.

"With this growth rate, the market is expected to reach $535 billion by 2013," added the report compiled by Franchise India Holding Ltd, a franchise solutions provider.

"The growth of organised retail will be driven by the franchise model in future," said company president Gaurav Marya while releasing the report at the two-day Franchise India summit on retail trade that began here Thursday. "In fact, that is the reason that many big companies going into retail mode are adopting it," Marya said, adding that he expected business deals worth Rs.150 crore would be struck at the summit.

About 250 firms including 30 foreign brands are participating. India's franchise segment is growing at 38 percent annually with the market size, currently valued at $7.2 billion, expected to reach $20 billion by 2013, the report said.

There are 1,200 active franchise concepts and over 110,000 franchisees in India, it added, and identified apparel retail, education and food leading the pack.
Thursday, November 26, 2009

Wal-Mart has not applied for retail stores-India min

Wal-Mart Stores, the world's largest retailer, has not sought to invest in retail stores in India, the junior trade minister told parliament on Wednesday.

The U.S. firm has also not sought any changes to India's ban on foreign holdings in multi-brand retail, Jyotiraditya Scindia said in a written reply.

India does not permit foreign direct investment in multiple-brand retailers, and caps foreign holdings in single-branded retailers at 51 percent.

Wal-Mart currently runs cash-and-carry operations in India in partnership with Bharti Enterprises.

Trade Minister Anand Sharma told parliament the government had no plans to review foreign ownership rules for the retail sector.

The entry of multinational retailers like Wal-Mart into India has been mired in controversy, with moves to open up the sector opposed by leftist parties and small traders fearful of job losses.

India's fragmented and tightly controlled $400-billion retail industry is forecast to nearly double in size by 2015, but less than 5 percent of the market is in the hands of modern retailers.

More foreign players in the textile sector in 4-5 months

While the global slowdown may still be far from over, the Indian textile industry is expected to have tie-ups with foreign companies in the next four to five months. The foreign investment through the direct route is likely in apparel sourcing, fabric manufacturing and textile machinery manufacturing.

The foreign joint ventures are expected to fructify following Union Minister of Textiles Dayanidhi Maran’s recent visit to Europe along with an industry delegation to attract FDI into the sector. The delegation held meetings with textile companies in Switzerland, Italy and Turkey. Talks with some companies have progressed which is expected to result in foreign textile players setting up bases in India in varying capacities.

Most investment would be in the form of joint ventures between Indian and foreign companies. However, a foreign player is expected to set up a green field machinery manufacturing unit on its own accord.

Some of the prominent companies the delegates had held discussions with include Italian companies Gruppo Coin, Radici Group and Miroglio, among others. For investment in the textile machinery sector, the delegation held discussions with Swiss companies like Beninger, Reiter, Jacob Muller, among others. Other prospective investors are Turkish companies Bilsar and Yunsa Yunlu san Tic A.S. "Currently, all prospective investors with whom the initial talks were done are exploring how big the Indian market is and the right time to enter into partnerships. In the next four to five months you will see agreements being signed in both the machinery and the apparel sector," said Prashant Agarwal, vice-president in consultancy agency Technopak. Agarwal was part of the minister’s delegation.

Investments are expected, however, to be slow in the areas of apparel retail as policy restrictions, limited understanding of the Indian retail market and apparent lack of suitable domestic players for joint ventures act as major hurdles.

"Foreign players are interested to invest in India in varying capacities. They are interested in setting up green field machinery (textiles) units as India really lacks in this sector. Apparel sourcing hubs are also one of the sectors which are attractive for foreign players. There are some players who want to set up retail outlets but sourcing hubs are more popular," said M Senthil Kumar, chairman and managing director of Tamil Nadu-based Palladam weaving park and a member of the trade delegation.

Countries like India and China have acted as sourcing hubs for foreign players primarily due to the cost-effectiveness of the locations. India, however, has constantly lost to China as a contender for location for sourcing hubs as Indian manufactures are unable to satisfy the large volumes needed by major brands. However, major foreign retailers like JCPenney, Nautica, Dockers and Target have their own sourcing network in India. Foreign players are less apprehensive about setting up sourcing bases than setting up retail outlets as it is considered a safe venture, as many foreign players have already established themselves. Even as many major global retail brands have announced their intention to enter the Indian market, several high-priced international apparel brands were earlier forced to close shop due to sluggish demand. Few other brands like Jimmy Choo and Bottega Veneta changed hands from the Murjanis to Genesis Colors and Springfield in order to sustain growth.

"Sourcing is one of the most lucrative options for foreign players in India and they can use it as their export base too. Foreign players are apprehensive about retail ventures as there are already established players and brands and some functioning through franchisee outlets," said the chairman of another mid-sized textile firm requesting anonymity.

Sourcing hubs use the Indian base to source their fabric and export them to other countries. Sourcing hubs do not cater to the needs of the domestic market. However, some players like the Kohlapur-based Tessitura Monti India Private limited, which began its business in India as a sourcing hub, also established a brand for the domestic Indian market.

The Indian textiles sector has been able to attract only $200 million, which is a mere 0.6 per cent of the overall FDI of $33 billion, in the year 2008. In comparison to India’s dismal figures, the Chinese textiles industry has been able to attract foreign investment of $10 billion during the same period.

Francorp eyes 40-50 clients in India; to bring global brands

US-based franchise consultant Francorp International today said it expects to secure 40-50 clients in India by next year-end, besides introducing 10 global brands here.

"We expect to have at least 40-50 domestic clients, specially from the education, retail and food and beverages segments in the next one year," Francorp Chairman and CEO Donald Boroian told PTI on the sidelines of the Franchise India 2009 summit here.

The company, he said, is eyeing a revenue of up to $5 million as franchise consultancy fee from the deals.

The firm is also working with some international brands and hopes to bring in at least 10 of them to India next year.

"Many firms from US and other countries, who are our clients overseas, are exploring options to foray into India and we expect at least 10 of them will launch operations here during 2010 under franchise arrangements with local partners," Boroian said.

He, however, refused to divulge the name of brands citing confidentiality but said each international client would bring up to one million dollar as fee.

The company, which has a 40 per cent share in the US franchise consultancy market, last year formed a strategic partnership and licensing arrangement with the Franchise India Holdings (FIHL) under the name of Francorp India.

According to experts, the $7 billion Indian franchise market is growing at 25-30 per cent annually

"We want to tap its immense scope, basically in franchise consulting and sales. Besides, helping Indian firms to grow and brining international ones to the country, we will also offer Indian firms to venture abroad but it will take some time," Boroian said.

The company is also looking to expand its footprints by opening offices in all four metros.

"Currently, we have only just one office, located in Delhi. Next year, we plan to open our office in Mumbai and then venture to Kolkata and Chennai," he said.

