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.

All retailers, big and small, though fearful of the scourge, refrain from making reference to impact of this menace that is affecting their bottom-lines.

According to an ET report, large retailers like the Future Group, Spencer’s Retail, Reliance Retail and Aditya Birla Retail, who are already working on very thin margins, however, have now decided to join hands with a view to combat the growing menace that is directly killing their profits.

According to the second annual Global Retail Theft Barometer 2008 Survey, which covered 920 large retailers across 36 countries, India had the highest shrinkage rate of 3.10% during the year, an increase of 6.9% over last year.

The group of large retailer, though fiercely competing with each other for garnering higher market share, will now collaborate and create a blacklist of employees who are found guilty of theft. Apart from theft, the list of employees to be shared among the group members will also include the names of those employees who quit their companies without giving prior notice. Employees will also be identified for indulging in unethical practices and rudely with behaving with customers.

The blacklisted employees will find it extremely difficult to get employment with another retailer once such lists are prepared and become available to members of the group.

In this context, it may be intersting to know that, IT industry, which faces major problem of data theft and misrepresentation by employees, has created a blacklist of employees who indulge in data theft and other unscrupulous practices. NASSCOM, the representative association of IT and ITeS sector has also created a ‘National Skills Registry’ with a view to verify the background and antecedents of IT professionals. These lists are regularly updated by the industry bodies for benefit of their members.

Retailers Association of India (RAI), the representative association of big and small organised retailers, according to the report, is also planning to create a list on similar lines. While, identifying delinquent employees, it hopes to initiate the process of verification of potential employees.

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.

“Sabka Bazaar” along with another Delhi-based retail chain “Home Store” was bought by Wadhwan Food Retail for an undisclosed amount (of around Rs 100 crore) in mid-2007. Wadhwan Food Retail is owned by Wadhwans– a Delhi-based leading group of land developers and housing finance experts.

Wadhwan Food Retail operates several retail chains including ‘Spinach’ — the flagship chain of supermarkets operating mainly in Mumbai/ Pune regions of Maharashtra.

Most of Wadhwan Retail’s growth, over the years, has been through inorganic expansion. Apart from buying “Home Store” and “Sabka Bazaar” retail chains in the North, the group also acquired Mumbai-based businesses of “Maratha Stores” as well as “Sargam Direct”– a home delivery business operated by FMCG major Hindustan Levers in Mumbai. Later on, Wadhwan Retail also acquired “Smart” — a 14 stores supermarket retail chain operating from Bangalore.

“Sabka Bazaar,” according to the newspaper report, is facing difficulties in getting the material as vendors are unhappy about delayed payments on their supplies.

Fast moving consumer goods companies are these days tough on supplies to modern retailers after loosing heavy amounts after collapse of Subhiksha –a pan-India retail chain with over 1,600 stores in the ‘value’ segment, closure of several retail chains and cash crunch faced by many other retailers like Vishal Retail.

While, the retailer has refuted the reports concerning payment problems, a stockist of FMCG major Hindustan Unilever (HUL) and Reckitt Benckiser is reported to have stopped supplies on account of defaulted payments.

“Sabka Bazaar is definitely facing (financial) problems. They do not have funds and the stores are not stocked well.” said another vendors of a multinational company to the newspaper. “In the case of big and stable retail chains we do not mind keeping some bills pending, but in the case of Sabka Bazaar, we give them credit of only two outstanding bills. In order to get fresh supplies, they have to clear at least one outstanding bill,” added the vendor.

Accordingly, Pantaloon Retail (Future group’s retail arm), which operates several multi-format, multi-product, retail chains in value, lifestyle, and home retail segments, across the country and provides direct employment to 40,000 persons, after a short blip, has begun hiring new employees for retail chains.

Retail sector, one of the biggest job creators in any economy, according to Biyani, is a key growth driver for the country’s economy. The sector offers great potential for creation of jobs everywhere. India’s retail sector, like other global economies, too has great potential for creation of jobs.

