Indian Retailer

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.

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.

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.