Francorp, which operates in 45 countries across the world, has global client base which include companies like American Express, Du Pont, Kodak, Ford Motor Company, Hall Mark cards, Shell Oil and KFC among others.
Wednesday, November 25, 2009

Tomato rates more than double in a month

Hitting hard the consumer already reeling under high food prices, retail prices of tomato have jumped to around Rs 45 a kg in New Delhi within a month on soaring demand after the marriage season coupled with low supply.

The wholesale rates of tomato, a key ingredient in many an Indian dish, have also risen during the period but the hike is not as sharp as retail rates.

Retail prices of tomato are ruling at over Rs 45 a kg, against Rs 18 a kg a month earlier.

In the wholesale market of Azadpur, tomato was available at Rs 24.80 per kg on Saturday last week, against Rs 12.86 a kg on October 26, according to data by the Delhi Agricultural Marketing Board.

Vishal Retail In Debt Talks After Loan Default

In the second such move by a major Indian retailer this year, Vishal Retail has announced that is will under a corporate debt restructuring (CDR) process, after failing to repay its loans. The announcement comes just 10 months after discount chain Subhiksha said it would begin a similar process – one that has still not been completed.

Vishal Retail, which operates hypermarkets across India, said it will look to restructure Rs.7.3bn ($157m) of loans. According to CDR rules, the entire process has to be completed within 120 days, during which period no creditor can take a unilateral action against the company.

Reports said the group is looking for a moratorium on payment of both the interest and principal amount it owes to lenders. The company has an annual interest payment obligation of Rs.1.0bn ($21.5m). Group President Ambeek Khemka told a local TV station, “Lenders are very sure that the company will be in a position to service its debt. However, there would be some kind of sacrifices which the lenders might have to make. The company would have to ensure that the business is running by bringing down the financial cost.”
Tuesday, November 24, 2009

Mom-and-pop stores unfazed by organised retail entry

Even as the controversy over the entry of multi-brand retail continues, the Government on Monday said that the rate of closure of unorganised retail stores due to competition from organised retail is minimal at 1.7 per cent per annum.

In a written reply to the Lok Sabha, Mr Jyotiraditya Scindia, Minister of State for Commerce and Industry, said that a sample survey conducted by the Indian Council of Research on International Economic Relation (ICRIER) has indicated that a majority of mom-and-pop stores are keen to compete and remain in business. The Minister also pointed out that there was no evidence to suggest that overall employment has declined followed by the entry of organised retailers.

“There has been some decline in employment in the north and west regions, which however, also weakened over time,” he said. The study also said that the rate of closure of unorganised retail shops in gross term is about 4.2 per cent.

“Unorganised retailers in the vicinity of their organised counterparts experienced a decline in volume of business and profits in the initial years,” Mr Scindia said.

Retailers hitting the country road

Large retailers including S Kumars Nationwide, Reliance Retail, Arvind Ltd and Spencer's Retail are hitting the country road in their quest for higher margins which are dwindling in the larger but saturated urban markets.

The $390 billion Indian retail industry, which is projected to grow at a compound annual growth rate of 8-9% over the next 4-5 years, is finding a greater comfort level operating in villages where rentals are a fifth than that of the urban areas and manpower costs much lower.

Ramesh Srinivas, national industry director (consumer markets) at KPMG Services Advisory, said, "There are number of towns where well-known retailers do not have any retail presence, reflecting a significant growth potential."

In smaller towns it will be the large-format stores that will rule the roost for retail giants and help them break even. Around 315 hypermarkets are expected to come up in tier I and II cities by 2011, according to a study by KPMG and industry body Assocham.

Smaller towns should be on the radar of retail majors today if they plan to set up stores in these towns three years from now, the study says. More, the Aditya Birla Group promoted retail chain which is looking for a pan-India presence in a short time, will open at least half of 33 new stores it plans to start by the end of this fiscal, in small towns.

"Smaller towns are major revenue contributors and business is growing at 40% compared to 10% in metros," Thomas Varghese, CEO, Aditya Birla Retail, said. Currently, the firm has 656 outlets across the country.

Spencer's expects smaller towns to contribute 50% of the revenue going ahead. The firm plans to roll out three hypermarkets in the next 8-10 months in tier I and II towns. Spencer's currently has 251 outlets across India.

"The break-even is much faster in smaller towns and we expect to be profitable within 12 months at the store level," Vineet Kapila, president, Spencer's Retail, said. S Kumars Nationwide, the textiles firm, plans to penetrate into the smaller towns through its economy brand Belmonte.Arvind Ltd derives 30% of its revenue from tier II and III cities and plans to roll out 30 stores by the end of the current fiscal.
Monday, November 23, 2009

Cadbury aims for a bigger bite of Indian market

Even as US-based Kraft Foods Inc. and other likely bidders emerge for the world’s second largest confectioner, Cadbury Plc is renewing its own bid for the Indian consumer with hopes to raise its market share in the subcontinent.

Over last three years, Cadbury’s Indian arm has logged higher profits by doubling sales growth through its presence in more retail outlets through a wholesale network that has grown as it increased reach into smaller towns.

Smaller packs and variants of existing brands starting at Rs2 boosted sales in the last few years, but the aim now is to energize the category by attracting new customers via a new avatar of Perk, the wafer chocolate introduced in the 1990s to counter Swiss multinational Nestle SA’s successful launch of KitKat.

The new Rs5 Perk, which is bigger than the version it replaces, boasts of having glucose energy and is aimed at bringing more on-the-go teenagers looking for a low-cost hunger buster.

“The increase in size is important for the new consumers,” said V. Chandramouli, director of human resources and strategy for Cadbury India Ltd. “At the same time, the product went through multiple rounds of evaluation to make sure we do not alienate existing buyers.”

Cadbury’s switch to the fast lane happened with the arrival of Anand Kripalu, whose mantra even at his former employer Unilever was to kick up not just market share but to lift the entire category.

“If you have super brands and star talent, then that combination has to make us bigger than what we are,” said Kripalu, Cadbury India’s managing director who interacts informally with his employees every quarter via an open house.

The London-headquarted company, which also sells bubble gum Bubbaloo and milk-food drink Bournvita, has dominated the Indian market for over six decades with around 80% share of the chocolate business in the 1980s.

With the entry of Nestle in the 1990s, its share slipped and now stands at 71% of the Rs2,000-crore chocolate market, according to research group AC Nielsen. Nestle, which is more popular for its dairy products, Nescafe coffee and Maggi noodles, has a close to 25% share of the chocolate pie, and Gujarat Cooperative Milk Marketing Federation, widely known for its Amul butter, milk and ghee, and imported chocolates take the remaining 4% share.

“While I would applaud Cadbury by saying that they have put up barriers to entry, I think that their position today is not so much of their own making as much as the fact that nobody has chosen to give them an iota of a fight in the market because competitors have other businesses that are far more profitable,” said Sharda Agarwal, a director at brand consultancy MarketGate.