According to Biyani, increase in urban consumption leads to rural prosperity as well. According to a study conducted by his group, every Rs 100 worth of urban consumption results in channeling of Rs 39 to rural areas.

Biyani was participating in meeting of top industry leaders convened on Tuesday by India’s Finance Minister Pranab Mukherjee. The meeting was called to chart out a road map for reforms and sustainable economic growth.

While, Supplyco (Kerala State Civil Supplies Corporation), a state government retailer, has planned to celebrate the festival beginning the 28th August, 2009, private sector retail players have also geared up for the occasion with several mouth-watering shopping offers for their customers.

Supplyco is hoping to garner sales of Rs 210 crore this Onam by setting up five Metro People’s Bazaars and 12 Town People’s Bazaars that will cater to customer needs of essential commodities and other household products at reasonable prices during the festival time.

Sony, the leading Japanese consumer electronic brand, is all set to garner festive season business of Rs 75 crore, this Onam. Apart from promoting various other products in its range, Sony is expecting to sell 20,000 CTVs (LCDs) and 10,000 digicams during the period.

Whirlpool, the well known brand of home appliances, is ready to storm the market with a wide range of washing machines and other durable products. The brand is expecting to garner sales of Rs 100 crore by selling 250,000 appliances this year. The brand sold 170,000 appliances last year.

Tanishq, the leading gold jewellery maker owned by Tatas-led Titan, is offering gifts worth Rs 2 lakh at each store in Kerala. Besides, it is also freeing its customers from obligation of paying last installment under Golden Harvest Savings Scheme of the company.

Panasonic India, the leading consumer electronics company, is hoping to double its sales during the Onam festival in Kerala. The durables brand is expecting to achieve Rs 40 crore worth business this year compared to Rs 20 crore in the previous year by offering an exchange and upgrade offer to its customers. Panasonic will exchange and/or upgrade old colour TV sets with new CTV, LCD or plasma TV sets.

Sonata, the leading wrist watch maker, is offering 20 per cent special ‘Onam’ discount on its products. Sonata, according to its Regional Sales Manager Anand Moorthy, is looking at creating a distinct style and personality for its customers with the season’s ‘must have’ accessory.

Zuari Furniture, a K K Birla company, has also targeted big jump in the festive business this year. The brand, despite global economic meltdown, has registered 55 per cent growth this year.

Philips India, the leading consumer durables company, is looking at 40 per cent growth in its sales and is expecting to achieve sales worth Rs 60 crore for consumer electronic products during the quarter. It is offering free gifts and special prices on its products like CTVs and DVD players, among others.

Zapp, the kidswear brand, which currently operates six stores in the state, has decided to bring cheer to faces of poor children this Onam by partnering with ‘SOS Children’s Village.’ The brand will be gifting toys/books to children from poor families through its outlets at Ernakulam and Edappally.

Telecom service provider MTS, a mobile telephony brand of Sistema Shyam TeleServices Limited (SSTL), has announced special plans, called MSaver 98 and MSaver 199, exclusively for its customers in Kerala on the occasion of Onam. Even Tata Telecom, apart from special tariffs for the occasion, has come out with gift and other offers for its prepaid customers.

Even State Bank of India (SBI) has reduced interest rates on consumer loans as “Onam Gift.’ The bank is offering interest rates of 7 per cent on housing loans and 8 per cent on car loans to its consumers.

Apart from experiencing falling footfalls and declining basket size (average invoice value) due to global slowdown, the highly leveraged retail chain was facing the problems of high interest cost and paying heavy payroll expenses.

On both the counts, the company, according to a BS report, appears to have succeeded. Vishal has been able to bring down the number of employees by a whopping 45 per cent from nearly 16,000 a year ago to 8,500 now. The company has also been able to address the problem of high interest cost by bringing it down from Rs 10 crore a month earlier to Rs 7.25 crore a month now. The interest cost has mostly come down due to negotiaon of interest rates with the lenders. Against a high rate of 15 per cent per annum the rate has now come down to 9.75 per cent. What is most worrying, however, is the fact that the company continues to carry a high debt burden of Rs 730 crore at an extremely debt/ equity ratio of 1.7.

