“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.

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.

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 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.

Compared to the boom year of 2007, which had seen a large number of serious and non-serious players entering the sector, the year 2008 turned out to be quite tough. Global financial meltdown, which also resulted in loss of jobs and evaporation of retail credit in India, many retailers were forced to shut down a few or all of the shops in the face of falling footfalls and declining purchases.

The retailers were, therefore, cautious this festive season in projecting growth. While, they would have been happy achieving growth of around 15 to 20 per cent, were pleasantly surprised to see the growth of over 30 per cent, sometimes even going beyond 100 per cent.

Most interestingly, festive season, which began two months ago from early September with Onam festival in Kerala, according to media reports, has seen consumers buying not only apparel and fashion items but consumer durables and home improvement products, as well. These categories were incidentally most affected last year as there was a decline of business in home retail category.

While, Samsung saw the growth of 40 per cent growth, the growth for LG– another Korean consumer electronics and home appliance rival– was equally happy with over 40 per cent increase in home appliances business.

Both LG and Samsung, who between them control large part of durables pie, saw nearly one-third of their overall annual sales coming from festive season. For Samsung it meant $700 million (or 35 per cent) of targeted $ 2 billion sales during the year. LG, on the other hand, while not revealing exact figures, was quite happy with most of its products like washing machines, micro ovens, and LCD TVs doing very well in the market place.

Kishore Biyani-led Future group, which has been facing the spectre for over a year of declining same-store-sales in the home retail segment, the turnaround has been most satisfactory. The retailer, which operates retail chains like Home Town and e-Zone in this segment, saw quite happy registering a growth of 5 to 7 per cent in home products like furniture and 20 to 30 per cent in consumer electronics.

“The home segment recovered in this festive season. It showed a positive growth of 5-7 per cent. In electronics, we saw a 20-30 per cent jump in sales,” said Kishore Biyani, CEO, Future Group.

The group, which had targeted Rs 500 crore worth of sales during the week beginning 15th October, has already crossed targeted growth of 24 per cent. According to Rakesh Biyani, Chief Executive (Retail) of Future Group, “Consumer sentiment looks very positive and there is good traction in sales.”

Reliance Retail too has witnessed month-on-month growth of around 35 per cent in consumer electronics, home appliances and IT related gadget categories, among others.

Shopper’s Stop’s Vice Chairman B S Nagesh is also satisfied with positive consumer sentiment and is positive on the next two quarters. While, the retailer has seen increased spending on non-apparel, jewellery and cosmetics, it is also satisfied with stable business for apparel category.

Pantaloon Retail, part of Future group, and Reliance Retail have also seen improved business in apparel business this festive season. While, Pantaloon has witnessed 20 per cent growth in its fashion segment, Reliance is happy with growth in this category.

Vishal Retail, which for past few months has been facing lot of financial stress, is happy with 20 per cent growth in festive sales. It is confident of touching growth number of up to 35 per cent before the end of the season.

We hope to further cover festive performance of other important — large and small– retailers in the coming days.

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.

“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.

While, there was a rise of 31 per cent in consolidated net income (from Rs 58,405.4 million in 2007-08 to 76690.4 million in 2008-09), the growth in standalone net income was a bit lower at 25.60 per cent (from Rs 50,489.1 million in 2007-08 to Rs 63,417.0 million in 2008-09).

Thanks to efforts of the company to contain costs, standalone operating profit of the company went up by 140 basis points (1.4 per cent) as margins grew up from 9.1 per cent in the previous year to 10.5 per cent, during the reporting year (2008-09). This resulted in operating profit leap frogging 46 per cent (2008-09) over the previous year (2007-08). The impact of growin operating margin was greeted by stock exchanges as the company’s share price registered an increase of 2.69% on NSE (Rs 347.55) during the day.

Incidentally, Pantaloon Retail takes July-June period as its financial year, compared to most other Indian companies, who follow April-March period as their financial year.

The stark difference between consolidated and standalone numbers of a company for the same period arise because while the consolidate numbers incorporate pro-rata impact of performances of other group companies in which the reporting company has equity stake, standalone numbers relate specifically to individual performance of the reporting company. As such, standalone results of a company are more important than consolidated results for the purpose of analysing its performance during the reporting period.

Thus, the announced consolidated net sale/income of Rs 76.69 billion (7,669.04 crore) for the year 2008-09 include Rs 1.327 billion (132.7 crore) in net sales of other Kishore Biyani-led Future group companies in which Pantaloon Retail holds financial interst.

The consolidated net profit took a severe hit ) as there was a sharp rise of 87 per cent in interest charges and 70 per cent in depreciation charges during the year (2008-09) under reference. Employee cost also rose by 30 per cent during the year.

Net sales of the retailing company, which operates several multi-format retail chains across segments, for the year (2008-09) reached Rs 7,669 crore compared to Rs 5,841 crore of net sales during the previous year (2007-08).

Thanks, however, to steep increases of 30 per cent in employee cost, 75 per cent in depreciation and 87 per cent in interest charges, net profit of the company nose dived by 54 per cent during the year. According to numbers posted by the company, the net profit declined sharply from Rs 21.93 crore in the previous year (2007-08) to Rs 10.07 crore in this year (2008-09).

According to an earlier announcement, Pantaloon Retail is expecting to achieve a sales growth of 35 to 40 per cent during the current financial year (2009-10). The growth will be achieved through a combination of factors, major among which are, creation of new space, improvement in productivity, and efficient sourcing of products.