Cadbury’s brand share in India may be the highest in the world but that ranking lacks sheen as annual consumption of chocolates by an Indian is just 54g, against 10.5kg in the UK and 5kg in the US.

So, three years ago, with a multifunctional team of sales people with distributor focus, marketeers intuitive of consumer needs and the scientists in the product and packaging research and development lab, the move to create a chocolate magnet for new customers that would push per capita consumption began.

Meanwhile, Sunil Sethi, Cadbury India’s director of sales, pedalled hard to improve supply chain efficiencies by chiselling away more than half of the distributors to remain with the most productive ones and connecting their computers to the corporate server, enabling electronic order placements and shrinking unreliable paper bills.

Next came offering-specific assortments, as against the entire brand basket, to retailers via distributors based on the customers they attracted, which reduced inventory at the distributors and also improved their cash flow.

The result: a 700% jump in the number of wholesalers that the distributors serviced and an average of at least 20% annual growth in sales along with a nearly 30% jump in profit.

“We’ve freed up money from blocked inventory, and as a result, you have made your distributor far more profitable,” Sethi said. “Today, most of my retailers are earning a 24% return on investment versus earlier when it would vary anywhere between 15-25%.”

With the launch of the new Perk, which has a more cost-effective recipe along with cheaper packaging, the firm expects to double its retail presence to two million outlets in another two-three years, inching closer to reaching all the 4.6 million outlets that stock confectionaries. It is also offering the new Perk in a more affordable Rs100 trade pack versus Rs145 earlier.

FIPB defers Gucci’s stake buy proposal

Italian designer goods maker Gucci’s proposal to pick up a majority stake in its Indian franchisee has been deferred by the government after Department of Industrial Policy and Promotion (DIPP) sought further examination.

Gucci had approached the Foreign Investment Promotion Board (FIPB) with a proposal to pick up a majority 51% stake in its Indian franchisee, Luxury Goods Retail Pvt Ltd (LGR). The proposal sought equity participation by Gucci Group NV, Netherlands, for retailing Gucci brands in the country and it would have resulted in FDI inflow of Rs 1.04 crore.

Luxury Goods Retail Pvt Ltd currently retails products under Gucci brand in India. Sources said Department of Economic Affairs (DEA) — despite granting no-objection to the proposal — asked DIPP to examine the foreign holding in LGR, apart from looking into some other issues. DIPP requested for time to further examine the proposal, following which Foreign Investment Promotion Board decided to defer it.

India currently allows 51% foreign direct investment in single brand retail but none in multi-brand retailing. Gucci India entered into a franchise agreement with Murjani Retail on January 9, 2006 for sale of Gucci products. The pact was terminated on July 31, 2009 and replaced with a new franchise with the investing company.

Gucci product are sold in over 50 countries through stores owned by Gucci Group and also through franchisee agreements.

Global luxury apparel retailers eyeing Indian mkts

The fashionista dream is alive and kicking. But it’s no longer strictly elitist! With the US and Europe still grappling with recession,global luxury apparel retailers are eyeing markets like India, which has put itself firmly on the path of recovery.

Reworking their business model by focusing on affordable luxury, international majors are in talks with Indian players to target aspirational but value-conscious consumers.

While retail chain major Shoppers Stop is all set to launch Playboy brand of unisex wear, textile conglomerate S Kumars group is bringing in three international brands by the end of this fiscal.

Several high-priced international apparel brands were earlier forced to close shop due to sluggish demand. Few other brands like Jimmy Choo and Bottega Veneta changed hands from the Murjanis to Genesis Colors and Springfield in order to sustain growth.

Now, global brands are relying on Indian retailers’ understanding of the local market while Indian retailers are reworking the price in accordance with preference of the consumers.

“Indian retailers, tying up with international brands, are giving them an insight of the Indian market and taking the responsibility of marketing on franchisee basis, which is being preferred by the overseas brands,” says Rahul Mehta, president of Clothing Manufacturers Association.

Shoppers Stop, which had launched foreign brands like MAC, Mothercare and Austin Reed among dozen of global brands, and now plans to add about half-a-dozen international labels soon.

“We have recently introduced European jeanswear brand Mustang and will be launching Playboy apparel (Avinix Fashion) and luxury cosmetic brand Guerlain (Baccarrose),” says Govind Shrikhande, chief executive officer of Shoppers Stop. India is seen as a key growth market and is getting positive response from several international brands, added Mr Shrikhande.

S Kumars group, which tied up with Italian brand Oviesse this year, is in talks with other international brands. Nitin Kasliwal, managing director of S Kumars Nationwide (SKNL), said, “We are in advanced stage of talks with international apparel brands keen to tap the Indian market soon. Some of these brands are top-end luxury brands.” Brandhouse Retails, apparel retail arm of SKNL, will look after the retail expansion and marketing of these brands in the country.

Arvind Brands, which has a licence to market premium segment men’s wear brands such as Arrow and Gant, has launched ‘Izod’ in India, a label of global apparel firm Van Heusen. In line with others, Murjani Group, that brought brands like Calvin Klein, Tommy Hilfiger, Gloria Vanderbilt and French connection funky wears for youngsters FCUK, has also launched an on-line sales service for the brand.

Industry analysts contend that earlier the global luxury brands, which came in India, were highly priced for the Indian consumers. Now, in order to sustain in the market, most of them have started discount selling. The big brands Mega Carnival in Mumbai recently offered almost 80% on international brands like Roberto Cavalli, Givenchy, Davidoff, Chopard and Calvin Klein, to name a few.

“Market for luxury brands is yet to develop in a country like India, where demand is rising with consumers’ purchasing power,” said Tarun Joshi, managing director Brandhouse.

According to industry analysts, the market for luxury and premium brands in India is estimated at about Rs 6,000 crore- Rs 7,000 crore and growing at about 25-30%. However, luxury is still in its nascent stages as only 8-10% of the Indian population in metros is exposed to such brands. Overall, organised apparel retail contributed more than 35 % of the entire organised retail market aggregating over $ 60 billion.
Sunday, November 22, 2009

Retail rentals: Revenue sharing new buzzword

There is a new vocabulary evolving with retailers and their landlords in Pune. With a “market correction” on the rental front, the talk now is of MG (i.e minimum guarantees) and rev share (i.e. revenue share).

For landlords, rev share, a pre-determined precentage share of sales at the store, is emerging as a better option than vacant space. The trend has caught on at most of Pune’s premier high street areas, except the traditional market of Laxmi Road due to high demand and low availability.

“The highest correction in rentals has been on the Jangli Maharaj and MG Road high street shopping areas, where the correction has been up to 30%,” said Anand Dutta, who heads the retail practice in Pune for property consultants Jones Lang LaSalle Meghraj (JLLM).

Retail rentals in the city, based on carpet area, are now in the range of Rs 20-40 per sq ft. However, the prime high street locations offer rates at the upper end of the range.

