IndiaRetailBiz

The contours of financial package for stabilising operations of financially stressed value retailer Vishal Retail have begun emerging. The Delhi-based retailer owes around Rs 730 crore to a consortium of around 13 banks. Of these 13-odd banks, Vishal owes an amount of about Rs 170 crore, or nearly one fourth of the total, to State Bank of India (SBI).

It is expected that restructuring of debt under “Corporate Debt Restructuring (CDR) programme of RBI will take about 60 days to complete.

“We are looking at a loan extension from banks and hope to achieve a conclusion soon,” said Ambeek Khemka, Group Vice-President, Vishal Retail.

Under restructuring package under consideration of banks, the lenders may allow Vishal Retail to enjoy a maritorium period of four years on repayment of loans as well as payment of interest charges. The interest liability on debt is currently placed at around Rs 100 crore per annum. This will give necessary breathing space for the retailer to reorganise its business and come out of the cash crunch situation.

The retailer on its part of the deal will be required to close down a few of the 180 stores that are under performing. The retailer will also be required to infuse equity funds by way of issue of new equity. This will result in dilution of equity stake for promoters. The company was founded and promoted by R C Agrawal, its present Chairman.

Reliance Industries Limited (RIL), the flagship company of Mukesh Ambani-led Reliance group, has identified retail as one of the five main areas of growth for future. Apart from retail, core areas of conventional energy and hydrocarbons as well as as rural transformation and innovations (like non-woven fibres for wallpaper and paper for currency), have also been identified as the main areas of growth by the company, according to Mukesh Ambani, Chairman, RIL, who was addressing shareholders at the 35th Annual General Meeting (AGM) of the company held on the 17th November, 2009 in Mumbai.

“Our efforts would be on expanding the edifice created by Reliance Retail at the customer end and reinforcing supply chain and logistics,” said Chairman Mukesh Ambani.

Referring to “short breather” taken by retail business, Ambani assured the shareholders that Reliance Retail will return to “expanding coverage” by reaching out to “new cities, new markets and new strategic alliances.”

Reliance Retail, the retail initiative of the Reliance group, was launched three years ago. Reliance unveiled first cluster of convenience format retail stores under the brand name of ‘Reliance Fresh’ at Hyderabad in November, 2006. Today, Reliance Retail, is serving over five million loyal customers across 86 cities in 14 states, through 900 plus stores that are operating under several (convenience supermarket, mini-hypermarket, hypermarket, and specialty) formats and 15 brand names.

The retail company, which is a wholly owned subsidiary of RIL, is still in its growth phase and has incurred a loss of over Rs 450 crore during the financial year 2008-09. According to recently published results for the period ending 31st March, 2009, while Reliance Fresh had the maximum negative reserve of Rs 276.77 crore, Reliance Hypermart had the negative reserves of Rs 54.32 crore.

Reliance Retail has also entered into business partnerships with several well known global retailers and brands like Marks and Spencer, Office Depot, Pearle Europe, and Hamleys, among others.

Shoppers Stop, leading lifestyle retailers of the country, is going to invest Rs 250 crore to expand its department store format, lifestyle, retail chain operating under the same brand name.

Founded in 19991 by K Raheja group, Shopper’s Stop, currently operates around 27 stores and occupies a total retail space of 1.88 million sq ft. It is looking at setting up 15 to 18 new stores of its flagship chain operating under its own name. The expansion will take the tally of its stores to around 45 stores in the next 3 to 3.5 years by March 2013. Each of the new stores is expected to require an investment of Rs 12 to 15 crore.

Shopper’s Stop is also raising an amount of Rs 100 to 120 crore to exercise its option of purchasing additional 32 per cent stake in HyperCity– a hypermarket format, retail chain owned by the group. HyperCity is currently operating three stores at Malad (Mumbai), Vashi, and Hyderabad. The purchase of additional 32 per cent stake will help Shopper’s Stop become majority shareholder in HyperCity as its stake will then rise from present 19 per cent to 51 per cent. Shopper’s Stop can exercise purchase option up to June, 2010.

