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.

“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.

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.

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.

“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.

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.

For example, Rahejas-led Shopper’s Stop, which was relatively a bigger and more famous retailer than Pantaloon in 2001, despite being owned by a leading construction group, has not been able to keep pace since, with the growth of Pantaloon Retail.

While, Shopper’s Stop at Rs 204 crore (turnover) was 33 per cent higher than Pantaloon (Rs 150 crore) in 2001, today it’s less than one-sixth of the latter, in terms of both sales and size. Shopper’s Stop’s 2009 turnover of Rs 1,270.37 crore (Year ending March 31) is a mere 16.56 per cent of Pantaloon Retail’s 2009 turnover of Rs 7,669.40 crore (Year ending June 30).

This, among others, is a direct outcome of Pantaloon Retail multplying its retail space at a much faster rate than Shopper’s Stop. Against around 2.5 million sq ft of space occupied by Shopper’s Stop, Pantaloon is currently operating with more than five-fold space of around 13 million sq ft.

The importance of this can be gauged from the fact while most retailers in boom days of retail in 2007 were leasing space between Rs 60 and 80 (or more) per sq ft, Pantaloon was sitting pretty with large contracts at around Rs 30 per sq ft.

Pantaloon is again ahead in the race of signing new space contacts, while most of its competitors are still busy with consolidating/ rationalising their badly bruised operations.

Kishore Biyani, in a conference call, has revealed that he has already signed contracts for a whopping 20 to 22 million sq ft of new space This has to be seen in the context of Pantaloon Retail, currently occupying 13 million sq ft of space. The company is operating around 260 stores under several value and lifestyle brands.

Subhiksha’s used its time tested brand mantra of “low cost” to lure customers to its shops. Many customers, who lined up the shops to buy crackers, were attracted by promotional lines like “Largest Cracker Shop” and “Lowest Price, All Varieties.” Triad Trading Services– a group shell company– was roped in as a franchisee for the purpose.

This year only four outlets could be roped in to sell crackers, though last year their number was as high as 30. As against last year’s sales of Rs 10 crore in 10 days, this year the retailer is believed to have sold crackers of Rs 3 crore in value.

Although, this would have rekindled hopes of reviving beleaguered company’s operations in the near future, probability of this happening is very slim as Subhiksha is facing several petitions seeking winding-up of the company’s operations. Madras High Court (MHC) has already posted dates for hearing of these petitions.

The Liverpool family store is part of 50 such family stores being planned to be set up by the company by March, 2011. Twenty five of these 50 family stores are slated to come up in the next three months.

Apart from family stores, the retailer is also embarking on an aggressive plan to expand its present network of 500 Liverpool menswear stores located across 22 states of the country. While 70 of the 500 stores are located in the home state of Gujarat, the retailer is also having its presence outside India. It is currently operating a store each in the UAE and Nepal.

Liverpool has drawn up plans to set up 700 new menswear stores by March 2010. It will also set up another 300 stores by March 2011, thus, taking the tally of new stores to 1,000 in less than 18 months. The total network of menswear outlets after completion of expansion will thus rise to 1,500 stores.

The company is also diversifying into footwear retailing by opening a new exclusive footwear chain. This retail chain is planning to set up 25 footwear stores this year, while another 75 stores are expected to be added soon, thereby, taking the number of footwear stores to 100 in the coming months.

The company has earmarked a sum of Rs 200 crore to fund its expansion.

Liverpool is presently sourcing its requirement from third party manufacturers, however, to augment supplies, it has decided to also set up a garments manufacturing facility in Ahmedabad. The plant is expected to be ready for production by 2010-11.

The JV has already launched its first C&C store under the brand name of “Best Price Modern Wholesale” a few months ago. The store was launched at Amritsar in Punjab state on the 30th May, 2009. The company is also ready to launch its second store in December (perhaps at Ludhiana– the home town of Mittals, Bharti group owners).

Walmart, though known for its big-box format stores, has been forced to begin its operations in India with ‘cash and carry’ format as the current government policy guidelines do not allow setting up of front-end, multi-brand, retail stores by MNC retailers in India.

“After north, the discussion is really south or west. We believe southern markets are much more growth oriented”, said Rajan Bharti Mittal, Vice-Chairman and Managing Director of Bharti Enterprises, while speaking to reporters in Bangalore.

“Ecosystem (in the south) is far better than the north when the company started operations there,” said Rajan Mittal, adding, “Hopefully, south will see some action from us. We have to be a pan-India company.”

The prevailing real estate costs will, however, be an important consideration in deciding on the South or the West. “… we are already looking at real estate pieces here in southern and western parts (of the country). It (opening stores) depends on how real estate plays its game,” said Mittal.

Bharti- Walmart is planning to set up 10 to 15 cash and carry centres across India by 2015.

“We are currently working on how best we can come back to the state in a major way. It’s all currently on the drawing board,” said Jhunjhunwala.

Reliance Retail, which is present through Reliance Fresh and Reliance Digital retail chains, may be required to even buy real estate in the state as it has already run out of space.

“We have exhausted the space for our Reliance Fresh format and so if we plan to expand this format, we have to buy real estate,” said Jhunjhunwala.

Reliance is also hopeful of settling its dispute with local authorities soon to develop its stalled project of reviving municipal market at Park Circus in Kolkata. “The company was now at an advanced stage of negotiation with the authorities to settle the dispute,” said Jhunjhunwala.