Mr Dutta said more retailers are now looking at hiring space after the correction, but using the MG and rev share model. “The number of transactions is up as landlords become more practical, having discounted rentals by 30-40% with an 8-12% of revenue share,” Mr Dutta said.

One example of a retailer modifying his strategy is the 3 lakh sq ft Ishanya Mall in Yeravada area, near the airport. The retailer is believed to be re-working the rental strategy in line with market demand. Market sources said the mall, developed as retail business of Deepak Fertiliser and Petrochemicals Corp (DFPCL), is working out such a model with its two or three largest anchor tenants, having already re-worked its rentals.

“Arrangements like rev share are usually entered into with large retail chains which have books of account which they are willing to share so that the landlord is not done out of revenues,” market players explained. Office spaces are usually rented by MNCs and this segment is now back in the market.

However, JLLM managing director (west India) Pawan Swamy says: “Over the last six-eight months, MNCs have shown large requirements for office space. This is more for rent rationalisation or consolidation of operations. This is not new space hiring so don’t read a revival in this because office space is not reviving. It is still flat.”

The consolidation opportunity is bigger in Pune than rent rationalisation as MNCs are using the current opportunity to consolidate all operations in one place. Also, they might be relocating to a lower rental location, using the current price correction. Across the country, office rentals have fallen by 25-40% from the high of mid-2007.

Bucking the more cautious trend of the MNCs, Indian companies are expanding and in their traditional manner, preferring to buy rather than lease office space. Industry sources added that some real estate developers are changing the end use of some of their projects, in anticipation of an expected over-supply of retail space in the city in the next three years.
Friday, November 20, 2009

Pantaloon's tie-up with an international retailer in final stages

Pantaloon Retail is looking at acquiring a food led fast moving consumer goods (FMCG) business. It is in the final stages for Big Bazaar tie-up with international player.

Here is a verbatim transcript of Haresh Soneji’s comments on CNBC-TV18.

The company is into value unlocking thing. So it is going in for a holding company kind of structure where in all the businesses apart from retail business is unlocked and transferred to a holding company. Hence, pure retail will remain under Pantaloon Retail and the shareholders of the company will receive shares in the swap ratio which will be decided. A postal ballot is already on and the decision will be announced on December 16.

Apart from that, the company is close to an international tie up with an European retail major. This will help the company get into a Hyper Mart as well as cash and carry business. Pantaloon is looking at acquiring a food led FMCG business. Its private labels in the FMCG space, which do around Rs 125-130 crore annually and the acquisition in this space will help Pantaloon go in with logistics of that food led FMCG business. This is how they will see growth multiplying in this segment. We might see a deal announced soon on the e-zone front.

In the E-zone segment, which is an electronic bazaar segment of Pantaloon, ICICI Ventures and Bajaj, it holds close to about 33% stake. Tata Croma’s private equity (PE) deal is also likely. Hence, a PE player will come in and ICICI Ventures and Kotak Mahindra will find an exit. The market is clearly excited on the stock.

Indian pharmaceutical market is over Rs 55,000 cr

Indian pharmaceutical market, which has registered robust growth in last few years, was valued at over Rs 55,000 crore in the last fiscal, the Lok Sabha was informed today.

"As per the information available with Pharmaceutical Department through ORG-IMS (market research agency), April 2009, moving annual total (MAT) value of Indian Pharmaceutical market is Rs 55,454 crore," Minister of State for Chemical and Fertilisers Srikant Jena said while replying to a written query in Lok Sabha.

This includes retail pharmaceutical market at maximum retail price, companies not tracked by ORG, hospitals and institutional sales (except government procurement), direct doctor purchase, over the counter products and diagnostic chemicals, Jena said.

The average MAT value of Indian pharmaceutical market for the 2006-07 fiscal is around Rs 43,904 crore, for 2007-08 is around Rs 50,410 crore and for 2008-09 fiscal is Rs 55,454 crore.
Thursday, November 19, 2009

Sunglass Hut targets 30 outlets in India by 2012

The world's largest eye-wear retail chain Sunglass Hut said on Thursday that it is looking to take the number of its exclusive outlets in the country to 30 by 2012 as part of its expansion plan.

Besides, it also plans to venture into Tier II cities. "Sunglass Hut has got great response in India so far. We plan to create a chain of 30 outlets in the next three years across key cities like Delhi, Kolkata, Mumbai, Bangalore and Chennai, besides foraying into Tier II cities like Amritsar, Ludhiana and Jalandhar," said Sunglass Hut Brand Manager Pradeep Bhanot.

He, however, did not disclose the company's investment plans.

Sunglass Hut, owned by Italian firm Luxottica, had ventured into India in 2008 under a franchise agreement with realty major DLF’s retail management arm DLF Brands.

The chain today opened its fourth Indian outlet at Hyderabad.

"The Indian eye-wear market is worth hundreds of crores of rupees, of which only a small segment is organised. It gives us immense scope to increase our business," Bhanot said. The chain offers over two dozen premium international brands including Versace, Bulgari, Burberry, Prada, Tiffany, Persol, Revo and Salvatore Ferragamo.

Sunglass Hut has over 2,000 outlets across markets including the United States, Canada, the Caribbean, Europe, Australia, New Zealand, Hong Kong, Singapore, Middle East and South Africa.

Pantaloon Retail eyes small food cos

The Future Group-owned Pantaloon Retail is looking at acquiring small foods companies in India to bolster its portfolio in the category.

‘‘We are in talks with several small companies in the foods domain. These are Indian companies and have a clearly demarcated role to play,'' said Kishore Biyani, founder and CEO, Future Group.

Though Biyani refused to divulge the names of companies with which the group has initiated talks, industry sources said that it could be an existing third-party supplier from whom the group sources products. ‘‘With an existing supplier, the group would already be aware of the pitfalls involved in the company,'' said a source.

Future group had embarked on a strategy to boost its private label brand business which has achieved a scale in excess of Rs 100 crore. It plans to more than double its private labels business in foods. The move comes in sync with the large thrust given to its private labels FMCG business.

Dubai chains X-cite and Jumbo look to exit Indian retail

Three years ago, retail was the happening thing for corporates. Everyone wanted a slice of the ‘future.’ Now, after months of downsizing and desperation, many are hurtling to the exit door. The first ones to trigger the consolidation phase in the retail sector could be West Asian chains X-Cite and Jumbo.

According to sources, Dubai-based Jashanmal group’s X-cite and Manu Chhabria-founded Jumbo Electronics, also based in Dubai, are looking at winding up their Indian operations.

X-cite, a consumer durables chain, is negotiating with Reliance Retail for a sellout, sources told FE. In 2008, Tony Jashanmal, a promoter of the business group, had entered into a franchisee agreement with Kuwaiti conglomerate Alghanim to launch large-format multi-brand electronics retail chain in India. The chain was launched through an Indian firm, Impact Retail. X-cite was eyeing close to 30 stores across the country by 2009, investing more than Rs 200 crore, but could open only eight.