Coming out of the specter of falling footfalls and declining ticket size last year, Shopper’s Stop has recorded a rise of 7 per cent in sales to Rs 720 crore during the first six months of this fiscal (April-September, 2009). The rise in sales (Rs 413 crore) was even more significant at 11 per cent during the latest quarter ending September, 2009.

Thanks to several measures of cost cutting and increase in sales, the lifestyle retailer was also able to earn a net profit of Rs 12.06 crore in the last quarter as against the loss of Rs 11.02 crore for the same quarter of the previous year.

“The net profit,” according to Govind Shrikhande, President & CEO, Shoppers Stop, “was due to a combination of cost reduction, maintained margins and increase in sales.”

Among the several cost cutting measures, top management of the company, agreed to take a cut of 15 per cent in its salaries. During the difficult period, Shopper’s Stop refrained from resorting to retrenching of staff, it also refrained from hiring new staff and met requirement of new stores through existing people.

Apart from operating large format, flagship, department format, retail chain, Shopper’s Stop also operates several other home and specialty retail chains. Besides, Crossword– a leading specialty books and leisure chain– Shopper’s Stop is operating retail stores of well known global brands including M.A.C cosmetics (under a retail agreement with Estee Lauder), Mothercare (under distribution tie-up), and Mustang (German lifestyle and jeanswear) in India.

Reliance Dairy Foods, a subsidiary company of Mukesh Ambani-led Reliance Industries Ltd (RIL), which manufactures and markets milk and other dairy under ‘Dairy Pure’ brand, has begun expanding footprint of its dairy products by roping in retailers outside the group. Apart from state cooperatives which operate within their respective states/ regions, Amul, Nestle, Mother Dairy (NDDB) are among the leading dairy brands that are operating across the country in this sector.

Until recently, Reliance Retail was handling retailing of milk products mostly through Reliance Fresh outlets across the North (Punjab, Haryana, Himachal, Rajasthan, and NCR) and the South India (Andhra and Tamilnadu). ‘Dairy Pure’ could register three-fold increase in its sales from Rs Rs 65.77 crore (2007-08) to Rs 178.05 crore (2008-09) largely on account of the efforts put in by Reliance Retail.

Reliance has been popularising dairy products by offering 10 per cent more quantity of products to consumers at the same price as that offered by its competitors. While, welcoming entry of large player like Reliance into the sector, the competitors are not unduly worried about the price advantage offered by Reliance to its customers.

According to R S Sodhi Chief General Manager of Amul, “Reliance Retail’s milk brand has not got much presence in the market as yet. But it is good for the market to have more players and entry of a large corporate house would be beneficial for farmers as well as customers.”

Although tight lipped about future investment and sales targets, Reliance Dairy officials are quite bullish on its future growth and its presence as a major dairy products player in the market.

Vishal Retail, financially stressed Delhi-based multi-products retailer which for months has been forced to put expansion on hold, has bought peace with its institutional lenders by signing a deal to kickstart the process of restructuring debt.

The deal has been inked with lending banks like with SBI, HDFC and HSBC to whom the retailer owes major part of debt of around Rs 730 crore.

“The agreement with our lenders has been signed and the corporate debt restructuring (CDR) process will begin within the first half of November,” said Ambeek Khemka Group President Vishal retail to PTI. The company is confident of completing the process of CDR in 100 days, according to Khemka. Scoffing the rumour of banks insisting on the condition of Company’s founder and Chairman Ram Chander Agarwal resigning from the Board, Khemka said, “There is no such condition. The CDR is an open-ended business and any decision will be made only after the process is completed.”

It may be interesting recall that another retail wonder “Subhiksha” which also grew at breakneck speed during heydays of retail was unable to complete the process of CDR initiated by the banks. Of course, while the two companies grew at a much faster pace than most others, there situations are not quite comparable.

The retailer, which operates around 170 mega (mini- hyper market format) stores across the country has been battling hard for cash as most of the funds raised by the company through hugely successful IPO and debt from banks has been invested in capital intensive expansion of retail chain which has failed to generate adequate cash flows to service the same.

Although, the retailer in the past few months had initiated several measures to restructure the operations, it was unable to stem the rot that had arisen due to the double whammy of falling footfalls and shrinking customer basket faced by the company in 2008-09. Interestingly, Vishal has held last year’s global economic slowdown for most of its woes.