The retailer is looking at expanding number of its stores from 174 at present to around 200 before the end of this fiscal (March, 2010). Some of the resources would be required to also increase stocks. Some vendors, it may be recalled, have stopped supplying goods to the company on account of delayed payments.

While, Vishal Retail’s shareholders in their Annual General Meeting held on the 29th September have authorised raising up to Rs 250 cr. (2.5 billion), the company, according to its group president Ambeek Khemka, may not go beyond raising Rs 100 cr.

“Though we have the shareholders nod to raise up to Rs 250 crore, we might wish to raise only Rs 100 crore through the QIP route,” said Khemka without specifying on details of equity dilution or its time frame. “It is too premature to talk on specifics at the moment,” added Khemka.

The Delhi-based, R C Agarwal-led retailer ran out of cash as its business could not keep pace with heavy expenditure incurred on creating new space. Vishal kept borrowing money fondly hoping that growth in business would generate sufficient cash to meet increasing financial obligations. Unfortunately, however, the company was once forced to even default on repayment of loan. The company as a consequence of global economic slowdown has for some time been facing twin challenges of falling footfalls coupled with shrinking customer basket.

Delhi-based, R. C. Agarwal-led, value retailer, has for quite sometimes been finding it hard to meet the challenges of falling footfalls, which on the one hand has resulted in sharply declining sales and on the other in increasing losses. The company, as such, has been finding it hard to timely service its growing financial obligations and even delay payment to its vendors.

The retailer, believed to be currently carrying a debt burden of around Rs 7.3 billion (730 crore), has reported a sharp decline in sales from Rs 3765 million in Q1 (2009) to Rs 2653.7 million in Q1 (2010). The retail chain as a consequence has incurred a net loss of Rs 906 million during Q1 2010 (ending June 2009) against the net loss of Rs 140 million incurred during Q1 2009 (ending June 2008).

Chennai-based discount retailer “Subhiksha Trading,” which had also commenced CDR process under somewhat similar circumstances was, however, unable to take the process to its logical conclusion.

Vishal Retail, which earlier had defaulted on payment of a loan installment, has been trying hard for almost a year with its lenders to reschedule loan repayments and reduce interest rates.

On operational side, to overcome financial stress, the company has initiated several steps that among others include closure of unprofitable stores, closing down regional distribution centres, reducing staff strength, and even selling most of garment manufacturing units.

Vishal may, perhaps, be able to stem the rot if it can succeed in convincing its dozen or so lenders to restructure its debt and reduce interest rates. It should, however, be noted that RBI’s CDR programme is basically meant to help loss making manufacturing companies and not the trading companies like Subhiksha or Vishal.

The company on a standalone basis has achieved net sales Rs1,663 crore representing a 20% YOY growth in comparison to performance of the company in the same quarter of the previous year. Thanks, however, to several cost containment measures initiated by the company, EBITDA (earnings before interest, taxes, depreciation, and amortisation), of Rs 183.2 crore represented a higher rate of growth at 29.8 per cent, during the quarter.

The net profit for the quarter at Rs 36 crore was, however, continued to remain under the pressure on account of higher interest and depreciation charges during the quarter.

Apart from cost rationalisation measures initiated during the period, Pantaloon was able to lower lease rentals after negotiating the same with property owners. The impact of these measures could be seen in the increased EBITDA margin at 11 per cent during the quarter.This was 80 bps (0.8 percent) higher than the previous period.

This means that the company in a change of strategy has now begun to pay more attention to profits than growth. This was visible in terms of physical growth of the company during the year.

The country’s largest retailer, which in the last 10 years had focused on capacity addition to grow, had to cut down its plans during the year. Pantaloon could just add 1.8 million sq feet during 2008-09 compared to 2.8 million sq feet during 2007-08. Capacity addition was affected on account of higher cost of capital and scarcity of space during initial months of the year.

“Internationally, we’re focusing on larger markets. China is a big opportunity for us. We’re just getting started in India, where we see great opportunity over the long term,” said Watson, while participating in a Forbes Global CEO Conference at Kuala Lumpur (Malaysia). According to Walton, Asia is expected to lead the global economic recovery.

Walmart, which derives close to one quarter of its global revenues (over $400 billion) from outside the USA, is currently operating over 600 stores in China and Japan, though company was forced a couple of years or so ago to withdraw its operations from South Korea- another growing Asian economy in the far Eastern region.

Bharti Wal-Mart Pvt Ltd– Walmart’s Indian JV with Bharti Retail, has launched its first ‘cash and carry’ wholesale store in Amritsar from May, 2009. The store is operating under the brand name of “Best Price Modern Wholesale.” The JV company is planning to open 10 to 15 such stores, which are expected to provide employment to around 5,000 persons. Walmart had to reconcile with launching its operations through ‘cash and carry’ route as no foreign direct investment (FDI) is allowed in multi-brand, front-end retail under current policy framework of India.

Walmart’s Indian partner, though, is quite hopeful of change in the policy soon. According to Rajan Mittal, vice chairman of the group, who supervises the group’s retail initiative, Bhartis are expected to achieve $ 1 billion in retail sales and employ around 60,000 people by 2015.

In view of the present policy hurdles, Bharti Retail has already forayed into front-end, multi-brand, retail on its own. It operates a general merchandise retail chain called “Easyday” comprising 28 stores under supermarket (26) and mini-hypermarket (2) formats in Punjab and Haryana. The retail chain is looking at adding 40 new stores in NCR during this quarter before the end of calendar 2009.