Details about the chain’s negotiations with Reliance are not immediately available. A Reliance retail spokesperson, when contacted, said, “We don’t comment on market speculation.”

Jumbo Electronics, with stores in key metros, is considering an exit from the Indian market, sources said. “Unlike in the West, Indian market is highly fragmented and organised retail has been a very hard learning even for established players. For instance, in the electronics segment, the market is still controlled by suppliers or manufacturers. Unlike neighbourhood stores, organised retail chains can’t give spot discounts as they have small inventory and operate on very small margins”, an industry expert told FE.

Analysts say Reliance Retail, which targeted Rs 1-lakh-crore business by 2011, has managed just 4% of that as turnover so far. The story is no different for the AV Birla group, which operates about 600 stores under the More brand. These companies, however, have deep pockets and can sustain losses for a few years. But smaller chains do not have the cash comfort. Subhiksha and Vishal MegaMart are already gasping for breath. Vishal has filed for corporate debt restructuring with the lenders.

“Retail was hit essentially due to the high rentals, and then, funds dried up. Now, retailers are a lot more cautious about signing properties and we are willing to wait for the right price. As for consolidation in the industry, there would be a lot of people in need of funds, and so, strategic partnerships might indeed be on the cards for a lot of players in the market”, Raghu Pillai, CEO, Reliance Retail, told FE.

“Compared to the previous years, there has been only a marginal rise in the sales of the organised retail segment this year. On the cost side, retailers have managed to cut costs but the rentals are still very high. A few retailers have been able to sign properties at 10-20% lower costs. But, by and large, there has been no strategic dip in the rentals. Developers still command 30-40% margins. Outlook is still difficult for the retail sector as a whole. It will take some more time”, Pinaki Ranjan Mishra of Ernst &Young said.

Mishra said there was a strong business case for consolidation and the industry could see much activity in the coming months.

Kishore Biyani, group CEO, Future group, said, “The footfalls compared to the previous year are improving slowly and we are optimistic that growth would gather steam.”
Wednesday, November 18, 2009

Hardware mkt poised for double digit growth

India's computer hardware market, which includes servers and desktops, is set to regain double digit growth rates from next year, as customers seek to establish new data centres and invest more in expanding their operations.

Top hardware vendors such as IBM, HP and Acer have already started seeing a revival in their sales, and experts forecast the hardware market to rebound by next year.

“Enterprises from the sectors of BFSI, automotive, retail and pharma are in forefront of making increased hardware investments primarily to remain globally competitive as well as to get better agility at the marketplace,” said Diptarup Chakraborti, principal research analyst, Gartner.

“We expect these companies to increase their spend in 2010,” he added. With new phone firms such as Unitech Wireless and MTS launching their operations, demand for computer servers and other infrastructure is indeed looking up.

According to research firm IDC, the overall PC market unit shipments in the second quarter of 2009 touched 1.7 million units recording a quarter-on-quarter (QoQ) growth of 5.2 per cent indicating the market is indeed headed towards a recovery.

“The India PC market performance in Q2 CY2009 has shown, what may be termed as early signs of a revival, as the decline in overall PC shipments year-on-year reduced from a high of 22.7 per cent (Q4 CY2008 vs Q4 CY2007) to 15.3 per cent in the current quarter (Q2 CY09 vs Q2 CY08),” Kapil Dev Singh, country manager, IDC India said recently.

Individual consumers and educational institutions are driving the recovery, Mr Singh added. Rival research firm Gartner has also projected that PC market in India will grow at 18.6 per cent in 2010, much higher than around 1.5 per cent growth this year.

Indeed, vendors such as IBM and HP are beginning to see their sales rise. “I do expect the India systems (hardware) market to be robust, Indian institutions are stronger than ever and companies continue to invest in both domestic and abroad,” said, Elly Keinan, general manager, system and technology group, IBM Growth markets.

The computer server market, which declined by almost 38% during second quarter of this year, looks to achieve positive growth from January next year.

“The Indian PC market has rebounded post the slump in the early part of this year. We are extremely bullish about the market going into next year and expect the Indian market to show a double digit growth in 2010. In the overall PC (notebooks and desktops) market, HP retains the top spot with a market share of 17.8 per cent, followed by HCL and Dell.

Reliance Retail to expand in new cities

Mukesh Ambani-led Reliance Retail is in the expansion mode and is looking to take its food-to- fashion chains into newer Indian cities as well forge new strategic alliances.

"I am pleased to report that we have done extraordinarily well, despite the tough economic conditions.

Having achieved critical scale, Reliance Retail is now working on expanding its coverage. This expansion would encompass new cities, new markets and new strategic alliances," Reliance Industries Chairman and Managing Director, Mukesh Ambani, told shareholders at the company's 35th Annual General Meeting.

Reliance Retail is an unlisted and wholly-owned subsidiary of energy giant, Reliance Industries Ltd (RIL).

Concurrently, Reliance Retail would focus on continuously innovating to enrich the shopping experience, through customised offers, private labels and 'value-for-money' merchandise, he added.

Reliance Retail today serves over five-million customers in 86 cities across 14 states. The fashion-food-gadgets chain operates nearly 1,000 stores.

"We are developing an ecosystem, which will strengthen our offering, while bringing wealth to our stakeholders, primarily marginal farmers, small transporters and vendors," Ambani said.

Indian logistic cos boost capacity, eye economic recovery

Logistics firms in India are expanding capacity and boosting investments eyeing business from sectors like retail and infrastructure, but high operating costs remain a worry.

Organised players in the largely fragmented industry are expanding operations in warehousing, port and air services, aiming to boost their share of the logistics business to 14% from the current 6%, industry participants said.

One of the major contributors to the logistics industry would be warehousing sector, which, in turn, will be driven by a growth in retail and agriculture, said Abhishek Kiran Gupta, Associate Director, Research, at real estate consultant Jones Lang LaSalle Meghraj.

"The size of warehousing will increase as more niche and specialised stores open and requirement for food increases, the retail sector that had taken a beating, will bounce back," he added.

Future Group, Gati, AFL and Safe Express are among logistics firms pumping in about Rs 50 billion over the next three years to expand warehousing operations across the country, Tushar Jani, Chairman, Confederation of Indian Industry (CII), Western Region Logistics Sub-Committee, said.

Jani, also the former chairman of logistics major Blue Dart, said the investment will lead to development of 30 million square feet of warehousing space in India over three years, even though the country would still face a deficit of 50 million square feet. India's total warehousing capacity stands at around 9,700 million square feet.

Infrastructure is another key driver for the warehousing sector, Jones Lang LaSalle Meghraj's Gupta said.

The government has proposed a USD 494 billion investment under the Eleventh Five Year Plan (2007-12) in developing of infrastructure that would have a directly impact on the sector.

Air, Ports

Blue Dart Express is ramping up air and ground infrastructure by investing Rs 10 billion over 5-7 years.