Walmart Stores Inc, the world’s largest retailer, which operates a retail JV with India’s telecom behemoth Bharti Enterprises (Bharti Walmart Retail Limited), is satisfied with its results and is looking at expanding the footprint of its cash and carry stores in India. This was stated by Anand Sharma, Commerce & Industries minister of India, while talking with media persons during the India Economic Summit held in New Delhi.

“Wal-Mart is very satisfied with the results in India. I was informed by the Wal-Mart CEO that they are looking at opening more stores. He gave a figure of 40 more stores across the country in the immediate future.”

It may be recalled that S Robson Walton, scion of Walmart’s founder Sam Walton and present Chairman, was recently in India. Walton, during his visit to the country last week, had a meeting with India’s Prime Minister Manmohan Singh and Commerce & Industries Minister Anand Sharma to discuss retail sector in India.

Walton is keen that India initiates policy changes for foreign direct investment (FDI) in retail sector of India. He wants the government to lift the ban on entry of MNC retailers in multi-brand front-end retail by allowing them to invest in this segmen of retail business. Currently, India allows FDI of up to 100 per cent in cash and carry and of up to 51 per cent in single brand retail.

Walmart has so far set up a solitary cash and carry store under the brand name “Best Price Modern” wholesale Store at Amritsar in Punjab. The store set up by 50:50 JV between Walmart and Sunil Mittal-led Bharti group was launched on the 30th May, this year. To prepare manpower for the company’s existing and future stores as well as to help the retail industry meet its human resources requirements, the JV under PPP initiative has also set up training academies in partnership with the government of Punjab. These academies are offering courses in different aspects of retail business to rural and unemployed youth coming from nearby towns and villages.

Sunil Mittal, Chairman of Bharti group, though eching the sentiments of Walmart’s Chief, was little cautious on the retail venture’s expansion plans for cash and carry business. According to Mittal, while more and more cash and carry stores will be opened every few months, the company will not go very fast on the same. The company will follow a measured approach, said Mittal.

Walmart Stores, world’s largest multi-brand retailer with over $400 billion in annual sales and operations under 53 banners across 15 countries (including India), is lobbying hard for change of policy on foreign direct investment (FDI) in multi-brand retail in India.

Currently, while no FDI is allowed in the multi-brand segment of retail operations, up to 51 per cent of foreign equity is allowed in single-brand retail and up to 100 per cent foreign equity is allowed in cash and carry (B2B) wholesale (indirect retail) in India.

S Robson Walton, chairman of Wal-Mart Stores, according to an ET report, called on Prime Minister Manmohan Singh on Wednesday, to impress upon him the need to open the multi-brand, front-end, retail segment to foreign investors in India. Doug McMillon, Walmart’s CEO of international business, had also recently met India’s ministers of agriculture and commerce to canvas for company’s future plans for India.

India, the second fastest growing economy of the world, holds special attraction for the world’s top multi-brand American and European retailers like Walmart Inc, Carrefour SA, Tesco plc, and Metro AG to fullfil their growth ambitions, since the growth in western economies has almost become stagnant.

Walmart Stores is present India via Bharti Wal-Mart Private Ltd– a 50:50 joint venture with Bharti Enterprises (Sunil Mittal-led India’s largest private telecom player). This joint venture has already opened a cash and carry store under the brand name of Best Modern wholesale on the 30th May, 2009 at the holy city of Amritsar and is ready to open another store at Ludhiana in Punjab.

To somewhat overcome its non-presence in multi-brand retail, Walmart is also offering back-end logistic and technical support services to Bharti’s retail arm Bharti Retail, which has opened a multi-brand supermarket and mini-hypermarket retail chain called “Easyday” in several areas of North India. The retail chain was launched over a one and a half year ago in April 2008 from Ludhiana in Punjab.

According to earlier assertions, Bharti Retail will eventually become a part of Walmart Bharti’s retail JV in India, once the government agrees to change the policy for a sector that provides second largest employment in India.