“We have told the bankers that ours is a profit-making business model. All we need is some leniency in the rate of interest, so that we could make a comeback,” said Ambeek Khemka, group president.

Unless the company resorts to further dilution of some of its investments in assets, or inducts fresh equity capital in the system, it will be extremely difficult for the retailer to improve upon its leveraged position.

One of the major reasons for highly leveraged position of Vishal Retail could be attributed to the policy of going in for ‘unbridled expansion’ of its retail network. At one point of time, the number of its stores had crossed 184 while the space occupied by these stores had almost touched three million sq ft.

Most of the Vishal’s expansion like many other fast growing retailers (like Subhiksha) was funded via short term funds in the hope that fresh infusion of capital will help replace these high cost, low maturity funds.

The sudden plummeting of equity markets, however, led to a situation in which there was a sudden evaporation of capital from the markets. Even the plan for dilution of promoters’ equity stake could not fructify as most of the potential buyers themselves were struggling for raising funds and at the same time pruning their own operations.

“Excess short-term debt, coupled with plans of equity fund raising falling apart owing to poor market sentiments, led to sub-optimum capital mix and increased interest burden,” said Khemka.

Vishal Retail, which has now begun to clock over Rs 100 crore in monthly sales, is looking at closing down 20-odd stores to further rationalise its business. It is also looking at optimising employee expenses by cutting down on travel and communication allowances, particularly that of the top management, including the president.

“We are looking at increasing our per-employee productivity and this is one step in that direction,” Khemka added.

Spencer’s Retail, a retail arm of the diversified RPG (R P Goenka) group, is a wholly owned subsidiary of Kolkata-based CEC (Calcutta Electtric Supply Company).

Spencer’s Retail, according to a top company official, has witnessed a 15 to 16 per cent growth in revenues during the first quarter (ended June 30) of this financial year.

‘Sales per square feet are actually going up. We have seen a revenue growth of 15-16 percent in the 2009-10 first quarter as compared to the like period last year,’ said Sanjeev Goenka vice-chairman RPG Enterprises, while inaugurating a new format gourmet store in Kolkata.

According to Goenka, ‘The closing down part is now over.’

Spencer’s Retail is presently operating a retail network of 246 stores occupying a trading space of around 1 million sq ft. across the country. Spencer’s is planning to create an additional space of 225,000 sq ft during this fiscal.

The company has earmarked Rs 300 crore for investment to open 8 new large format stores this fiscal (up to 31st March, 2010).

According to a FICCI-Technopak report, the sector is expected to grow 4-fold from Rs1.25 lakh crore ($25 billion) sales in 2008 to Rs 4.5 lakh crore ($95 billion) by 2018. Even without the implementation of FDI and GST, though unlikely, the sector will continue to grow at 10-12 per cent annually. According to estimates, the turnover in the next 5 years (by 2013) is expected to rise to Rs 2.06 lakh crore ($47 billion) and in the next 10 years (by 2018) it is expected to rise three-fold to Rs 3.55 lakh crore.

While making wide-ranging recommendations to the government, the FMCG companies and the retailers to put their act together, it has urged the government to rapidly implement GST with a view to replace the multiple indirect taxes currently levied on FMCG products.

While, the report has, on the one hand, asked modern retailers to work with FMCG companies to improve fill rates, better capture consumer and shopper needs, and explore co-branding and co-promotion opportunities, on the other, it has advised traditional retailers (Kiranas) to invest in better customer service, product display and store ambience and invest in infrastructure, particularly for products that require controlled environmental conditions.

“Demand from the rural areas would be instrumental in fueling the growth of FMCG companies in India,” said Amit Mitra, FICCI General Secretary, while releasing the report.

