Indian Retailer

India's Future Group may look at options including an initial public offering if its discount store business needs to raise funds, the chief executive of its retail operations said Wednesday.

"An IPO is a possibility," Rakesh Biyani told Dow Jones Newswires. "But there are no such plans now."

Future Group operates Pantaloon Retail (India) Ltd., the country's largest listed retailer by market capitalization and revenue.

Pantaloon Retail separated its discount store business, which includes the Big Bazaar hypermarket and the Food Bazaar supermarket businesses, into Future Value Retail Ltd. with effect Jan. 1. The company had in October said the move will enable capital infusion into the business.

Pantaloon Retail has raised about 7.50 billion rupees ($163 million) so far in the current financial year, Mr. Biyani said. He didn't provide details on the fundraising.

It had raised 5.00 billion rupees via a share sale to institutional investors, while a banker had told Dow Jones Newswires in July that Pantaloon Retail was looking to sell 2.50 billion rupees of bonds.

Mr. Biyani said while sales for the October-December quarter were on the "positive side," they took a hit as stores had to be shut for almost nine days in the southern Indian state of Andhra Pradesh due to political unrest.

The company has a significant presence in Andhra Pradesh, which has witnessed protests and demonstrations over plans to divide the state into two.

"There has been a significant impact there," Mr. Biyani said, without elaborating on loss in sales.

Pantaloon Retail had posted an 18% rise in net sales from a year earlier to 17.77 billion rupees in the three months ended Sept. 30.

The company projects its net sales for the current financial year ending June 30 to rise more than 30% from the year-earlier period's 76.69 billion rupees because of a strong rebound in India's retail sales.

"Sentiment (overall) is extremely positive," Mr. Biyani said.

India’s biggest watch and jewellery retailer, Titan Industries, is looking to triple its topline from Rs 4,600 crore this fiscal to Rs 14,000 crore over the next five years. Bangalore-based watch and jewellery arm of the Tata Group, which did not alter its expansion plans during recession, plans to strengthen its presence in the wedding jewellery market and divert focus to smaller international watch markets such as Vietnam, Oman and Qatar.

“We did not project ambitious sales growth this fiscal due to rise in gold prices which impacted our volumes. But the next five years presents a big opportunity as we project our revenues to grow from Rs 4,600 crore to Rs 14,000 crore,” said Titan Industries MD Bhaskar Bhat.

These views were expressed before the company went into its silent period. Titan Industries has built up a portfolio of strong lifestyle brands, including the top-end jewellery brand Tanishq, fashion accessories brand Fastrack and the watch brand Xylys.

Titan, which has been selling Tommy Hilfiger and Hugo Boss range of watches in India, drew up its five-year plan in April 2009. It launched three formats including lifestyle accessories chain Fastrack, high-end diamond jewellery boutique Zoya and pure-play watch retail format Helios, which is being ramped up to 50 outlets by FY13.

Over the next five years, the topline growth will still be led by Tanishq, with the division expected to contribute Rs 10,000 crore. Diverting focus from the US market—where it closed two Tanishq stores while navigating recessionary pressures—Tanishq will adopt a highly design-led, diamond-robust and large store intensive strategy.

“The opportunity is still very large in India as the jewellery market is expected to grow from Rs 80,000 crore to around Rs 1,25, 000 crore by 2014-15. We don’t want to renew attention on international markets yet, “ Mr Bhat added.

Tanishq, which has been offering relatively low-ticket value products for convenient every-day wear, is slowly edging into the wedding jewellery market. An additional 50-store rollout plan, driven by a number of large-format (15, 000 sq ft) stores, will see it compete in a market that is heavily skewed towards plain gold designs that are often made-to-order for brides.

The watchmaker is, however, switching gears in its international strategy for watches. It has zeroed in on newer smaller markets such as Vietnam, Oman and Qatar as opposed to existing market Dubai, which underperformed this year. The company intends to aggressively invest in advertising while growing its distribution presence beyond traditional watch stores within these markets. The Middle East, South East Asian and African countries together account for 10 per cent of the watch division’s turnover.

Even in India, Titan harvested growth from selective markets where the sales grew. Together with significant overhead cost cutting, Titan will see a reasonably good bottomline this fiscal, Mr Bhat said. In fact, this improved profitability is also a function of its revamped mass-market strategy that saw Sonata watches undertake a major stock correction in April. This was done to balancing out inefficiencies in the brand’s distribution system.

“Once the investment by the trade was brought down, with sales remaining the same, profitability improved. After that, we focused on consolidating the business,” Mr Bhat added.

Kishore Biyani-led Future Group, which recently hived off its value segments —Big Bazaar and Food Bazaar— into a separate entity called Future Value retail, is now looking to list this company independently. Future Group director & CEO-retail Rakesh Biyani said this was one of the options the company would seriously consider for funding its growth.

"With the subsidiarisation of the value retail business, one option is to list it independently. If there is a listing, it should happen this year," Mr Biyani told ET.

Earlier this week, Kishore Biyani-led Pantaloon Retail (India) in a filing on the BSE had said that it had transfered its value retail business — both Big Bazaar and Food Bazaar — to its wholly-owned subsidiary Future Value Retail (FVRL).

The transfer of the two chains to the value subsidiary came into effect on January 1, along with all its assets, rights and obligations and employees.

Mr Biyani was in town on Tuesday for the launch of Wilson’s new range of tennis rackets, in tie-up with Winner Sports, a subsidiary of Pantaloon Retail India which has exclusive rights to distribute the product in India.

On the source of funds, Mr Biyani said that the group has a total requirement of Rs 1,800 crore, of which Rs 750 crore has been raised so far. "Listing the value retail business is one of the options we are looking at to fund our growth."

On the impact of food price inflation and whether there will be a price hike of any of its private label products, Mr Biyani said they were trying to sustain prices as low as possible. "There are good indications that inflation might come down so we will hold onto prices even at the expense of margin. We will take a call in the next 4-6 weeks on prices."