"We would keep investing in infrastructure and technology to ramp up our operations, reach and transit times. We would invest in air and ground infrastructure with transit hubs, hi-tech material handling equipment and aircraft," Blue Dart Managing Director Anil Khanna said.

Private port developer Mundra Port & SEZ is investing in development of port infrastructure that would help in fostering the logistics industry, said Sandeep Mehta CEO, Container and Logistics business at the firm. But high costs are already beginning to hurt.

"Fuel prices (both ATF and diesel) keep fluctuating, which drastically affect our operational expenses inflationary trends in security, air-side and off-site congestion have also impacted us. All these factors knit together have enhanced our operating costs manyfold," said Blue Dart's Khanna.

Gati is trying to control costs by replacing its existing fleet with younger vessels and reaching out to newer geographies like Rangong (Thailand), said Atul Srivastava, head (commercial).

But despite higher costs, officials agree that the sector is poised for growth as increased consumption will lead to greater demand and supply leading to more movement of goods and the current investments will pay dividends.

"Growth in our economy is driven primarily by domestic consumption and not by foreign trade as is the case with many other economies like China. The government is also playing its part by drawing up robust plans for developing and upgrading infrastructure - both air and ground," Blue Dart's Khanna said.
Tuesday, November 17, 2009

Levi’s, UCB in Rs 500 cr club

BANGALORE: It’s not easy to live unbuttoned and succeed in India, but Levi Strauss & Co and United Colors of Benetton have done it. The fashion giants are set to notch Rs 500-crore sales this year, making them the first international apparel brands to successfully replicate their global brand appeal here.

Denim jeans maker Levi’s and casual wear brand Benetton, both of which have been around since the 1990s, will cross the Rs 500-crore mark in turnover this year, two industry executives close to the companies told ET. Spokespersons of both the companies declined to confirm the number or comment on the development.

The road to the $100-million mark has been tough for the two fashion majors that figure in most lists of top global brands due to tough competition and an extremely price-sensitive market.

The common thread between Levi’s and Benetton has been their long-term focus on India that has seen them keeping their ears close to the market through local sourcing and production.

As a result, they have been competitively priced—escaping import duties and freight costs—and are able to replenish stock in time to support aggressive store expansions. But breaking into the Indian market was tough for both the firms.

The 1994 entry of the inventor of jeans received a tepid response as Pepe Jeans and Arvind Brands’ Lee locked on to youth connect faster. It was only at the turn of the century that this age group embraced Levi’s as its ‘Low rise-Dangerously low’ campaign, coupled with an altered entry-level pricing and expanding distribution network, found a place in the consumer mind space. From then on, Levi’s made all the right noises, be it ‘Live unbuttoned’ or ‘Diva rules’.

It stirred up the market by spinning off Levi Strauss Signature as an entry-level brand through separate stores, creating a volume generator even in tier II and tier III cities. “We operate the Signature brand in select markets in the world. It is a key pillar on which the future plans of the company in India are built,” says Shumone Chatterjee, MD of Levi’s Strauss (India).

Levi’s has created a fine balancing act of being able to operate at more premium prices than competition at one end, while remaining aspirational to the mid-market segment without diluting the overall brand, says Baqar Naqvi, associate vice-president, retail and consumer goods, at Technopak, a retail an management consultancy.

Its focus on the women’s market backed by celebrity endorsements has helped it grab almost 40% share in the Rs 2, 000-crore Indian branded denim market. Levi’s also has a made-for-India non-denim street wear brand, Sykes.

Benetton, which entered the country through a joint venture with the DCM Group in 1991, too had a slow start. Setting up of a 100% subsidiary in 2004 changed the game for firm renowned for its ‘united colors’ campaigns. The Italian casuals brand has grown over 10 times from a turnover of around $9 million in 2004 as it crosses $100 million in 2009.

Benetton’s USP has also been its ability to cater to varied age groups and needs across its flagship brand Benetton, leisure-oriented Playlife as well as innerwear and childrenswear. It has tied up with Tata Group Company Trent Ltd to penetrate its high-end fashion brand Sisley in India.

“Benetton has fairly understood the Indian market, possibly because it is one of the first international apparel brands to enter the country. The Group has demonstrated this through sharp product pricing and marketing communication that is in tune with consumer perceptions and willingness to pay,” national leader, retail & consumer product practice at Ernst & Young India, Pinakiranjan Mishra said.

The Benetton Group has identified India as a priority growth market. According to the Benetton Group’s nine-month performance review in 2009, the emerging markets grew 13% particularly due to India and China.

In India, there was further acceleration in growth due to continued increase in comparable performance and department stores in prime locations, the review said. The company set up close to 80 stores in the country in the first half of 2009.

Both the global brands are now looking to step on the gas and increase their lead over key rivals — Pepe Jeans, Lee and Wrangler in the case of Levi’s and Madura Garment’s Allen Solly (menswear) and Mango (womenswear) for Benetton.

There’s enough room for growth in the country’s Rs 40,000-crore branded apparel market, growing at an annual rate of 12% over the last five years, according to Technopak estimates.

Makeover time for direct sellers

NEW DELHI: Amway is changing its way. The largest direct selling company in the world, which has emerged a global retail giant over the last 50 years with minimal advertising and no store presence, will soon start product advertisement as it increases its adspend.

And its showing the way too. The US-based wellness and personal care products firm is part of an army of direct sellers in India that has woken up to the need for complete brand-building exercise through mass media.

Oriflame, Tupperware and Modicare have all started spending more on advertising and even tying up with retailers as India’s Rs 3,300-crore direct selling industry is bracing up for increased competition from traditional players who have added direct selling and e-tailing to widen their reach to rural and semi-urban areas.

Other direct sellers such as international cosmetics brand Jafra and wellness brand New-skin too are looking at advertising their products.

Tupperware, an international brand of food storage, preparation and serving items, recently tied up with the country’s largest retailer Future Group’s Big Bazaar to display its products at select outlets during the festive season.

“We have realised the importance of a complete brand-building exercise,” says Asha Gupta, MD of Tupperware India. The company also tied up with ICICI Bank last month to reach out to the latter’s corporate clients and co-branded Bollywood movies Billu Barber and Namaste London as part of its 360-degree marketing exercise.

Amway has seen its spend on advertisement rise from about Rs 4 crore in 2005 to close to Rs 15 crore this year. “Amway does not traditionally advertise but we realised that India was a different market and that we would need to supplement sales force’s efforts with brand campaigns in mainstream media,” says Bill Pinckney, CEO and MD, Amway India, a Rs 1,128-crore enterprise.

So long, Amway’s campaigns focused on building the corporate brand. Next year, the maker of largest vitamins dietary supplement brand Nutrilite, Artistry skincare products and Persona premium soaps, plans to start product advertisement.