“As of now the Rights Issue we had planned is not happening. Whenever we have requirement of money for expansion we will approach the capital market,” said Nagesh while speaking to media-persons in Mumbai on the sidelines of India Retail Forum conference.

The company had earlier proposed to raise between Rs 300 to 350 crore through rights issue to fuel its expansion and raise its equity stake in HyperCity (another K Raheja group company). The expansion will now be funded through internal resources.

According to Nagesh, the company will invest Rs 35 to 40 crore to open four new Shoppers Stop stores during the financial year 2009-10.

The group, according to an earlier announcement, is expecting to add 500,000 sq ft space during this fiscal with by opening four new Shoppers Stop (department store format) flagship stores and 3 new HyperCity (hypermarket format) stores. After addition of new stores, the group by 31st March, 2010 will be operating 31 Shoppers Stop stores and 7 HyperCity stores. The group is currently occupying 1.8 mn sq ft of space.

Shoppers Stop is currently holding an equity stake of 19 per cent in HyperCity. It has an option of raising the stake to 51 per cent by June, 2010.

Talking about sales outlook, Nagesh said that the same store sales (an important metric to judge performace and trends in retail business) are expected to show flat-to-positive growth in the next six months.

While, the air time retailing plan is expected to be unveiled sometime in early 2010, the group is planning for an annual revenue of Rs 1,000 crore from this business. This revenue stream will form an important part of Future group’s grand plan of achieving retailing turnover of Rs 25,000 crore in the next 4 years.

Talking about advantages of airtime business, Biyani, who was talking on sidelines of the India Retail Forum conference at Mumbai, said that while this business did not require any specific retail format, it provided much longer shelf life.

Future group is believed to have already initiated talks for purchase of bulk airtime with the country’s major telecom players including the sixth largest Tata Communication, which offers mobile dual technology (GSM and CDMA) services across the country.

Future group’s flagship retailing arm Pantaloon Retail (India) is incidentally already having a 50:50 joint venture in place with the UAE’s Axiom Telecom LLC to retail mobile phones, accessories, and services. The joint venture formed two years ago in July, 2007, was apart from developing backend sourcing infrastructure for the Pantaloon’s existing telecom retailing business, was set up to “exponentially” expand and scale up the telecom business of the group.

Axiom– the leading distributor, retailer and after sales support provider of mobile phones, phone accessories, wireless gadgets, memory and storage devices in the Middle East– is expected to create a nationwide network of state-of-the-art after sales service centers for mobile handsets in the country. The joint venture is planning to set up 1,500 specialty outlets across the country in the next 24 months.

After signing the joint venture agreement with Axiom in 2007, Kishore Biyani had said: “The current explosion of the telecom retail market that we are witnessing is breaking new barriers every day. There is no doubt that mobiles will soon be the single largest electronic products retailed in the country. Future Group, with the knowledge and expertise of Axiom Telecom’s systems and process in this area, will be best positioned to retail and service the Indian telecom market.”

The retail carpet area will go up from 12 million sq ft at present to 30 million sq ft at an investment outly of Rs 3,000 to 4,000 crore ($600 mn to $800 mn), says Biyani.

The group’s retail business, expected to cross Rs 10,000 crore (over $2 billion) this year, will also grow to Rs 25,000 crore (over $ 5 billion) in the next four years.

“We will be a very dominant player in the consumption business with around Rs 25,000 crore of sales in next 3-4 years. That is quite meaningful and impactful,” said Biyani, adding that the group would clock a turnover of Rs 10,000 crore this fiscal.

Resources for required for fueling the targeted growth will not pose a problem as the group can leverage on its current financial strength as reflected through its low debt:equity ratio of 1.2. ‘Gearing’ (or debt:equity ratio) of a business indicates its ability to raise resources through borrowing. Lower the ratio, better the capacity to borrow as the business capable of servicing its financial obligations.

On being asked about the resources, Biyani said, “We can leverage substantially.” According to Biyani, the group would look at different options, including selling of non-core assets.

Talking about profitability, Biyani said, “We will have earnings before interest depreciation taxes and ammortatisation (EBIDTA) margin of eight to ten per cent of the Rs 25,000 crore turnover. You can calculate how our profitability will be.”

The retail business post expansion would, therefore, be able to generate cash surplus of Rs 2,000 to Rs. 2,500 crore per year, subject of course to payment of taxes and disbursement of dividend to shareholder, if any, against the same.

Future group through its retail arm Pantaloon Retail India Limited currently operates several multi-format, pan-India retail chains across ‘value,’ ‘lifestyle,’ and ‘home retail’ segments. Pantaloon currently operates over 1,000 stores in 71 cities and 65 rural locations across India.

Among several large pan-India retail chains operated by the group include: Pantaloons (flagship, department store format, lifestyle, fashion, chain), Big Bazaar (hypermarket format, general merchandise, value, chain), Food Bazaar (supermarkets style, value, food chain), Central (chain of seamles destination malls), e-Zone (speciality format, durables, lifestyle, chain), Brand Factory (fashion, value chain selling braded apparel at factory ‘gate’ prices), Ethnicity (ethnic, fashion and home products, lifestyle, chain) and Home Town (home retail) chains. The group is also operating ‘Aadhaar’– a rural retailing chain.