Kishore Biyani, Founder and CEO, Future group, is quite fond of number 30 or similarly sounding 13. He has set the group target of Rs 30,000 crore ($6.5 billion) in sales, from 30 million sq ft by 2013. Biyani revealed the agenda for growth of his group, while delivering the keynote address on 22nd October, 2009, at the 5th TiE-ISB Connect 2009.

The targets set by Biyani, though ambitious, are quite doable for the group. They translate into annual growth rate of around 20 per cent per number. It must, however, be said that this growth now onwards will have to come from much bigger base. The targets will mean doubling the group turnover from present Rs 15,000 crore to Rs 30,000 crore as well as doubling the occupied space from 14 million sq ft to 30 mn sq ft in a time span of less than 4 years.

According to Kishore Biyani India’s consumption business market at $350-400 billion is 35 to 40 per cent of the country’s $1 trillion total economy.

Future group keeps track of consumption habits of consumers belonging to different religions and communities on a continuing basis. “We keep track of nine communities and observe what they eat and consume,” said Biyani.

TiE-ISB, billed as the country’s most exciting annual networking event for entrepreneurs and investors, was held at Hotel Marriot on the 22nd and 23rd October, 2009 in Hyderabad. The theme for this year’s event was “The Crisis will pass….Will You, addressing real issues.” TiE-ISB Connect enables interaction of aspiring entrepreneurs, early-stage ventures, and growth-stage ventures with potential investors, successful entrepreneurs and mentors.

Futurebrands, India’s first Brand IPR company with a portfolio of 20 brands across apparels, FMCG and home durables categories, is launching Mohena- a new brand in the lingerie and nightwear category. Futurebrands is a subsidiary of Pantaloon Retail ( India) Limited — a Kishore Biyani-led Future group company.

Mohena– the lingerie and nightwear brand– which has been specially designed for the Indian woman is looking at redefining style and comfort in Indian lingerie market.

Mohena will initially offer a range of 5 products comprising two lingerie and three nightwear products. While, lingeries will be priced between Rs. 299/- and Rs. 699/-, the nightwear products will be available between Rs. 449/- and 799/-.

“Our reading of Indian woman established her need to ‘express herself with comfort,’ to drop the tag of ‘traditional,’ and her growing desire to ‘celebrate comfort and freedom in contemporary Indian context,’ said Atulit Saxena, COO-Brands, Futurebrands Ltd, while explaining the brand’s concept.

“Mohena has a range of intimate wear which captures Indian femininity not only in design motifs, but also through the architecture of the product, through ease-breathing fabrics and fits suited to the Indian woman. With Mohena, we aim to create a brand that is reminiscent of the timeless portrayal of the Indian female form and that pays tribute to her beauty,” said Jaydeep Shetty, Head-New Business Development, Future Group.

Mohena is expecting to garner a turnover of Rs. 7-8 crores in the first full year of operations. The turnover is expected to then double each year for the next two years. Mohena will be a Rs. 20-25 crores brand by end of the third year of operations (by 2012) and is targeting to penetrate 20 per cent of the mass premium market in the main metros over the next 3 years, according to a press release issued by the company.

Reliance Autozone, one of the specialty retail chains of Reliance Retail, has joind hands with Garmin, to market Global Positioning (GPS) devices and systems across the country.

Apart from selling these products at Reliance Autozone’s specialty stores, Reliance will also set up shop-in-shop format retail outlets at Reliance Digital and some other group retail chains to offer the new generation navigational products to Indian consumers.

“Through co-operation with Reliance Autozone and its affiliated companies as strategic partners in India, Garmin has jumped a bigger step to be closer to the Indian market,” Garmin Corporation director (sales and marketing) Tony An said.

While, the Cayman Islands-based Garmin is one the world’s leading brands of GPS enabled navigation, communication and information devices, applications and related products Reliance Autozone is one of the niche retail format of Reliance Retail, a Mukesh Ambani-led Reliance group company owned by Reliance Industries Limited.

Launched at Jamnagar in Gujarat on the 6th February, 2008, Reliance Autozone is presently operating six stores at Gurgaon, Jaipur, Ghaziabad, Jamnagar, Mumbai and Hyderabad. The Autozone specialty chain has, however, announced plans for setting up 10 to 15 new stores of the retail chain by March, 2011.