The company is also encouraging its 5.5-lakh distributors to tie up with salons and beauty parlours to sell its range of personal care products. Cosmetics brand Mary Kay has been advertising ever since its entry into the country in 2007. “We utilise outdoor, regional print media and radio advertising to complement the sales forces’ efforts,” says Renuka Dudeja, senior manager, communications and consultant marketing programmes, at Mary Kay India.

The Rs 100-crore FMCG brand Modicare plans to spend over Rs 2 crore on advertisement next financial year, according to Manisha Amol, VP, marketing, at Modicare.

With companies taking the mass media route, India’s 15-member direct selling industry is expected to retain if not accelerate last year’s growth rate of 17%. Way to go.
Monday, November 16, 2009

Reliance Retail awash in red

RELIANCE Retail is yet to see profit in any of its formats. The company has reported total losses in excess of Rs 450 crore in 2008-09 alone. Mukesh Ambani had launched the retail business in 2006, which now operates under 15 formats.

Data obtained from RIL shows that till March 2009, Reliance Fresh had run up the highest negative reserves of Rs 276.77 crore. The other formats such as Reliance Hypermart (negative reserves of Rs 54.32 crore), Retail Concepts & Services (-Rs 38.37 crore) and Reliance Vantage Retail (-Rs 21.23 crore) have also run up negative reserves.

Reliance Dairy Foods (with negative reserves of Rs 7.63 crore), Reliance Digital Retail (-Rs 15.49 crore), Reliance Footprint (-Rs 10.47 crore), Reliance Trends (-Rs 3.1 crore), Reliance Gems and Jewels (-Rs 5.73 crore) and Reliance Home Store (-Rs 4.54 crore) are among the other formats that have reported accumulated losses.

RIL’s unabridged annual report confirms the consolidated negative reserves and the total loss. The company did not respond to an email seeking comment, possibly because of the silent period ahead of its annual general body meeting.

A part of Reliance Industries, India’s most valuable company, Reliance Retail now runs as many as 900 stores across 14 states in India, spanning the supermarket, convenience store and mini hypermart formats, in addition to specialised units which sell everything from eyewear to jewellery. The business, which encompasses partnerships with firms such as Marks and Spencer, Office Depot and Hamleys, now counts five million customers as members of its business-wide loyalty programme.

Reliance Retail has now struck a strategy to partner with global majors for specialised retail formats, catering to distinct sets of shoppers.

While the retail major has outlined a plan to enhance value for its customers through customised offers, private labels and ‘value-for-money merchandise,’ its shareholders are seeing a rising portion of Rs 4,051 crore invested as equity capital in Reliance Retail erode by way of losses accumulated at each of its subsidiaries.

These firms, which run formats such as the food and grocery specialty store, electronics specialty store, foot wear specialty store and apparel specialty store, have all made losses in the fiscal year 2008-09 (see table alongside). Even support businesses such as Strategic Manpower Solutions have totted up negative reserves of Rs 10.24 crore while Reliance Trade Services Centre has accumulated Rs 21.23 crore in losses. Companies engaged in the supply chain aspects of the retail business too have not been spared.

Reliance Agri Products Distribution had negative reserves of Rs 7.83 crore while Reliance Food Processing Solutions had negative reserves of Rs 37.34 crore and Reliance Supply Chain Solutions Rs 12.9 crore. Firms such as Reliance Loyalty & Analytics, which supports the Reliance One customer relationship management programme, had negative reserves of Rs 6.44 crore till March.

The rising losses in the retail business are learnt to have led to the billionaire Ambani downsizing the ambition for this business, which was expected to bring about a paradigm shift to his oil and petrochemicals commodity venture. However industry experts point out that even other large business families such as the Kumar Mangalam Birla-controlled Aditya Birla Retail too are losing money as they try to get their business model, scale and efficiencies right.

Shoppers Stop to raise funds

Department store Shoppers Stop is planning to raise funds to acquire 32% in group firm and hypermarket chain Hypercity, a top official said. The company is looking at generating Rs 1 billion to Rs 1.2 billion rupees (USD 21.6 million to USD 26 million) for the acquisition, President and Chief Executive Govind Shrikhande said.

On Saturday, the company's board approved an issue of 4 million shares to institutional investors and also 4 million convertible warrants to founders, but did not specify how much it would be raising. Hypercity is the multi-brand retailing format floated by the founders of Shoppers Stop, which has a 19% stake in it and under an agreement is exercising the option to raise it to 51% by June next year.

Shoppers Stop, with a total retail area of 1.88 million sq ft, operates large format department stores, home stores and speciality stores like bookstore chain Crossword and M.A.C cosmetics stores through a retail agreement with Estee Lauder. It has distribution tie-ups with Britain's Mothercare Plc and German lifestyle and jeanswear Mustang in India.

Earlier this year, it dissolved its catalogue retailing venture with Britain's Home Retail Group as the venture did not perform up to expectations. Shoppers Stop has plans to open 15 to 18 stores in India over the next 40 months with an average investment of Rs 1 billion a year, Shrikhande said.

The company, which reported a Rs 120.6 million net profit in the September quarter versus loss year-ago expects its financial performance to improve in future quarters with an improvement in the retail climate. "Customer confidence is improving, rental rates are coming down and overall costs are also coming down," Shrikhande said.

Rents were down nearly 35-40% compared to a year earlier, while realty owners were now more ready to enter into revenue sharing agreements with tenants than previously, he said.

Shoppers Stop, along with Pantaloon Retail, India's largest listed retailer and Tata Group's Trent dominate the organised domestic Indian retail sector. Large overseas retailers such as WalMart, Tesco, Metro AG, have recently started operations in India with cash and carry ventures. Organised retail, growing at 25-30% annually, constitutes 6-7% of the total Indian retail market, estimated at USD 350 million to USD 400 million.
Saturday, November 14, 2009

Retail players have reported better results for the September quarter

Retail players have reported better results for the September quarter as compared with the year-ago period.

Pantaloon Retail (India)'s numbers were in line with street expectations. Revenues increased 17.5%, driven by higher contribution from the higher-margin lifestyle stores. Same-store sales for value retailing increased by around 7% and for lifestyle retailing by about 11%. Operating profit margins increased 45 basis points (100 basis points make a percentage point) to 10.7%. Operating performance improved on account of staff-cost control and marginally higher gross margins. Net profit increased 21% to Rs 43.82 crore, helped by other income.

Shoppers Stop posted a net profit of Rs 8.67 crore against a net loss of Rs 18.26 crore last year. Profitability was helped by strong operating performance and a decline in depreciation and interest costs. Operating margins stood at 6.63% compared with negative margins last year. Operating performance was helped by much lower growth of 1.7% in total expenditure. Cost-cutting measures including closure of loss-making formats in the last few months resulted in a drop in operating expenses. Revenues increased 9%, driven by a 2.3% growth in same-store sales in departmental stores and 1.8% growth in all formats. Also, the number of customers entering the stores increased 5.3%.

Provogue's revenues increased 9%, primarily led by discount sales, even as same-store sales got back on the growth track. Provogue added three stores in the quarter.

Operating performance was good and margins expanded by 191 basis points to 9.78% last year. Other expenditure declined 6.8% as lease rentals of some properties were revised downwards, which boosted operating performance. Net profit increased 12%.

Trent's net profit increased to Rs 5.26 crore from Rs 3.53 crore last year. Revenues increased 10.2%, driven by more than doubling of other operating income. Total expenditure grew at a relatively slower pace of 6%, as advertising and sales promotion costs increased by just 1.8% and total raw material costs grew 4.6%.

Operating margins stood at 3.78% from almost nil last year.

PVR acquires DLF's DT Cinemas for Rs 60 cr

PVR, one of the India’s leading retail entertainment companies, has decided to buy out the cinemas owned by India’s largest developer DLF, in a mix of part cash and part stock deal. The total value of the deal is estimated to be around Rs 60 crore.

NDTV Profit reported the story first on August 26. The company will issue 25.57 lakh of its shares to DT Cinemas, representing 10 per cent of the fully diluted paid up share capital apart from making a payment of Rs 20.2 crore to fund the acquisition, PVR said in a filing to the Bombay Stock Exchange.

DT cinemas has 29 screens in Delhi and NCR, of which 26 are operational, while another three screens expected to commence operations in the next six months. PVR has 108 screens across the country.

The deal will be on a slump sale basis (transfer of one or more business undertakings as a result of the sale for a lump-sum consideration without assigning values to individual assets and liabilities), the company said.

Sugar prices up 19% since October on delay in cane crushing

Retail prices of sugar have risen by up to 19% in the four metros since the start of the new season in October, as delay in cane crushing in top two producing states have affected fresh supply of the commodity.

In the national capital, sugar prices have risen to Rs 38 a kg as on November 12 from Rs 32 per kg on October 1, according to the data complied by the ministry of consumer affairs, food and public distribution.

During the period under review, sweetener prices have advanced by Rs five to Rs 35 a kg in Kolkata. Sugar is selling at Rs 37 a kg in Mumbai and Rs 33 in Chennai, an increase of Rs 4 and Rs 3 a kg, respectively since October 1.

The prices are rising because of delay in the crushing process in the top two sugar producing states -- Maharashtra and Uttar Pradesh.

While in Maharashtra the crushing has been delayed by 15 days, the sugar mills in Uttar Pradesh have yet not been able to start crushing due to farmers' protest who are demanding Rs 280 a quintal for their produce.

Processing of imported raw sugar has also not started in UP as mills have not started their operations so far.

Sugar prices have been rising and have almost doubled since October last year due to sharp fall in production.

In the 2008-09 season, sugar production of India, the world's biggest consumer, fell to 15 million tonnes from 26.4 million tonnes in the previous year.

Big Apple to invest $10 million to expand Indian retail business

Big Apple, a unit of Express Retail Services Private Limited in India, (a $25 million food and grocery retailer) has announced an investment of $10 million towards the consolidation and expansion of its business.

Big Apple is the Indian version of the popular US retail chain 7-Eleven.

With shopping becoming another casualty of long working hours, Express Retail Services Pvt Ltd expanded its Big Apple chain of convenience stores with 25 stores already merchandising 2,500 products including FMCG, grocery, fruits and vegetables, company managing director Munish Hemrajani said.

With 65 operational outlets in Delhi, Big Apple looks forward to add another 35 stores and take this number to100 in the next phase of expansion. Express Retail Services Private Limited is Delhi's first ever company owned retail chain.

Consumers are now looking at branded groceries and the new retailing fever is redefining grocery and farm produce retail in Delhi.

Big Apple has direct tie-up with farmers in Haryana, Rajasthan, Himachal Pradesh and Uttar Pradesh, provides consumers with uninterrupted and qualitative product supply every single time, it is learnt.

''The objective is not only making profits, also to bring the convenience and money saving shopping experience to Delhites within the walking distance of their homes. The stores are also designed to give hygienic and pollution free environment, which makes shopping experience a real pleasure,'' said Munish Hemrajani of Big Apple.

The company is currently sourcing its Ready to Eat (RTE) food products from Indian leading processed food companies like ITC Limited and Kohinoor Foods.
Thursday, November 12, 2009

Indian retail is emerging wiser from the experience

2008-09 was a year of across-the-board losses for retailers. Shoppers Stop, Reliance Retail and Aditya Birla were some of the big names to post losses, while chains such as Straps, Etam, Subhiksha and Pyramid headed the list of high-profile casualties forced to fold. But now the blues are being shrugged off, and Indian retail is emerging wiser from the experience. When the crunch from the GFC hit India in the second half of last financial year, it surprised as industry too caught up with the good times.

Too many retailers were expanding fast, chasing too many stores and pushing too many products, formats and promotions than what the market was ready for. Too much of focus was on what competitors were doing rather than on viable and sensible market strategies.

Really, at that time, our industry was in a bubble and the result of the downturn was to prick the bubble. It was tough, but it forced businesses to trim fat.

Those that survived have moderated the pace of their store openings. Prudent stock management, focus on proven formats and products, leaner teams, optimising costs are now the mantras for revival. This new self discipline has also helped companies deal with other problems. In reaction to the recent doubling and tripling of power costs, Shoppers Stop has been able to cut power usage by 14%.

A number of external factors have also helped to boost industry’s optimism. At the height of the boom, rental prices skyrocketed. And when the services tax on rent was introduced, rentals accounted for a whopping 35 % of all costs for most retailers. Fortunately, with the downturn, rental prices have normalised and landlords are now open to revenue-sharing agreements in combination with lower minimum rents.

Likewise, key consumption indicators are up again; stock markets have revived & the global economy is slowly recovering.

This combination of improved externals, along with Indian retail’s renewed focus on profitable growth, has not only shrugged off the blues, but has also been a blessing in disguise. At Shoppers Stop, we think we now have a business model that can weather future downturns.

Indian retail industry records highest theft rates....3rd year in a row!

For the third year in a row, India has recorded the highest rate of pilferage in its Rs3.7 trillion retail industry, according to the Global Retail Theft Barometer 2009 (GRTB 2009) survey that was conducted across 40 countries, and results of which will be released Tuesday.

The shrinkage, or losses caused to the retailer, or shrinkage, caused by shoplifting, employees, administrative error, or vendors, amounted to 3.2% of the total size of the country’s retail industry, including the unorganized sector. The survey is prepared by the Centre for Retail Research, Nottingham, UK, and is funded by Checkpoint Systems Inc., a US-based security systems provider.

“The shrinkage increased by 3.2% over last year,” Dharmesh Lamba, country manager for Checkpoint Systems, told Mint.

At 45.2%,, shoplifting was the leading source of retail shrinkage, followed by employee theft (23.3%). Electronics, cosmetics, alcohol/ food, clothing and jewellery were among the leading items of theft.

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