Coming heavily on counterfeit products, which account for nearly 5 per cent of all products produced by the industry, the study has urged the government to enforce trade mark and copyright laws so as to protect the rights of the consumers and FMCG companies. These products while impacting tax collections significantly, also pose serious challenges to the sector’s growth, says the report.

The FMCG sector is among the largest employers in India and livelihood of 13 million people associated with it across 8 million Kiranas are directly depended on it, said Mitra while talking about potential of the sector.
Indirectly, 25 million more people employed at wholesalers, distributors, stockists, etc are also affected with well-being of sector.

The FMCG sector is also one of the major contributor to the exchequer as it contributes Rs 31,000 crore ($6.5 billion) though direct and indirect taxes.

The company, which markets its products, among others, under Koutons, Charlie Outlaw, Les Femme, Koutons Junior, K2ONE, FeeMe brands is looking at increasing the number of its stores from over 1,420 to 2,000, by the end of this financial year (31st March, 2010).

The company, which unlike many of its counterparts, operates with comfortable leverage is looking at expanding the network through additional debt. Since, Koutons prefers franchise model for expansion, it does not require much capital to expand its network. As such, it will raise capital through equity dilution only when it becomes necessary to do so.

Koutons is also trying to restrict expansion of its outlets as it wants to focus on converting existing stores into ‘family’ stores where all product categories (apparel, accessories, and footwear) are available under one roof. It will, therefore, consider increasing the size of some of its stores than to open new stores.

Koutons has also put its overseas expansion plans on hold until it is able to consolidate its position in the local market.

Koutons has in the past won several awards, including “Best Retailer Leadership Award 2008,” “Most Admired Fashion group,” “Value Retailer of the Year,” “Chain Store of the Year,” among others, while its Chairman DPS Kohli has won the “Most Admired Fashion Face of the year,” and “Brand Entrepreneur of the Year” awards.

Global financial meltdown resulting in collapse of capital markets had its impact on India’s HNWIs (high networth individuals or dollar millionaires), as their number dwindled by 39,000 (or 31.6 per cent) from 123,000 (2008) compared to 84,000 in the previous year (2007). This is the first drop recorded for India in the past seven years.

An HNWI is defined as the one who owns net assets of at least $1 million, excluding his/her primary residence and consumables. HNWIs are among the largest spending consumers patronising purchase of lifestyle and luxury products.

These are findings of the report titled “World Wealth Report” released by DSP Merrill Lynch and Capgemini, investment banking firms, on Thursday.

“India’s HNWI (high net worth individuals) population shrunk 31.6 per cent to 84,000, the second largest decline in the world, after posting the fastest rate of growth (up 22.7 per cent) in 2007,” said the report.

“India, still an emerging economy, suffered declining global demand for its goods and services and a hefty drop in market capitalisation of 64.1 per cent in 2008,” adds the report.

Globally, HNWIs are concentrated mainly in North America, Europe and Asia. While their combined wealth in 2008 dropped by 19.5 per cent to $32.8 trillion, their overall number was down by 14.9 per cent to 8.6 million.

This was a direct consequence of global market capitalisation plummeting by $30 trillion, or nearly 50 per cent, during the year.

Responding to the crisis in equity markets, HNWIs poured more money into fixed income, cash-based investments, and real estate, said Pradeep Dokania, DSP Merrill Lynch managing director and global private client head.

“HNWIs significantly increased allocations in art and jewellery, gems and watches in 2008 compared to pre-crises levels in 2006, as alternative flight to safety,” added Salil Parekh, Capgemini, CEO, financial services, India, Asia SBU.

The report, however, is quite upbeat on hopes of economic activity gain momentum in the coming years. It predicts an annualised growth rate of 8.1 per cent until 2013 and expects the overall wealth to rise to $48.5 trillion by then.

“HNWI financial wealth will grow to $48.5 trillion by 2013, advancing at an annualised rate of 8.1 per cent driven by the recovery in asset prices as the global economy and financial system right themselves,” says the report.

Our earlier report on the subject: