Fierce competition in the mobile retail space has claimed its first victim. The RP Goenka Group has sold its 50% stake in mobile and laptop retail chain RPG
Cellucom to joint venture partner Arun Nagar, founder and owner of Dubai-based Cellucom. Industry analysts peg the deal value at Rs 150-200 crore. However, this could not be independently verified. RPG group declined to provide details. While confirming the exit, a group spokesperson said, “This divestment is consistent with RPG’s focus on higher margin retail categories.” Cellucom is spread across Asia, Eastern Europe, South America and Africa. In October, Mr Nagar had announced plans to invest around Rs 300 crore on the India expansion, and said the company was adding 15-20 outlets every month. Currently, there are over 200 RPG Cellucom stores across the country, and the company plans to set up 500 stores by March 2010. It is expected that RPG Cellucom will rechristen itself to reflect the change in ownership. Cellucom, which is a mobile-and-IT product retail chain, has mandated Ernst & Young to find an Indian investor for the venture, said a source familiar with the development.
Saturday, December 20, 2008
Wednesday, December 10, 2008
Bossini to expand to 55 standalone outlets by 2010
Bossini, the international casual wear brand from LMG Brands, plans to have 55 standalone stores across India by end of March 2009, said Bossini brand head Chetansi Markandeya.
The brand has 22 stores in India, of which 3 are in Bangalore.
Bossini is also present in multi-brand outlets of Lifestyle, Reliance and Future Groups Central and Pantaloon outlets. The brand will also be present in the new outlets of these groups.
Realty takes another blow as buyers back out
The recent terror attack has dampened the already slackened demand in the realty sector. Several expatriates and visitors to Mumbai have kept their business plans on hold, hitting the sale and rental market in this segment.
Property consultants say NRIs and expatriates have deferred, if not backed out of, their plans to buy property in the country’s financial capital. Sandeep Sadh, CEO of Mumbai Property Exchange, says three of his clients, who were in the process of finalising deals last week, have now deferred their decision. “An expatriate employed with a multi-national company had finalised a high-end property in Bandra. But following the attack, his wife has decided to wait until January before going ahead with the deal. A Singaporean, who was planning to relocate to Mumbai, too has deferred his decision,” said Sadh. He is hopeful, however, that the affect on the economy will be short-lived.
Demand for property is down also in Colaba, which bore the burnt of the attacks with Nariman House, Taj Hotel and Leopold's Café having been targeted. “Business ekdum down hai,” said Chandu Naik, a local estate agent. He added that transactions were virtually nil once the share market started its downward spiral. “Now after the recent attacks, even enquiries have stopped,” said Naik.
Financial markets research group Macquarie Research has predicted that the terror attacks will also affect the demand for office and retail space in Mumbai.
“The sense of identification with Taj and Oberoi is very strong, not only for the business community but also for visitors and investors from foreign countries. We have not seen a more sombre mood,” said Anshuman Magazine, chairman and MD for CB Richard Ellis. He added that several visitors planning business trips to Mumbai have cancelled plans.
“This time the short-term impact would be much more than one would think. The risk perception has increased and none of the MNCs want any threat to the lives of their employees. The immediate impact will be seen on the leave and licence market. However, Mumbai is known for its ability for resurgence and over the next few months the mood will definitely improve,” said Magazine.
The impact has been felt also in the retail sector. A Morgan Stanley report looks at the impact in the weekends before and after the attack. Sales for Pantaloon’s declined 18 per cent in Mumbai while rising 10 per cent in the rest of the country. Shoppers’ Stop sales dropped 12 per cent in Mumbai against a 5 per cent growth elsewhere.
Vegetable vendors recover business
Reliance Fresh’s veg biz hit by 50%, Subhiksha temporarily shuts its veg division.
Vegetable-vendors and fruit-sellers across Nashik, whose vegetable business had been hit badly due to opening of Reliance Fresh and Subhiksha stores during last few months, have restored their business as consumers have once again turned towards them.
On the contrary, the vegetable and fruit business of Reliance Fresh has been hit by 50 to 60 per cent at its 11 stores in different locations across the city during the last six to eight months as most of their vegetable consumers have moved away. Another major retail chain Subhiksha has temporarily closed its fruits and vegetables division at its 11 stores across Nashik for the last two months and its reason is yet not known.
The livelihood of close to 6000 vegetable-vendors and fruit-sellers across Nashik city was affected following the opening of retail stores of Reliance Fresh and Subhiksha, in the second half of the calendar year 2007. Initially, most of the consumers had diverted towards these retail stores. Vegetable markets within a radius of 2-3 kms from these stores had been hit badly due to the sale of vegetables and fruits in these retail stores. Pawan Nagar’s Jijamata Vegetable Market, where 150 vendors sell vegetables, had worn a deserted look due to absence of consumers.
"Initially, my business and livelihood was at stake as sales had been hit by 70-80 per cent due to opening of retail stores of Reliance Fresh and Subhiksha here. But, this effect was upto six months only. Now, I have recovered 90 per cent of my business. Consumers diverting to these retail stores was just a part of the attraction and curiosity, but we have won their trust back. They (consumers) have experienced that only vegetable-vendors can offer fresh and quality vegetables,” said a 49-year-old vendor, who sells fruits and vegetables at Trimurti Chowk market, which is at a walking distance of three minutes from Subhiksha store and 1.5 km away from Reliance Fresh outlet at Cidco.
Laxmibai, who sells vegetables in the same area, says, “When our consumers had diverted to these retail format stores, it had become really difficult to earn even Rs 30-40 a day. But today, with our customers returning, I earn a profit of Rs 100-150 a day." Other 60 vendors at Trimurti Chowk have also heaved a sigh of relief after restoring business.
Bandu Narayane, who sells vegetables at Jijamata Vegetable market (Pawan Nagar) just one km from Reliance Fresh store, said, "Our traditional occupation was at stake due to the opening of branded retail stores. But, this effect was for the first few months only. My daily sale of vegetables, which had come down to Rs 700 a day, has reached again to Rs 2500-3000 a day. This market, which had worn a deserted look, is brimming with consumers again.”
Sunita Pendse, a 45-year old housewife, says, “Initially, I bought vegetables from Reliance Fresh store. Now, I prefer buying vegetables from vegetable-vendors as I get fresh vegetables from these vegetable-vendors at the same rate. On the contrary, vegetables at retail outlets are stored for two-three days in their cold storages.”
“The sale of vegetable and fruits at its 11 Reliance Fresh outlets across the Nashik city has been affected 50 to 60 per cent during the last six to eight months due to decrease in demand,” Reliance Fresh official told Business Standard on condition of anonymity.
Subhiksha official, who did not want to be identified, said, “Subhiksha has temporarily closed its vegetable and fruits division at its 11 stores across Nashik for the last two months and it is expected to commence again within a month's time.” He avoided a comment on the reason to stop the sale of vegetable and fruits at its outlets.
Retail workers report abuse by public
Stressed shoppers have been called upon to respect retail workers in the run up to Christmas after a new survey revealed that 70 per cent of shop assistants have been verbally abused by customers in the last 12 months.
The trade union Mandate, which represents over 50,000 workers in the retail sector, launched a new campaign today to draw awareness to the abuse that those working in shops experience.
According to research commissioned by the union, 30 per cent of retail workers received threats from a customer over the last year while 10 per cent were assaulted.
The union said that many incidents of abuse experienced by employees are based around issues which are outside the control of the worker.
"Our survey results show that nine times out of ten, the problem the customer has is completely out of the control of the employee. Issues such as clothing sizes, refund policies and a lack of stock are high on the agenda of customer complaints, yet retail workers have very little control over these matters," said Mandate's national coordinator for campaigns, Brian Forbes.
"It's clear from the survey that it is a minority of customers who treat retail workers badly and this is not acceptable in the long run," he added.
Mandate called on shoppers to show respect for retail workers over the holiday period and said that employers should also be aware of the stress that its employees are under.
The wholesale and retail sector now accounts for the largest share of employment in the Irish economy with over 200,000 people working in the retail industry alone, according to the union.
Sunday, November 30, 2008
A V Birla More Retail Opens 15 Stores
Aditya Birla Group promoted retail venture in the supermarket format, More Retail opened 15 stores in AP most of them at Hyderabad. They are not new openings but renovated and refurbished stores of Trinethra Retail which the Birlas took over earlier this year.Mr Murti, COO of More Retail said,
In all we are planning to setup 150 stores or so in the coastal region and parts of Rayalasema and 150 more in the rest of the state by the end of this financial year. In Karnataka we are starting from Mysore.To establish one supermarket store it costs anywhere between Rs 40 lakh to Rs 90 lakh. Aditya Birla group has set an ambitious target of investing Rs 15,000 crore in the venture of which they have invest Rs 3,000 crore so far. Aditya Birla group is very well known to divert money from group companies for new ventures.
In all we are planning to setup 150 stores or so in the coastal region and parts of Rayalasema and 150 more in the rest of the state by the end of this financial year. In Karnataka we are starting from Mysore.To establish one supermarket store it costs anywhere between Rs 40 lakh to Rs 90 lakh. Aditya Birla group has set an ambitious target of investing Rs 15,000 crore in the venture of which they have invest Rs 3,000 crore so far. Aditya Birla group is very well known to divert money from group companies for new ventures.
Modern retail offers wide choice, farmers want to exercise it all
When he has a ready crop, Dnyaneshwar Nikam’s day would often start with a phone call, typically to the local wholesale agricultural produce marketing committee (APMC) market, which has for decades been the only wholesale buyer of his produce.
These days, his phone list is a lot longer. It includes officials of Godrej Agrovet Ltd, Aditya Birla Retail Ltd and Reliance Retail Ltd and he carefully compares prices before promising delivery of his ripe but unharvested crop that day.
Nikam, who has a 10-acre farm in Pune’s Ranjani village, has heard Subhiksha Trading Services Ltd may also start buying from around here and is excited because, he says, “The more companies there are, the better it is for us because we can choose where we will get better rates and want to sell our produce.”
The next day, when the Godrej officials land up at his farm, Nikam makes sure he lets them know that Birla offered Rs7 for a kg of cucumber and ITC offered him Rs8 for it, while Godrej offered just Rs6 the previous day. The key to selling to modern retail is to ensure that he sells to more than one retailer, he says. But also letting them know that.
Nikam grows tomatoes, watermelons, onions, brinjals, capsicum and chillies on his farm, apart from oranges and chickoos. He sold several of these vegetables to Godrej the previous day.
Driving past the procurement offices that dot that landscape around rural Pune’s vegetable farming strip, it is clear that change is in the air.
For the first time in India’s history, modern retailers are offering farmers a choice of a buyer other than the traders at government-controlled APMC markets. But some farmers also say this may be something of a limiting choice because they could end up selling to the only buyer who comes to them rather than selling through the APMC’s open auction system that ensures several buyers bid.
As Indians prepare for the army of retailers, who are drawing up plans to open stores in all sizes and price-ranges for them to buy from, the nascent industry is offering selling choices for farmers as well—from cooperatives to big retail firms to higher rates from APMC traders and even farmer-owned stores.
And the way they choose to sell is changing rapidly.
One recent winter day, Godrej Agrovet’s eight gourmet food and grocery stores, Nature’s Basket, paid less than the rate in Mumbai’s wholesale market for beetroots, peas and cabbage; matched rates for brinjals and tomatoes; and paid higher rates for cauliflower and cucumber.
These days, his phone list is a lot longer. It includes officials of Godrej Agrovet Ltd, Aditya Birla Retail Ltd and Reliance Retail Ltd and he carefully compares prices before promising delivery of his ripe but unharvested crop that day.
Nikam, who has a 10-acre farm in Pune’s Ranjani village, has heard Subhiksha Trading Services Ltd may also start buying from around here and is excited because, he says, “The more companies there are, the better it is for us because we can choose where we will get better rates and want to sell our produce.”
The next day, when the Godrej officials land up at his farm, Nikam makes sure he lets them know that Birla offered Rs7 for a kg of cucumber and ITC offered him Rs8 for it, while Godrej offered just Rs6 the previous day. The key to selling to modern retail is to ensure that he sells to more than one retailer, he says. But also letting them know that.
Nikam grows tomatoes, watermelons, onions, brinjals, capsicum and chillies on his farm, apart from oranges and chickoos. He sold several of these vegetables to Godrej the previous day.
Driving past the procurement offices that dot that landscape around rural Pune’s vegetable farming strip, it is clear that change is in the air.
For the first time in India’s history, modern retailers are offering farmers a choice of a buyer other than the traders at government-controlled APMC markets. But some farmers also say this may be something of a limiting choice because they could end up selling to the only buyer who comes to them rather than selling through the APMC’s open auction system that ensures several buyers bid.
As Indians prepare for the army of retailers, who are drawing up plans to open stores in all sizes and price-ranges for them to buy from, the nascent industry is offering selling choices for farmers as well—from cooperatives to big retail firms to higher rates from APMC traders and even farmer-owned stores.
And the way they choose to sell is changing rapidly.
One recent winter day, Godrej Agrovet’s eight gourmet food and grocery stores, Nature’s Basket, paid less than the rate in Mumbai’s wholesale market for beetroots, peas and cabbage; matched rates for brinjals and tomatoes; and paid higher rates for cauliflower and cucumber.
Aditya Birla Retail plans a store a day
Even as branded retailers face various protests and some political backlash, Aditya Birla Retail Ltd is stepping up its roll-out plans, and hopes to have about 150 stores in New Delhi and its suburbs, dubbed More, in the next six months, according to a company official and a supplier.
“They plan to open one store a day after January,” said one of the persons familiar with the situation, who didn’t want to be named as he is not authorized to speak to the media.
The Aditya Birla Group said it wants to invest around Rs8,000-9,000 crore in the retail venture in the next five years and plans to open 1,000 supermarkets and an undecided number of hypermarkets. It currently has about 300 supermarkets countrywide and a hypermarket in Hyderabad.
The conglomerate already has 20 More grocery stores in various localities within the Capital such as Hari Nagar, Pusa Road, Janakpuri, Patel Nagar and Jagatpuri. The firm may add another half a dozen such stores in the Capital in a couple of weeks, said two people familiar with the plans.
Also, the company has leased around 125,000 sq. ft in Parsvnath Developers Ltd’s Metro Mall in the Capital’s Seelampur area to open its hypermarket there and another 15,000 sq. ft in Parsvnath’s mall in Rohini Metro station to open a supermarket there.
A spokesperson for Aditya Birla Group declined to provide any details of More’s expansion. The group’s plans illustrate a continuing surge in retailing despite protests by small retailers and their employees, local bans in some states, including Uttar Pradesh that have affected some chains such as Reliance Fresh and political uncertainty spurred by a long pending study that the government ordered on quantifying the impact of organized retail on so-called mom-and-pop stores.
That study was started in March by the Indian Council for Research on International Economic Relations (Icrier) at the behest of the commerce ministry. It stems from a letter that Congress party president Sonia Gandhi wrote to the Prime Minister’s Office, expressing concern over the seeming impact of multinational retailers on India’s small retailers. It is unclear when Icrier plans to submit its report.
In New Delhi, the group is playing catch-up with Reliance Industries Ltd’s Reliance Retail, which is planning to open around 600 stores in the city and its suburbs in the next three years with hundreds of Reliance Fresh grocery stores, at least two dozen hypermarkets and several other formats, including apparel, shoes, jewellery, health and wellness.
Marketers say New Delhi is the country’s biggest consumer market with an annual market size of about Rs64,039 crore at the end of 2006, compared with Mumbai, the second biggest one, with Rs53,071 crore, according to research group Indicus Analytics.
“They plan to open one store a day after January,” said one of the persons familiar with the situation, who didn’t want to be named as he is not authorized to speak to the media.
The Aditya Birla Group said it wants to invest around Rs8,000-9,000 crore in the retail venture in the next five years and plans to open 1,000 supermarkets and an undecided number of hypermarkets. It currently has about 300 supermarkets countrywide and a hypermarket in Hyderabad.
The conglomerate already has 20 More grocery stores in various localities within the Capital such as Hari Nagar, Pusa Road, Janakpuri, Patel Nagar and Jagatpuri. The firm may add another half a dozen such stores in the Capital in a couple of weeks, said two people familiar with the plans.
Also, the company has leased around 125,000 sq. ft in Parsvnath Developers Ltd’s Metro Mall in the Capital’s Seelampur area to open its hypermarket there and another 15,000 sq. ft in Parsvnath’s mall in Rohini Metro station to open a supermarket there.
A spokesperson for Aditya Birla Group declined to provide any details of More’s expansion. The group’s plans illustrate a continuing surge in retailing despite protests by small retailers and their employees, local bans in some states, including Uttar Pradesh that have affected some chains such as Reliance Fresh and political uncertainty spurred by a long pending study that the government ordered on quantifying the impact of organized retail on so-called mom-and-pop stores.
That study was started in March by the Indian Council for Research on International Economic Relations (Icrier) at the behest of the commerce ministry. It stems from a letter that Congress party president Sonia Gandhi wrote to the Prime Minister’s Office, expressing concern over the seeming impact of multinational retailers on India’s small retailers. It is unclear when Icrier plans to submit its report.
In New Delhi, the group is playing catch-up with Reliance Industries Ltd’s Reliance Retail, which is planning to open around 600 stores in the city and its suburbs in the next three years with hundreds of Reliance Fresh grocery stores, at least two dozen hypermarkets and several other formats, including apparel, shoes, jewellery, health and wellness.
Marketers say New Delhi is the country’s biggest consumer market with an annual market size of about Rs64,039 crore at the end of 2006, compared with Mumbai, the second biggest one, with Rs53,071 crore, according to research group Indicus Analytics.
Retailers seek discounted rentals as prices of real estate decline
With realty prices sliding, retailers are looking to renegotiate rentals signed in better times. In some cases, they are even shutting and relocating stores to offset the drag on profitability.
Kishore Biyani, managing director of Pantaloon Retail (India) Ltd, India’s biggest publicly traded retailer, said store rentals are down by 25-50%. “We are renegotiating the rentals in some cases,” he said, but declined to elaborate.
However, Thomas Varghese, chief executive officer of Aditya Birla Retail Ltd, which operates the More retail chain, said while rentals have softened for big stores, they remain unchanged for smaller shops.
The latest to join the pack is The MobileStore Ltd, a venture of the Essar Group that sells telecom products such as mobile phones.
“We have signed deals on high rentals a year back and now the rentals are coming down by almost 50%,” said chief executive officer Rajiv Agarwal. “We are renegotiating with the owners and whoever is refusing to revise the prices, we are relocating the store to a viable location having lesser rentals.”
The company currently operates some 1,200 stores and plans to shutter 5% of those — primarily in metros — if rentals can’t be renegotiated, Agarwal said. Three stores have already been shut, even as the company plans to add another 600 shops across India, because volumes have gone up, he said.
The company is not alone in walking away from contracts signed at a time when the economy looked better, oil had yet to cross $100 (Rs4,640) a barrel and inflation was in single digits.
Rentals typically are 15% of gross revenues for small properties, 5% for hypermarkets and 7% for departmental stores, said Shubhranshu Pani, Mumbai-based managing director of retail services at real-estate consulting firm Jones Lang LaSalle Meghraj.
Other retailers Mint spoke with also said they were trying to take advantage of cheaper commercial space and moving to more affordable places when renegotiations fail.
“We have started renegotiating the rentals with property owners where it is unreasonable, especially in places like Bangalore, Chennai and other metros,” said Suresh J., chief executive officer of Arvind Brands Ltd, which operates the Megamart retail chain. Rentals have come down by around 50-80% depending on location, he said.
However, the company will not close shops should negotiations fail, since they have long-term agreements with property owners and could face lawsuits if it terminates such deals, he clarified.
Samar Shiekhawat, vice-president of marketing at Spencer’s Retail Ltd, an RPG group company, said that since rentals have started declining by around 20-25%, the company is renegotiating with owners.
The retailer plans to relocate some 46 stores this year, of which 20 have already been shuttered, a key reason being high rentals, Shiekhawat said.
However, the company will continue with plans to have 300 more stores by next March, in addition to the 365 small and 35 large shops it now runs.
Anuj Puri, chairman and country head of Jones Lang LaSalle Meghraj, agreed rentals are falling in select malls and smaller stores.
“Only in those malls where the turnover was less, the rentals are coming down,” he said. “However, rentals in malls like Select Citywalk in Delhi, Inorbit and Phoenix in Mumbai and a few others in Bangalore are not coming down since the sales turnover is very good in these malls.”
For smaller stores, rentals are down by 15-20%, he said, adding that prices are likely to be stable and unlikely to fall further.
Puri said retailers who got small stores in malls last year typically paid between 35% and 40% more than the anchor — the largest store in a mall. These rents are now coming down by 25-30%, effectively reducing the gap between the smaller stores and anchors.
But the profits of retailers that are relocating will be impacted negatively, he said.
“Already, the margins are squeezed and to continue with high-rental outlets does not make sense. With the rentals coming down by around 40-50%, I want the reduced rentals,” said Agarwal of MobileStore. “Why should the company carry on with properties which have been signed at unreasonable rentals?”
Kishore Biyani, managing director of Pantaloon Retail (India) Ltd, India’s biggest publicly traded retailer, said store rentals are down by 25-50%. “We are renegotiating the rentals in some cases,” he said, but declined to elaborate.
However, Thomas Varghese, chief executive officer of Aditya Birla Retail Ltd, which operates the More retail chain, said while rentals have softened for big stores, they remain unchanged for smaller shops.
The latest to join the pack is The MobileStore Ltd, a venture of the Essar Group that sells telecom products such as mobile phones.
“We have signed deals on high rentals a year back and now the rentals are coming down by almost 50%,” said chief executive officer Rajiv Agarwal. “We are renegotiating with the owners and whoever is refusing to revise the prices, we are relocating the store to a viable location having lesser rentals.”
The company currently operates some 1,200 stores and plans to shutter 5% of those — primarily in metros — if rentals can’t be renegotiated, Agarwal said. Three stores have already been shut, even as the company plans to add another 600 shops across India, because volumes have gone up, he said.
The company is not alone in walking away from contracts signed at a time when the economy looked better, oil had yet to cross $100 (Rs4,640) a barrel and inflation was in single digits.
Rentals typically are 15% of gross revenues for small properties, 5% for hypermarkets and 7% for departmental stores, said Shubhranshu Pani, Mumbai-based managing director of retail services at real-estate consulting firm Jones Lang LaSalle Meghraj.
Other retailers Mint spoke with also said they were trying to take advantage of cheaper commercial space and moving to more affordable places when renegotiations fail.
“We have started renegotiating the rentals with property owners where it is unreasonable, especially in places like Bangalore, Chennai and other metros,” said Suresh J., chief executive officer of Arvind Brands Ltd, which operates the Megamart retail chain. Rentals have come down by around 50-80% depending on location, he said.
However, the company will not close shops should negotiations fail, since they have long-term agreements with property owners and could face lawsuits if it terminates such deals, he clarified.
Samar Shiekhawat, vice-president of marketing at Spencer’s Retail Ltd, an RPG group company, said that since rentals have started declining by around 20-25%, the company is renegotiating with owners.
The retailer plans to relocate some 46 stores this year, of which 20 have already been shuttered, a key reason being high rentals, Shiekhawat said.
However, the company will continue with plans to have 300 more stores by next March, in addition to the 365 small and 35 large shops it now runs.
Anuj Puri, chairman and country head of Jones Lang LaSalle Meghraj, agreed rentals are falling in select malls and smaller stores.
“Only in those malls where the turnover was less, the rentals are coming down,” he said. “However, rentals in malls like Select Citywalk in Delhi, Inorbit and Phoenix in Mumbai and a few others in Bangalore are not coming down since the sales turnover is very good in these malls.”
For smaller stores, rentals are down by 15-20%, he said, adding that prices are likely to be stable and unlikely to fall further.
Puri said retailers who got small stores in malls last year typically paid between 35% and 40% more than the anchor — the largest store in a mall. These rents are now coming down by 25-30%, effectively reducing the gap between the smaller stores and anchors.
But the profits of retailers that are relocating will be impacted negatively, he said.
“Already, the margins are squeezed and to continue with high-rental outlets does not make sense. With the rentals coming down by around 40-50%, I want the reduced rentals,” said Agarwal of MobileStore. “Why should the company carry on with properties which have been signed at unreasonable rentals?”
Aditya Birla Group's retail arm seeks to expand 'More'
The retail arm of Aditya Birla Group, Aditya Birla Retail Ltd (ABRL) has announced plans of investing Rs.250-300 crore to expand its retail business and set up at least a dozen hypermarts across the country under the brand name More Megastore in the coming financial year.
"We will probably open a dozen hypermarkets in the country in 2008-09. The hypermarket offers a seamless shopping experience offering 60,000 products from over 500 suppliers," said Russell Berman, head of ABRL's hypermarket division, on the sidelines of inaugurating the first of such hypermarket in Vadodara in Gujarat.
"Our mission at Aditya Birla Retail's More stores - be they super marts or hypermarts, is to change the way people shop and to make the entire shopping experience, a fun-filled enjoyable process for the whole family from the husband, to wife, to kids and to parents," said Aditya Birla Group chairman, Kumar Mangalam Birla.
"While our conveniently located neighborhood super marts all over the country provide all the daily and weekly shopping needs, our destination hypermarkets will cater to monthly and event-based shopping requirements. The More Megastore is a one-stop shop for the entire family. Here we offer an extensive range of 60,000 products catering to every need of a household," Birla said.
"As you walk through the Megastore, you will find an excellent toys and stationery mart for children, every household product for the woman of the house, furniture, electronics, mobiles, apparel and what-have-you for the husbands and wives to shop together, a live bakery and a cozy caf for parents to relax," he added.
"We have now 430 super marts across the country and this is our second More Megastore which is a hypermarket. We will end the year with 500 super marts so it has gone very much as per our expectations," Birla said.
"We have enough funds for our retail plans through internal accruals and won't be raising money from the capital market. As for the investment, it depends on the scale of rollout in the country. However, it will be substantiative enough for a national presence," he added.
Overall, the group plans to invest Rs.10000 crore in retail business and open nearly 1,500 supermarket and 100 hypermart stores in the next five years.
In a separate development, ABRL, maintaining a low profile, has launched five More outlets in Kolkata, West Bengal, taking the total number of smaller version of the hypermarket to nine.
By end March, there will be at least 30 More stores in the state, each of around 2000-2500 sq ft, a senior executive of ABRL said.
"We will probably open a dozen hypermarkets in the country in 2008-09. The hypermarket offers a seamless shopping experience offering 60,000 products from over 500 suppliers," said Russell Berman, head of ABRL's hypermarket division, on the sidelines of inaugurating the first of such hypermarket in Vadodara in Gujarat.
"Our mission at Aditya Birla Retail's More stores - be they super marts or hypermarts, is to change the way people shop and to make the entire shopping experience, a fun-filled enjoyable process for the whole family from the husband, to wife, to kids and to parents," said Aditya Birla Group chairman, Kumar Mangalam Birla.
"While our conveniently located neighborhood super marts all over the country provide all the daily and weekly shopping needs, our destination hypermarkets will cater to monthly and event-based shopping requirements. The More Megastore is a one-stop shop for the entire family. Here we offer an extensive range of 60,000 products catering to every need of a household," Birla said.
"As you walk through the Megastore, you will find an excellent toys and stationery mart for children, every household product for the woman of the house, furniture, electronics, mobiles, apparel and what-have-you for the husbands and wives to shop together, a live bakery and a cozy caf for parents to relax," he added.
"We have now 430 super marts across the country and this is our second More Megastore which is a hypermarket. We will end the year with 500 super marts so it has gone very much as per our expectations," Birla said.
"We have enough funds for our retail plans through internal accruals and won't be raising money from the capital market. As for the investment, it depends on the scale of rollout in the country. However, it will be substantiative enough for a national presence," he added.
Overall, the group plans to invest Rs.10000 crore in retail business and open nearly 1,500 supermarket and 100 hypermart stores in the next five years.
In a separate development, ABRL, maintaining a low profile, has launched five More outlets in Kolkata, West Bengal, taking the total number of smaller version of the hypermarket to nine.
By end March, there will be at least 30 More stores in the state, each of around 2000-2500 sq ft, a senior executive of ABRL said.
Reliance Retail recasts operations to cut losses
Reliance Retail Ltd, an arm of Reliance Industries Ltd (RIL), India’s biggest company by market value, has embarked on a restructuring exercise that involves shutting, relocating or resizing at least 200 of its smaller stores, said two persons familiar with the development.
Most of the stores are part of Reliance Fresh, the supermarket chain, said one of them who did not want to be named.
The firm has also temporarily shelved expansion plans to focus on making existing stores profitable. It currently has 816 stores in 60 cities.
“The company will relocate some unprofitable stores and even close down a few, and some of the smaller stores will be integrated into the larger hypermarket format,” the same person said.
A supermarket typically ranges between 1,000 sq. ft and 5,000 sq. ft in size, while a hypermarket can be between 100,000 sq. ft and 200,000 sq. ft. As part of the restructuring, Reliance Retail plans to reduce the size of some stores. It recently cut the size of its Ahmedabad hypermarket to 100,000 sq. ft from 165,000 sq. ft. In the smaller supermarket format, too, some stores have been reduced in size, the person added.
Neucom Consulting, the company’s external public relations firm, declined comment on the development.
The second person familiar with the development, a company executive who did not want to be named, said such resizing and restructuring is happening across cities, and expansion plans are either being put on hold or significantly reduced. For instance, an initial plan to have 70 small stores in Pune, which already has 20, has been pared to about 30. The company is cancelling realty agreements now considered expensive and not in sync with current times.
Even in Mumbai, the initial target of opening 100 stores has been scaled down to around 70. Mumbai currently has about 40 outlets.
“The company will shut down stores that are not viable, bring down the present size of the stores and also cancel some of the agreements that were signed when rentals were high,” the executive said.
The restructuring comes at a time when the entire organized retail industry is scaling back expansion plans.
“If Reliance Retail is restructuring, it is nothing out of the ordinary. Recently, even Future Group and Spencers have made changes in their strategies as they understood the business better with time,” said Arvind Singhal, chairman of management consultancy firm KSA Technopak Advisors. “Reliance Retail started just 18 months back and they are likely to experiment with the formats for quite some time, and certain amount of changes will keep happening” Singhal said. “Closing stores and relocating in viable locations is done by most of the retailers across the world and Reliance will also consider it.”
In a 30 October research report, investment research firm Clear Capital Ltd, an associate of UK-based Noble group, said falling margins were affecting the profits of retailers. “The minimal cash generation and wafer thin operating margins in the range of 4-14% (average of ~7%), in what is considered to be a highly cash-rich business the world over, a lack of cash generation, alongside the high leverage levels (average debt to equity of 1.1x), have left the retailers looking exposed,” its analyst Jaibir Sethi wrote.
At RIL’s annual general meeting in June, Mukesh Ambani, chairman and managing director of the company, spoke about the retail business being on track to “create a significant value-creating platform.”
The retail business of the company continues to open new stores in the smaller formats and the recently unveiled Reliance Footprint, which sells footwear. According to the company executive, Reliance Retail is looking to consolidate its back-office operations as well. About six months ago, it closed down a collection and processing centre in Pune.
In a related development, the company is reopening some stores in Uttar Pradesh that were earlier selling vegetables and grocery items. These stores, which were asked to be closed by the state government following protests, will now retail non-food items. For instance, its outlet in Noida’s Shopprix Mall that opened on Thursday is now selling home furnishings
Most of the stores are part of Reliance Fresh, the supermarket chain, said one of them who did not want to be named.
The firm has also temporarily shelved expansion plans to focus on making existing stores profitable. It currently has 816 stores in 60 cities.
“The company will relocate some unprofitable stores and even close down a few, and some of the smaller stores will be integrated into the larger hypermarket format,” the same person said.
A supermarket typically ranges between 1,000 sq. ft and 5,000 sq. ft in size, while a hypermarket can be between 100,000 sq. ft and 200,000 sq. ft. As part of the restructuring, Reliance Retail plans to reduce the size of some stores. It recently cut the size of its Ahmedabad hypermarket to 100,000 sq. ft from 165,000 sq. ft. In the smaller supermarket format, too, some stores have been reduced in size, the person added.
Neucom Consulting, the company’s external public relations firm, declined comment on the development.
The second person familiar with the development, a company executive who did not want to be named, said such resizing and restructuring is happening across cities, and expansion plans are either being put on hold or significantly reduced. For instance, an initial plan to have 70 small stores in Pune, which already has 20, has been pared to about 30. The company is cancelling realty agreements now considered expensive and not in sync with current times.
Even in Mumbai, the initial target of opening 100 stores has been scaled down to around 70. Mumbai currently has about 40 outlets.
“The company will shut down stores that are not viable, bring down the present size of the stores and also cancel some of the agreements that were signed when rentals were high,” the executive said.
The restructuring comes at a time when the entire organized retail industry is scaling back expansion plans.
“If Reliance Retail is restructuring, it is nothing out of the ordinary. Recently, even Future Group and Spencers have made changes in their strategies as they understood the business better with time,” said Arvind Singhal, chairman of management consultancy firm KSA Technopak Advisors. “Reliance Retail started just 18 months back and they are likely to experiment with the formats for quite some time, and certain amount of changes will keep happening” Singhal said. “Closing stores and relocating in viable locations is done by most of the retailers across the world and Reliance will also consider it.”
In a 30 October research report, investment research firm Clear Capital Ltd, an associate of UK-based Noble group, said falling margins were affecting the profits of retailers. “The minimal cash generation and wafer thin operating margins in the range of 4-14% (average of ~7%), in what is considered to be a highly cash-rich business the world over, a lack of cash generation, alongside the high leverage levels (average debt to equity of 1.1x), have left the retailers looking exposed,” its analyst Jaibir Sethi wrote.
At RIL’s annual general meeting in June, Mukesh Ambani, chairman and managing director of the company, spoke about the retail business being on track to “create a significant value-creating platform.”
The retail business of the company continues to open new stores in the smaller formats and the recently unveiled Reliance Footprint, which sells footwear. According to the company executive, Reliance Retail is looking to consolidate its back-office operations as well. About six months ago, it closed down a collection and processing centre in Pune.
In a related development, the company is reopening some stores in Uttar Pradesh that were earlier selling vegetables and grocery items. These stores, which were asked to be closed by the state government following protests, will now retail non-food items. For instance, its outlet in Noida’s Shopprix Mall that opened on Thursday is now selling home furnishings
Saturday, November 22, 2008
Subhiksha not paying some bills
Subhiksha in Sanskrit means “the giver of all good things in life”. Just don’t tell that to some vendors in the Capital’s largest wholesale market for fruit and vegetables, who allege that the no-frills discount retailer, Subhiksha Trading Services Ltd, hasn’t paid them their dues for the past several months.
As a result, many wholesale suppliers in Azadpur mandi, or market, say they have stopped supplying to various Subhiksha outlets in the National Capital Region (NCR) as Delhi and its environs are collectively called, after their payments were held up for anything between two and six months. As a rule, bulk buyers pay up suppliers within a month.
A senior office bearer of Vegetable Traders Association of Azadpur put the amount due to suppliers at around Rs2 crore. He didn’t wish to be identified. At least half a dozen other fruit and vegetable sellers in the mandi, however, said it could be as high as Rs3 crore.
A trader, who did not wish to be named, said: “I will stop supplying to Subhiksha the day I recover my dues.” He claimed his outstanding against the firm was more than Rs30 lakh. “If I stop supplying to them, they may withhold my previous dues.”
A Subhiksha official, however, downplayed the issue.
“If you are doing business and someone’s payment is delayed, it could be for several reasons. It could be because of supply issues, quality issues, or billing issues,” said Ashu Phakey, president (Delhi region) at Subhiksha. He said he was unaware of the payment-related problem at Azadpur even as wholesalers maintained they called on him at his office as well as spoke to him on phone. “Since they are not organized kind of vendors, they, at times, have problem in being able to reconcile their accounts because they don’t operate with all the invoices…so some guys may have problems.”
R. Subramanian, managing director of Subhiksha, said he was also unaware of such a problem at Azadpur. “We work in a completely decentralized system...we do not really handle payments to vendors centrally at all,” he said. However, he admitted that there are some “reconciliation issues” and said Subhiksha’s “team in Delhi was going through a large-scale reconciliation of accounts in Azadpur market”.
Mint couldn’t immediately ascertain whether alleged payment delays were restricted to NCR, or were broader.
But in NCR, many vendors, who have not been paid their dues, say they have stopped their supplies to the retailer.
Sujeet Kumar of Sujeet Ajeet and Co. said he stopped supplying to the retailer two months ago after unpaid dues amounted to around Rs25 lakh.
As a result, many wholesale suppliers in Azadpur mandi, or market, say they have stopped supplying to various Subhiksha outlets in the National Capital Region (NCR) as Delhi and its environs are collectively called, after their payments were held up for anything between two and six months. As a rule, bulk buyers pay up suppliers within a month.
A senior office bearer of Vegetable Traders Association of Azadpur put the amount due to suppliers at around Rs2 crore. He didn’t wish to be identified. At least half a dozen other fruit and vegetable sellers in the mandi, however, said it could be as high as Rs3 crore.
A trader, who did not wish to be named, said: “I will stop supplying to Subhiksha the day I recover my dues.” He claimed his outstanding against the firm was more than Rs30 lakh. “If I stop supplying to them, they may withhold my previous dues.”
A Subhiksha official, however, downplayed the issue.
“If you are doing business and someone’s payment is delayed, it could be for several reasons. It could be because of supply issues, quality issues, or billing issues,” said Ashu Phakey, president (Delhi region) at Subhiksha. He said he was unaware of the payment-related problem at Azadpur even as wholesalers maintained they called on him at his office as well as spoke to him on phone. “Since they are not organized kind of vendors, they, at times, have problem in being able to reconcile their accounts because they don’t operate with all the invoices…so some guys may have problems.”
R. Subramanian, managing director of Subhiksha, said he was also unaware of such a problem at Azadpur. “We work in a completely decentralized system...we do not really handle payments to vendors centrally at all,” he said. However, he admitted that there are some “reconciliation issues” and said Subhiksha’s “team in Delhi was going through a large-scale reconciliation of accounts in Azadpur market”.
Mint couldn’t immediately ascertain whether alleged payment delays were restricted to NCR, or were broader.
But in NCR, many vendors, who have not been paid their dues, say they have stopped their supplies to the retailer.
Sujeet Kumar of Sujeet Ajeet and Co. said he stopped supplying to the retailer two months ago after unpaid dues amounted to around Rs25 lakh.
R. Subramanian, managing director of Subhiksha, claims that the retail firm is on an extremely high growth path
Discount retailer Subhiksha Trading Services Ltd has been in the news lately. In early September, there were allegations that the firm was not paying its suppliers (Mint, 5 September), and reports that the firm had sold a 10% stake to billionaire Azim Premji for Rs230 crore. Then, the company said that after its merger with Blue Green Constructions and the subsequent renaming of the firm as Subhiksha India, the merged entity would seek a listing (Blue Green is already listed on the exchanges).
Last week, employees at some Subhiksha stores in New Delhi and its environs told Mint that the retailer had not paid them salaries for August.
R. Subramanian, managing director of Subhiksha, spoke to Mint over the telephone on Wednesday to specifically counter the allegations regarding salaries and also commented on the general perception that his firm is facing a cash crunch. Edited excerpts:
Some employees say they haven’t been paid August salaries. What has caused the delay?
There is no delay at all. I don’t know who you spoke to (and) whether they are our employees. I have no clue.
Let me be very clear: As an organization, we have 5,500 or so (employees) across the country and every single employee has been paid whatever salary is due and payable for the month of August in the month of September. There is not a single employee that has not been paid by us.
Is your company going through a financial crisis?
I think that was the theme of the last story you wrote and this story that you are trying to write now. I think we clarified the same thing last time as well.
The reality is that we are on an extremely high growth path. We are doubling turnover from last year to this year and we are also sort of investing in new projects and are sort of well on our way to setting up 2 million sq. ft of space by June of next year. Basically, the point is, we are expanding.
So, obviously, we don’t have any financial crunch and if we are having a financial crunch then we won’t be allocating funds for the expansion. We are in the middle of the year and we have already completed a reasonable 40% of the expansion planned for the year and we are reasonably hopeful that the balance 60% of the expansion plans will be completed. So, whatever targets we set out for ourselves we are moving on that.
When a company is going through a rapid expansion...a company in any business will allocate its money. I am saying... as a newspaper you will decide you will pay your newsprint vendor 15 days late or...pay printing and vendors 10 days late. Those sort of things happen in a bad market when vendors desperately need money—every retailer will find ways to squeeze the various suppliers and sort of vendors for best possible deals whether it’s discounts or whether it’s in terms of trade margin or whether it is in terms of credit. I am saying we are not sort of (Mahatma) Gandhi and (Gautama) Buddha to say that we are sort of completely not enchanted by the profit from whoever we deal with.
We are tempted to get better deals from whoever we deal with and, therefore, we would push to get the best deal we can and we do it. The fact is that we pushed for the best deal does not mean we are facing a financial crisis. We are exploiting the weak market for getting the best deals for us.
If you visit any Subhiksha store in Delhi or the National Capital Region, many of them are partially empty—with empty racks. Any reason for this?
We constantly sort of look at our merchandising strategy and inventory turnover strategy. Our inventory is in line with what sales we want to achieve and whether stores will be larger or the stores might have more racks, we might be following a particular strategy in terms of what we want to do. Fundamentally, the key piece, as far as we are concerned, is we have sales target for the stores. Our stores will achieve 90% to 100% of our sales target. The inventory is in line with the sales target we look for. Just because we have racks doesn’t mean that we have to fill the racks and I don’t think that is a strategy a retailer would want to work on.
Of course, we can fill the racks if that will give an impression that we are not in a financial crunch. But that’s not the basis on which we operate. We operate our business on the basis of what stocks are required to sell, what we want to sell... We supply our stores every day and need only so much inventory to be able to manage whatever sales we want to manage.
Last week, employees at some Subhiksha stores in New Delhi and its environs told Mint that the retailer had not paid them salaries for August.
R. Subramanian, managing director of Subhiksha, spoke to Mint over the telephone on Wednesday to specifically counter the allegations regarding salaries and also commented on the general perception that his firm is facing a cash crunch. Edited excerpts:
Some employees say they haven’t been paid August salaries. What has caused the delay?
There is no delay at all. I don’t know who you spoke to (and) whether they are our employees. I have no clue.
Let me be very clear: As an organization, we have 5,500 or so (employees) across the country and every single employee has been paid whatever salary is due and payable for the month of August in the month of September. There is not a single employee that has not been paid by us.
Is your company going through a financial crisis?
I think that was the theme of the last story you wrote and this story that you are trying to write now. I think we clarified the same thing last time as well.
The reality is that we are on an extremely high growth path. We are doubling turnover from last year to this year and we are also sort of investing in new projects and are sort of well on our way to setting up 2 million sq. ft of space by June of next year. Basically, the point is, we are expanding.
So, obviously, we don’t have any financial crunch and if we are having a financial crunch then we won’t be allocating funds for the expansion. We are in the middle of the year and we have already completed a reasonable 40% of the expansion planned for the year and we are reasonably hopeful that the balance 60% of the expansion plans will be completed. So, whatever targets we set out for ourselves we are moving on that.
When a company is going through a rapid expansion...a company in any business will allocate its money. I am saying... as a newspaper you will decide you will pay your newsprint vendor 15 days late or...pay printing and vendors 10 days late. Those sort of things happen in a bad market when vendors desperately need money—every retailer will find ways to squeeze the various suppliers and sort of vendors for best possible deals whether it’s discounts or whether it’s in terms of trade margin or whether it is in terms of credit. I am saying we are not sort of (Mahatma) Gandhi and (Gautama) Buddha to say that we are sort of completely not enchanted by the profit from whoever we deal with.
We are tempted to get better deals from whoever we deal with and, therefore, we would push to get the best deal we can and we do it. The fact is that we pushed for the best deal does not mean we are facing a financial crisis. We are exploiting the weak market for getting the best deals for us.
If you visit any Subhiksha store in Delhi or the National Capital Region, many of them are partially empty—with empty racks. Any reason for this?
We constantly sort of look at our merchandising strategy and inventory turnover strategy. Our inventory is in line with what sales we want to achieve and whether stores will be larger or the stores might have more racks, we might be following a particular strategy in terms of what we want to do. Fundamentally, the key piece, as far as we are concerned, is we have sales target for the stores. Our stores will achieve 90% to 100% of our sales target. The inventory is in line with the sales target we look for. Just because we have racks doesn’t mean that we have to fill the racks and I don’t think that is a strategy a retailer would want to work on.
Of course, we can fill the racks if that will give an impression that we are not in a financial crunch. But that’s not the basis on which we operate. We operate our business on the basis of what stocks are required to sell, what we want to sell... We supply our stores every day and need only so much inventory to be able to manage whatever sales we want to manage.
Friday, November 21, 2008
सिटी ग्रुप बेहाल, शेयर एक दिन में 26% डाउन
अमेरिका के दूसरे सबसे बड़े बैंक सिटी ग्रुप के शेयर गुरुवार को 26 परसेंट लुढ़क गए। शेयर का भाव इस समय 15 साल के लोएस्ट लेवल पर है।
सिंगापुर में सिटी ग्रुप के बोर्ड के सामने रेड सिग्नल। (Reuters)एक समय इस बैंक का एसेट 270 अरब डॉलर था। आज ये बैंक सिर्फ 25 अरब डॉलर का रह गया है। निवेशक डरे हुए हैं कि क्या बैंक के पास अपने अरबों डॉलर के घाटे का बोझ उठाने के लिए कैश है। सिर्फ इस हफ्ते में सिटी ग्रुप के शेयर 50 परसेंट गिर चुके हैं और अब ये खुद को बचाने के लिए तमाम ऑप्शन तलाश रहा है। इन ऑप्शन्स में किसी और कंपनी के साथ मर्जर शामिल हैं। जानकार बताते है कि मर्जर के लिए एक कंपनी के साथ शुरुआती बातचीत शुरू भी हो गई है। वाल स्ट्रीट जर्नल ने इस बारे में खबर देते हुए साफ किया है कि जिस कंपनी से सिटी ग्रुप की बात चल रही है वो मॉर्गन स्टेनले नहीं है। हालांकि सिटी ग्रुप का कहना है कि उसके पास काफी कैश हैं और कुछ समय में वो फिर से मुनाफा कमाने लगेगा। गुरुवार को सऊदी अरब के प्रिंस अलवालीद बिन तलाल ने कहा कि सिटी ग्रुप के शेयर बेहद नीचे चल रहे हैं और वो बैंक में अपनी हिस्सेदारी 4 परसेंट से बढ़ाकर 5 परसेंट करना चाहते हैं। सिटीग्रुप के सीईओ विक्रम पंडित ने पिछले ही हफ्ते कहा था कि बैंक के 52,000 कर्मचारियों को काम से निकाला जाएगा और 20 परसेंट खर्च घटाए जाएंगे। लेकिन एनालिस्ट कह रहे हैं कि इन उपायों से भी बैंक को बचाना शायद आसान नहीं होगा क्योंकि 2009 में उसे कमर्शियल रियल एस्टेट, क्रेडिट कार्ड और इमर्जिंग मार्केट के बिजनेस से 20 अरब डॉलर का नुकसान होने वाला है।
सिंगापुर में सिटी ग्रुप के बोर्ड के सामने रेड सिग्नल। (Reuters)एक समय इस बैंक का एसेट 270 अरब डॉलर था। आज ये बैंक सिर्फ 25 अरब डॉलर का रह गया है। निवेशक डरे हुए हैं कि क्या बैंक के पास अपने अरबों डॉलर के घाटे का बोझ उठाने के लिए कैश है। सिर्फ इस हफ्ते में सिटी ग्रुप के शेयर 50 परसेंट गिर चुके हैं और अब ये खुद को बचाने के लिए तमाम ऑप्शन तलाश रहा है। इन ऑप्शन्स में किसी और कंपनी के साथ मर्जर शामिल हैं। जानकार बताते है कि मर्जर के लिए एक कंपनी के साथ शुरुआती बातचीत शुरू भी हो गई है। वाल स्ट्रीट जर्नल ने इस बारे में खबर देते हुए साफ किया है कि जिस कंपनी से सिटी ग्रुप की बात चल रही है वो मॉर्गन स्टेनले नहीं है। हालांकि सिटी ग्रुप का कहना है कि उसके पास काफी कैश हैं और कुछ समय में वो फिर से मुनाफा कमाने लगेगा। गुरुवार को सऊदी अरब के प्रिंस अलवालीद बिन तलाल ने कहा कि सिटी ग्रुप के शेयर बेहद नीचे चल रहे हैं और वो बैंक में अपनी हिस्सेदारी 4 परसेंट से बढ़ाकर 5 परसेंट करना चाहते हैं। सिटीग्रुप के सीईओ विक्रम पंडित ने पिछले ही हफ्ते कहा था कि बैंक के 52,000 कर्मचारियों को काम से निकाला जाएगा और 20 परसेंट खर्च घटाए जाएंगे। लेकिन एनालिस्ट कह रहे हैं कि इन उपायों से भी बैंक को बचाना शायद आसान नहीं होगा क्योंकि 2009 में उसे कमर्शियल रियल एस्टेट, क्रेडिट कार्ड और इमर्जिंग मार्केट के बिजनेस से 20 अरब डॉलर का नुकसान होने वाला है।
प्रॉपर्टी: 2009 में 25% गिरावट का अंदेशा
भारतीय प्रॉपर्टी बाजार में अगले साल 25 परसेंट तक गिरावट आ सकती है। इसकी वजह ग्लोबल फाइनांशियल क्राइसिस की वजह से घर खरीदने वालों के
भरोसे में आई कमी है। इससे डेवलपर्स की हालत और खराब होगी, क्योंकि पहले से ही उनके पास फंड की भारी कमी है। एशिया में सबसे बड़े प्रॉपर्टी मेले MIPIM एशिया कॉन्फ्रेंस में आए प्रतिनिधियों का मानना है कि आने वाला समय प्रॉपर्टी के लिए बुरा बीतने वाला है। भारत में प्रॉपर्टी का बूम पिछले एक साल से उतार पर है और 2007 के सबसे ऊंचे लेवल से जमीन की कीमत 15 परसेंट तक नीचे आ चुकी हैं। प्रॉपर्टी कंसल्टेंसी फर्म DTZ के अंशुल जैन का कहना है कि वो 2009 को बेहद बुरा वक्त मानकर चल रहे हैं। कीमतों में गिरावट के संकेत दिखने लगे हैं और इस बात के संकेत भी हैं कि इसमें और गिरावट आ सकती है। एक और प्रॉपर्टी कंसल्टेंसी फर्म कुशमन एंड वेकफिल्ड के ज्वायंट एमडी अनुराग माथुर कहते हैं कि भारत में प्रॉपर्टी प्राइस में 20 से 25 परसेंट का करेक्शन हो सकता है। उनके मुताबिक कीमतों पर काफी दबाव है। 2005 में कंस्ट्रक्शन कंपनियों में निवेश के नियम आसान बनाए जाने के बाद के दो साल में कई इलाकों में प्रॉपर्टी की कीमत दोगुनी हो गई थी। इससे विदेशी फंड में भी भारत में प्रॉपर्टी खरीदने का जोश जगा। कई डेवलपर्स ने मार्गन स्टेनले, सिटीग्रुप और मेरिल लिंच जैसे विदेशी फंड के साथ मिलकर प्रॉपर्टी में खरीदारी की। डीएलएफ और पार्श्वनाथ जैसे बिल्डर्स ने बड़े-बड़े प्रोजेक्ट्स अनाउंस किए। लेकिन कीमतों में तेजी और इंटरेस्ट रेट में बढ़ोतरी से घरों की बिक्री पर ब्रेक लग गया। महंगाई रोकने के लिए सरकार और आरबीआई ने होम लोन को महंगा और मुश्किल बना दिया। इसके बाद आई ग्लोबल मंदी ने माहौल बिगाड़ने में बड़ी भूमिका निभाई। इस दौरान प्रॉपर्टी कंपनियों के शेयर भी जमीन पर आ गए। मिसाल के तौर पर सेंसेक्स इस साल 58 परसेंट गिरा, जबकि डीएलएफ के शेयर 80 परसेंट तक गिर गए। हालांकि डेवलपर उम्मीद कर रहे हैं कि इनफ्लेशन काबू में आने के बाद इंटरेस्ट रेट भी घटेंगे और इसका फायदा प्रॉपर्टी सेक्टर को मिलेगा। साथ ही इस बात की भी पहल हो रही है कि डेवलपर सस्ते घरों पर जोर बढ़ाएं।
भरोसे में आई कमी है। इससे डेवलपर्स की हालत और खराब होगी, क्योंकि पहले से ही उनके पास फंड की भारी कमी है। एशिया में सबसे बड़े प्रॉपर्टी मेले MIPIM एशिया कॉन्फ्रेंस में आए प्रतिनिधियों का मानना है कि आने वाला समय प्रॉपर्टी के लिए बुरा बीतने वाला है। भारत में प्रॉपर्टी का बूम पिछले एक साल से उतार पर है और 2007 के सबसे ऊंचे लेवल से जमीन की कीमत 15 परसेंट तक नीचे आ चुकी हैं। प्रॉपर्टी कंसल्टेंसी फर्म DTZ के अंशुल जैन का कहना है कि वो 2009 को बेहद बुरा वक्त मानकर चल रहे हैं। कीमतों में गिरावट के संकेत दिखने लगे हैं और इस बात के संकेत भी हैं कि इसमें और गिरावट आ सकती है। एक और प्रॉपर्टी कंसल्टेंसी फर्म कुशमन एंड वेकफिल्ड के ज्वायंट एमडी अनुराग माथुर कहते हैं कि भारत में प्रॉपर्टी प्राइस में 20 से 25 परसेंट का करेक्शन हो सकता है। उनके मुताबिक कीमतों पर काफी दबाव है। 2005 में कंस्ट्रक्शन कंपनियों में निवेश के नियम आसान बनाए जाने के बाद के दो साल में कई इलाकों में प्रॉपर्टी की कीमत दोगुनी हो गई थी। इससे विदेशी फंड में भी भारत में प्रॉपर्टी खरीदने का जोश जगा। कई डेवलपर्स ने मार्गन स्टेनले, सिटीग्रुप और मेरिल लिंच जैसे विदेशी फंड के साथ मिलकर प्रॉपर्टी में खरीदारी की। डीएलएफ और पार्श्वनाथ जैसे बिल्डर्स ने बड़े-बड़े प्रोजेक्ट्स अनाउंस किए। लेकिन कीमतों में तेजी और इंटरेस्ट रेट में बढ़ोतरी से घरों की बिक्री पर ब्रेक लग गया। महंगाई रोकने के लिए सरकार और आरबीआई ने होम लोन को महंगा और मुश्किल बना दिया। इसके बाद आई ग्लोबल मंदी ने माहौल बिगाड़ने में बड़ी भूमिका निभाई। इस दौरान प्रॉपर्टी कंपनियों के शेयर भी जमीन पर आ गए। मिसाल के तौर पर सेंसेक्स इस साल 58 परसेंट गिरा, जबकि डीएलएफ के शेयर 80 परसेंट तक गिर गए। हालांकि डेवलपर उम्मीद कर रहे हैं कि इनफ्लेशन काबू में आने के बाद इंटरेस्ट रेट भी घटेंगे और इसका फायदा प्रॉपर्टी सेक्टर को मिलेगा। साथ ही इस बात की भी पहल हो रही है कि डेवलपर सस्ते घरों पर जोर बढ़ाएं।
RBI makes recast of realty loans tougher
India’s struggling real estate sector is set to come under further pressure in the coming weeks as the Reserve Bank of India (RBI) has made
it tougher for banks to ‘restructure’ loans, forcing them to cut house prices or risk being starved of bank funding. Banks often resort to restructuring loans — a practice aimed at preventing loans from being classified as bad — when they sense their borrowers are facing difficulties in repaying loans. In a typical restructuring, banks give borrowers more time to repay the loan by extending the loan tenure, and sometimes, even at reduced interest rates. Such an exercise enables banks to keep their non-performing assets (NPA) ratios under check and their books clean of the stigma of dud loans. But in a little-known directive issued earlier this year, the central bank has ordered that the moment a loan to a builder is restructured, banks must classify the account as an NPA. However, for restructured loans in all other sectors, the account can continue to be treated as a so-called ‘standard asset’ , thus sparing banks from having to make large provisions in their profit and loss accounts. The inability to restructure loans easily is forcing banks to put pressure on builders to cut prices, sell properties and service loans. Builders are usually left with little choice as an NPA tag will make it difficult for them to approach other banks for funds. “We are putting pressure on the real estate sector to reduce property prices. In such times, even if they are able to keep their head above water, it would be fine. They have all had a good innings so far. Now, they have to learn to live with thin margins,” said TS Narayanasami, chairman & managing director of state-run Bank of India, and the chief of industry body — Indian Banks’ Association. “Just banks reducing interest rates will not help in reviving sentiments; builders will have to bring down prices for buyers,” Mr Narayanasami added. Bankers say demand for home loans has fallen because buyers are waiting for property prices to fall. “Banks have taken the initiative by cutting home loan rates. Prices of cement and steel too have fallen, but builders have not reduced property prices,” said MV Nair, CMD of Union Bank of India. Although the RBI relaxed some bank lending norms for the building sector last weekend, it has remained quiet on the issue of restructured loans of builders. Analysts have expressed concerns over the financial health of the real estate sector. City-based retail broking firm, India Infoline , fears the liquidity situation of developers could worsen further if banks refuse to refinance maturing debts of real estate companies and maintain the credit freeze on their accounts. “We reckon that debt maturing over the next 12 months for developers like Unitech, Sobha and Puravankara is higher than our estimate of these companies’ revenues over the corresponding period. The situation with Omaxe, Parsvnath and Ansals also remains precarious, owing to large land advances and high receivables” , it said in a research note. The building sector has seen a raft of credit downgrades amid refinancing concerns and bankers say the sector has little choice but to cut prices. “If a builder does not pay, banks would either initiate a recovery proceeding or restructure the loan. A recovery proceeding often results in lower realisation. This, hopefully, should indirectly put pressure on builders to bring down price and go for negotiated sales,” said SA Bhat, CMD of Indian Overseas Bank.
it tougher for banks to ‘restructure’ loans, forcing them to cut house prices or risk being starved of bank funding. Banks often resort to restructuring loans — a practice aimed at preventing loans from being classified as bad — when they sense their borrowers are facing difficulties in repaying loans. In a typical restructuring, banks give borrowers more time to repay the loan by extending the loan tenure, and sometimes, even at reduced interest rates. Such an exercise enables banks to keep their non-performing assets (NPA) ratios under check and their books clean of the stigma of dud loans. But in a little-known directive issued earlier this year, the central bank has ordered that the moment a loan to a builder is restructured, banks must classify the account as an NPA. However, for restructured loans in all other sectors, the account can continue to be treated as a so-called ‘standard asset’ , thus sparing banks from having to make large provisions in their profit and loss accounts. The inability to restructure loans easily is forcing banks to put pressure on builders to cut prices, sell properties and service loans. Builders are usually left with little choice as an NPA tag will make it difficult for them to approach other banks for funds. “We are putting pressure on the real estate sector to reduce property prices. In such times, even if they are able to keep their head above water, it would be fine. They have all had a good innings so far. Now, they have to learn to live with thin margins,” said TS Narayanasami, chairman & managing director of state-run Bank of India, and the chief of industry body — Indian Banks’ Association. “Just banks reducing interest rates will not help in reviving sentiments; builders will have to bring down prices for buyers,” Mr Narayanasami added. Bankers say demand for home loans has fallen because buyers are waiting for property prices to fall. “Banks have taken the initiative by cutting home loan rates. Prices of cement and steel too have fallen, but builders have not reduced property prices,” said MV Nair, CMD of Union Bank of India. Although the RBI relaxed some bank lending norms for the building sector last weekend, it has remained quiet on the issue of restructured loans of builders. Analysts have expressed concerns over the financial health of the real estate sector. City-based retail broking firm, India Infoline , fears the liquidity situation of developers could worsen further if banks refuse to refinance maturing debts of real estate companies and maintain the credit freeze on their accounts. “We reckon that debt maturing over the next 12 months for developers like Unitech, Sobha and Puravankara is higher than our estimate of these companies’ revenues over the corresponding period. The situation with Omaxe, Parsvnath and Ansals also remains precarious, owing to large land advances and high receivables” , it said in a research note. The building sector has seen a raft of credit downgrades amid refinancing concerns and bankers say the sector has little choice but to cut prices. “If a builder does not pay, banks would either initiate a recovery proceeding or restructure the loan. A recovery proceeding often results in lower realisation. This, hopefully, should indirectly put pressure on builders to bring down price and go for negotiated sales,” said SA Bhat, CMD of Indian Overseas Bank.
November may be worse, say car firms
With banks refusing to reduce interest rate on auto loans, car sales are expected to fall by 15 per cent in November — one of the worst monthly falls, at least in the last four years.
Reluctance on the part of leading private banks to either soften interest rates on car loans or ease the stringent lending criteria even after RBI aggressively pruned its key lending rates in the last two months, has led to a major slump in demand for automobiles.
Car makers say the situation has worsened of late with the consumers postponing purchases on the expectation that prices will come down over Finance minister P Chidambaram's recent appeal to the automobile industry to slash vehicle prices.
Last month, the car sales recorded a fall of nearly 10 per cent when compared to the same month of the previous year. "The going has become extremely tough, we do not expect the industry to record any growth this month. We are trying to avoid being in the red too. However, I expect the rest of the car industry to be in the negative in the current month," said Arvind Saxena, senior V-P (marketing and sales), Hyundai Motor India.
Recently, some of the leading auto makers, including Maruti Suzuki, had announced production cuts at its plants. Auto dealers are also at the receiving end of the slowdown. In many parts of the country, dealers, saddled with a huge inventory of unsold cars, are forced to shell out huge discounts, generally from their own account, in order to clear stocks.
"Things have surely started to take an ugly turn. Not only bookings have fallen dramatically, but in some markets they are facing cancellations also. There should be a fall of 15 per cent in overall sales this month. We fear that customers will hold back their purchases to March next year with a hope of an excise duty reduction in the upcoming budget," said S P Shah, president of Federation of Automobile Dealers Association, which is the apex body of dealers in the country.
The car segment posted growth of 3.5 per cent from April to October this financial year as against 13.4 per cent recorded during the seven-month period last year. Apart from October, the segment recorded fall in August and July. Jnaneswar Sen, vice-president of Honda Siel Cars India, said, "All our models, except the new City, are not doing well. Sales have been down drastically, well-to-do consumers are coming into showrooms but are disappointed due to lack of adequate financial provision. We do not foresee a helpful period."
The recent announcements about price hikes by two of the leading car-makers — Maruti Suzuki and Hyundai — have only deterred prospective buyers, believe analysts. Maruti had hiked prices by 1 per cent, while Hyundai had said it will look at a 2- per cent hike, although there has not been any upward revision yet.
The monthly sales numbers, which are handed out by auto companies, display wholesale dispatches from their factories and not the actual retail numbers. Manufacturers have been pushing inventory till the end of last month. Many analysts feel that the current month will pull out a much clearer picture of the turmoil.
"Baring two-wheelers, which may report healthy sales in the northern market, the four-wheeler industry will report flattish to negative growth this month. Last year in the same month, the segment reported good sales, which means that there will be high base to match with," said S Ramnath, auto analyst, SSKI Securities.
Reluctance on the part of leading private banks to either soften interest rates on car loans or ease the stringent lending criteria even after RBI aggressively pruned its key lending rates in the last two months, has led to a major slump in demand for automobiles.
Car makers say the situation has worsened of late with the consumers postponing purchases on the expectation that prices will come down over Finance minister P Chidambaram's recent appeal to the automobile industry to slash vehicle prices.
Last month, the car sales recorded a fall of nearly 10 per cent when compared to the same month of the previous year. "The going has become extremely tough, we do not expect the industry to record any growth this month. We are trying to avoid being in the red too. However, I expect the rest of the car industry to be in the negative in the current month," said Arvind Saxena, senior V-P (marketing and sales), Hyundai Motor India.
Recently, some of the leading auto makers, including Maruti Suzuki, had announced production cuts at its plants. Auto dealers are also at the receiving end of the slowdown. In many parts of the country, dealers, saddled with a huge inventory of unsold cars, are forced to shell out huge discounts, generally from their own account, in order to clear stocks.
"Things have surely started to take an ugly turn. Not only bookings have fallen dramatically, but in some markets they are facing cancellations also. There should be a fall of 15 per cent in overall sales this month. We fear that customers will hold back their purchases to March next year with a hope of an excise duty reduction in the upcoming budget," said S P Shah, president of Federation of Automobile Dealers Association, which is the apex body of dealers in the country.
The car segment posted growth of 3.5 per cent from April to October this financial year as against 13.4 per cent recorded during the seven-month period last year. Apart from October, the segment recorded fall in August and July. Jnaneswar Sen, vice-president of Honda Siel Cars India, said, "All our models, except the new City, are not doing well. Sales have been down drastically, well-to-do consumers are coming into showrooms but are disappointed due to lack of adequate financial provision. We do not foresee a helpful period."
The recent announcements about price hikes by two of the leading car-makers — Maruti Suzuki and Hyundai — have only deterred prospective buyers, believe analysts. Maruti had hiked prices by 1 per cent, while Hyundai had said it will look at a 2- per cent hike, although there has not been any upward revision yet.
The monthly sales numbers, which are handed out by auto companies, display wholesale dispatches from their factories and not the actual retail numbers. Manufacturers have been pushing inventory till the end of last month. Many analysts feel that the current month will pull out a much clearer picture of the turmoil.
"Baring two-wheelers, which may report healthy sales in the northern market, the four-wheeler industry will report flattish to negative growth this month. Last year in the same month, the segment reported good sales, which means that there will be high base to match with," said S Ramnath, auto analyst, SSKI Securities.
Booming Retail Sector in India - www.companiesandmarkets.com adds new report
India is one of the most attractive destinations for retailers from all across the globe. Thanks to the entry of corporate, changing consumer behavior & lifestyle, increasing influence of western culture and rising income, the Indian retail industry has seen phenomenal growth in the last five years (2001-2006) and organized retailing has finally emerged from the shadows of unorganized retailing and is contributing significantly to the growth of the overall retail sector. The research report helps the client to analyze the opportunities and factors that will make the Indian retail industry a success.Key FindingsOrganized retail market in India is expected to reach US$ 50 Billion mark by 2011. Number of shopping malls is expected to increase at a CAGR of more than 18.9% from 2007 to 2015. Rural market is projected to dominate the retail industry landscape in India by 2012 with total market share of above 50%.Organized retailing of mobile handset and accessories is expected to reach close to Rs. 5000 Crore by 2010. Driven by the expanding retail market, third party logistic market is forecasted to reach US$ 20 Billion by 2011. Apparel, along with food and grocery, will lead the organized retailing in India. Key Issues AnalyzedWhat is the market size and scope of the retail industry in India?What are the current market trends
?What are the growth prospects and issues related to the industry?What is the segment-wise size of the organized market and what are the growth prospects of the market?What are the opportunities and challenges faced by the industry?Who are the major players in the Indian retail industry and what are the latest developments?Key Players AnalyzedThis section covers the key players currently operating in the Indian retail industry, including Subhiksha, Reliance Retail Ltd, Pantaloon Retail (India) Ltd., etc.Research Methodology UsedInformation SourcesInformation has been sourced from books, newspapers, trade journals, and white papers, industry portals, government agencies, trade associations, monitoring industry news and developments, and through access to more than 3000 paid databases.Analysis MethodThe analysis methods include ratio analysis, historical trend analysis, linear regression analysis using software tools, judgmental forecasting and cause and effect analysis.
?What are the growth prospects and issues related to the industry?What is the segment-wise size of the organized market and what are the growth prospects of the market?What are the opportunities and challenges faced by the industry?Who are the major players in the Indian retail industry and what are the latest developments?Key Players AnalyzedThis section covers the key players currently operating in the Indian retail industry, including Subhiksha, Reliance Retail Ltd, Pantaloon Retail (India) Ltd., etc.Research Methodology UsedInformation SourcesInformation has been sourced from books, newspapers, trade journals, and white papers, industry portals, government agencies, trade associations, monitoring industry news and developments, and through access to more than 3000 paid databases.Analysis MethodThe analysis methods include ratio analysis, historical trend analysis, linear regression analysis using software tools, judgmental forecasting and cause and effect analysis.
Price cut is must in order to gain and maintain customer
Union Finance Minister P Chidambaram had on Tuesday asked Indian companies to cut prices to boost demand and tide over the economic slowdown. "The classic response to a demand slowdown is to cut prices," Chidambaram had said at the India Economic Summit in New Delhi.
However, many companies have ruled out a cut in the prices of their goods and services.
So even with most of the developed world in the grip of recession and the rest of the world witnessing economic slowdown, Corporate India is openly disagreeing with the Finance Minister.
Although they have turned down Chidambaram's request for price cuts, many wonder if price-cuts is really the only and best solution to beat slowdown?
CNN-IBN’s show Face the Nation debated: Is price cut the best solution to beat a possible slowdown?
The panellists included Vice-Chairman of Mercury Travels, Ashwini Kakkar and the Managing Trustee of Consumer Voice, Sri Ram Khanna. The debate was moderated by Senior Editor Sagarika Ghose.
Sri Ram Khanna began the debate by saying that the prescription given by the Finance Minister P Chidambaram was indeed the cure for slowdown in India.
“I agree with the Finance Minister that if you don’t bring the prices down, the consumers are not going to come back to the markets. They are going to save, they are going to hoard because they will think that a bigger storm is in the offing. Psychologically and sociologically there has been a negative impact of the western recession. We believe that the western recession will stay on for at least two and a half to three years and it will have a negative impact as is visible in the export-oriented industries. It is visible in the stock markets where the flight of capital has taken place and taken the dollar price to Rs 50. People are saving and going for bank deposits. They are not spending money. Thing are not as bad as it could be because we are still going to end up with 6.5 to 7 per cent growth rate as compared to the minus rate predicted for the USA, Europe and Japan,” argued Khanna.
So why doesn’t the aviation sector bring down prices of travel and consignments even though aviation turbine fuel prices have been cut. Afterall, the situation is not yet as bad as it is in the US.
Kakkar, too, responded by claiming the if the aviation industry lowers price, it will tide over the slowdown and also come out of the red.
“It is true that in traditional economy everybody says that the demand and supply curve should decide prices. But this is a unique situation and globally we are witnessing a socialistic response to a capitalistic problem. To me it seems that the Finance Minister sitting on his higher perch can probably see further than all of us. He is putting everybody in the country in one basket. He is saying ‘I am willing to look at tax cuts, I am looking to boosting of exports, I am willing to see that easy credit is available, I am willing to put money behind the rupee in terms of the dollar-rupee exchange rate’. He is trying to do a lot of things on his own but also on the other side asking the industry for a price cut,” Kakkar said.
“Looking at airlines, he first cut the taxes on aviation turbine fuel and then he gave them extended credit period. After that the prices of fuel were brought down by the oil companies, which was an inter-ministerial debate. Despite that, the airlines did not cut down the price. Clearly he is a bit miffed about that. Also the airlines are in a conundrum over the situation as by the end of this year they are going to show a loss of Rs 6000 crore. Even if they lower prices, the seat load factors aren’t going up and demand is stuck. We have been seeing this month after month. This is a great dilemma and I think the best solution to this might be for the airlines to start cutting their prices and see an increase in their seat load factor which will help them to come out of red,” he added.
However, many companies have ruled out a cut in the prices of their goods and services.
So even with most of the developed world in the grip of recession and the rest of the world witnessing economic slowdown, Corporate India is openly disagreeing with the Finance Minister.
Although they have turned down Chidambaram's request for price cuts, many wonder if price-cuts is really the only and best solution to beat slowdown?
CNN-IBN’s show Face the Nation debated: Is price cut the best solution to beat a possible slowdown?
The panellists included Vice-Chairman of Mercury Travels, Ashwini Kakkar and the Managing Trustee of Consumer Voice, Sri Ram Khanna. The debate was moderated by Senior Editor Sagarika Ghose.
Sri Ram Khanna began the debate by saying that the prescription given by the Finance Minister P Chidambaram was indeed the cure for slowdown in India.
“I agree with the Finance Minister that if you don’t bring the prices down, the consumers are not going to come back to the markets. They are going to save, they are going to hoard because they will think that a bigger storm is in the offing. Psychologically and sociologically there has been a negative impact of the western recession. We believe that the western recession will stay on for at least two and a half to three years and it will have a negative impact as is visible in the export-oriented industries. It is visible in the stock markets where the flight of capital has taken place and taken the dollar price to Rs 50. People are saving and going for bank deposits. They are not spending money. Thing are not as bad as it could be because we are still going to end up with 6.5 to 7 per cent growth rate as compared to the minus rate predicted for the USA, Europe and Japan,” argued Khanna.
So why doesn’t the aviation sector bring down prices of travel and consignments even though aviation turbine fuel prices have been cut. Afterall, the situation is not yet as bad as it is in the US.
Kakkar, too, responded by claiming the if the aviation industry lowers price, it will tide over the slowdown and also come out of the red.
“It is true that in traditional economy everybody says that the demand and supply curve should decide prices. But this is a unique situation and globally we are witnessing a socialistic response to a capitalistic problem. To me it seems that the Finance Minister sitting on his higher perch can probably see further than all of us. He is putting everybody in the country in one basket. He is saying ‘I am willing to look at tax cuts, I am looking to boosting of exports, I am willing to see that easy credit is available, I am willing to put money behind the rupee in terms of the dollar-rupee exchange rate’. He is trying to do a lot of things on his own but also on the other side asking the industry for a price cut,” Kakkar said.
“Looking at airlines, he first cut the taxes on aviation turbine fuel and then he gave them extended credit period. After that the prices of fuel were brought down by the oil companies, which was an inter-ministerial debate. Despite that, the airlines did not cut down the price. Clearly he is a bit miffed about that. Also the airlines are in a conundrum over the situation as by the end of this year they are going to show a loss of Rs 6000 crore. Even if they lower prices, the seat load factors aren’t going up and demand is stuck. We have been seeing this month after month. This is a great dilemma and I think the best solution to this might be for the airlines to start cutting their prices and see an increase in their seat load factor which will help them to come out of red,” he added.
Saturday, November 15, 2008
iPhone disconnects in India
India may have the world’s fastest growing wireless market, but Apple (AAPL) didn’t set its hopes particularly high when it launched the iPhone 3G there in August. It reportedly shipped only 50,000 units to its partners on the subcontinent, with plans to double that number by the end of the year.
If so, those partners may have a lot of unsold iPhones on their hands come January. According to a long postmortem published this week in the Delhi-based newspaper Mint, Apple has sold only 11,000 iPhones in India, a country of 1.14 billion that buys 8 to 10 million cellphones a month.
“IPhone’s launch in India has been dubbed the biggest failure of a top-notch brand from a well regarded company in recent times,” wrote Priyanka Mehra and Shauvik Ghosh in a piece that underscores the difficulty of adapting Apple’s U.S.-based smartphone strategy to markets around the world.
Price, according to the authors, is only part of the problem. Although most Indians buy cheap cellphones on a pre-paid basis, there were plenty of potential customers who could afford the 31,000 rupees ($716 at the time) that Bharti Airtel and Vodafone Essar were charging for the 8GB iPhone. According to Mint, Nokia (NOK), Samsung and RIM (RIMM) are all doing good business in India selling smartphones that cost even more.
But Steve Jobs had announced before the launch that Apple would be priced at $199 globally — less than 10,000 rupees — a promise he couldn’t deliver on in India because local cellphone companies don’t subsidize cellphones with lock-in clauses the way carriers routinely do in the United States and Europe.
“This built a false hope in the minds of those consumers who wanted to buy it and turned away those who could have actually bought it,” Prathap Suthan, creative director of advertising agency Cheil Communications India, told Mint.
Moreover, he says, Bharti and Vodafone, lacking experience in the complex Indian retail environment, dropped the ball in terms of marketing and distribution. By selling iPhones exclusively at their own outlets, they’ve antagonized the big retail chains that dominate the market in India.
“A brand like Apple need not be told that an iconic product needs iconic advertising, a solid marketing push,” says Suthan, “The company failed to strike a connect with Indian consumers.”
If so, those partners may have a lot of unsold iPhones on their hands come January. According to a long postmortem published this week in the Delhi-based newspaper Mint, Apple has sold only 11,000 iPhones in India, a country of 1.14 billion that buys 8 to 10 million cellphones a month.
“IPhone’s launch in India has been dubbed the biggest failure of a top-notch brand from a well regarded company in recent times,” wrote Priyanka Mehra and Shauvik Ghosh in a piece that underscores the difficulty of adapting Apple’s U.S.-based smartphone strategy to markets around the world.
Price, according to the authors, is only part of the problem. Although most Indians buy cheap cellphones on a pre-paid basis, there were plenty of potential customers who could afford the 31,000 rupees ($716 at the time) that Bharti Airtel and Vodafone Essar were charging for the 8GB iPhone. According to Mint, Nokia (NOK), Samsung and RIM (RIMM) are all doing good business in India selling smartphones that cost even more.
But Steve Jobs had announced before the launch that Apple would be priced at $199 globally — less than 10,000 rupees — a promise he couldn’t deliver on in India because local cellphone companies don’t subsidize cellphones with lock-in clauses the way carriers routinely do in the United States and Europe.
“This built a false hope in the minds of those consumers who wanted to buy it and turned away those who could have actually bought it,” Prathap Suthan, creative director of advertising agency Cheil Communications India, told Mint.
Moreover, he says, Bharti and Vodafone, lacking experience in the complex Indian retail environment, dropped the ball in terms of marketing and distribution. By selling iPhones exclusively at their own outlets, they’ve antagonized the big retail chains that dominate the market in India.
“A brand like Apple need not be told that an iconic product needs iconic advertising, a solid marketing push,” says Suthan, “The company failed to strike a connect with Indian consumers.”
Ambani brothers stay mum amid conflicting cases
Estranged billionaire brothers Mukesh and Anil Ambani may have fought over the inheritance of their father, the late Dhirubhai Ambani, a gas-rich river basin and global acquisitions, but the two have, so far, pulled their punches on one issue that could trigger future business conflicts.
Companies owned by the sibling rivals have applied for a raft of trademarks in the past three years that are markedly similar to the other’s already established brands. Besides the similarity in names, the applications also suggest they are looking at the possibility of entering businesses that could potentially put them in direct competition.
Information available on the website of the Controller General of Patents Designs and Trademarks shows that elder brother Mukesh Ambani’s Reliance Industries Ltd (RIL) and its associates have filed for a bevy of trademarks such as Reliance Big Boy, Reliance Big Lots, Reliance Big Box and Reliance Big, among others.
The Reliance-Anil Dhirubhai Ambani Group (R-Adag) of Anil Ambani has, in turn, filed for names such as Big Reliance, Big Fresh Mall, Reliance Big Retail and Reliance Fast Retail.
R-Adag uses the ‘Big’ moniker for its entertainment and media businesses. While its FM radio business is branded Big FM, its chain of mulitplexes has recently been rebranded Big Cinemas from Adlabs Cinemas. The group’s direct-to-home television service is called Big TV, the movie rental venture is named Big Flix and its film production company is registered as Big Pictures.
The younger brother, in the past, fended off a trademark filing by Mumbai-based Apricot Media Pvt. Ltd. The company had sought brand protection for the ‘The Big TV’, but R-Adag opposed the move in the trademark office.
However, so far, the group is conspicuously quiet over the applications filed by the elder brother in the trademark office.
Similarly, the Mukesh Ambani group has kept quiet over the younger brother’s move to register Reliance Big Retail and Reliance Fast Retail. RIL operates a multi-billion-dollar retail venture under a company called Reliance Retail Ltd.
The trademark office, after receiving an application for a trademark, puts it in the public domain for three-four months, to give parties that perceive a conflict of interest an opportunity to protest. The two parties have, so far, not raised any objections against each other.
RIL, India’s largest company by market value, has also filed for brand protection for ‘Reliance Magicplex’ and ‘Qwikrent Books.Movies’ for providing retail services and entertainment, sporting and cultural activities.
The firm has created a spate of fully-owned subsidiaries whose stated business objectives could overlap with some existing R-Adag companies operating in the same space.
The moves also raise questions about the so-called non-compete clause in the family de-merger pact under which the brothers carved up the Reliance empire in June 2005. While the scheme of de-merger that split the Reliance empire was put to all the shareholders, the family agreement remains shrouded in mystery.
Some trademarks experts who Mint spoke with differed on the issue. While some said the two parties may have agreed on some sort of a “co-existence” pact, others said it was unlikely because similar brand names are bound to create confusion among consumers.
Pratibha Singh, a New Delhi-based trademarks and patents attorney, agreed that the “phenomenon was strange”, noting that avoiding public confusion about identities of products or entities is one of the main objectives of trademark law.
“We don’t know the origin of the word ‘Big’ within the Reliance group. If it came from a common pool of assets and marks that were meant to be shared, then it is okay, but if that is not the case, then prima facie it is a case for filing an opposition,” Singh said.
Trademarks lawyer H. Subramanium said the two parties could have common brands if they had “an internal agreement” that allowed them to do so. “Trademark law allows for an honest, concurrent user,” he said, adding that while tangible assets can be divided in a de-merger, it is difficult to split intangible assets and some parties may decide to share them.
It is, however, not clear whether such an agreement exists between the two Ambani brothers.
Responding to a detailed questionnaire sent by Mint, an RIL spokesperson said: “The names mentioned in the list were part of a comprehensive set of names, which was filed as a pre-emptive step with the authorities over two years ago. This exercise was undertaken prior to the finalization of the brand names of our various retail formats. As you will appreciate, since then we have pruned the actual list of brand names, which we would like to be registered.”
The trademark website, however, doesn’t say if the applications have been withdrawn. The website shows the brand name Reliance Big as registered by RIL. The RIL spokesperson added that the company was “committed to protect our trademarks and acknowledge the right of other corporates to protect their trademarks”.
An R-Adag spokesman didn’t respond to Mint’s questions.
Three years after their father died in 2002 without dividing the empire he built, the brothers agreed to split businesses with a 10-year non-compete agreement.
This implied one will not enter the business in which the other is already present. There is no clarity on whether the agreement puts restrictions on entering existing businesses at the time of the de-merger, or applies to new ventures as well.
Companies owned by the sibling rivals have applied for a raft of trademarks in the past three years that are markedly similar to the other’s already established brands. Besides the similarity in names, the applications also suggest they are looking at the possibility of entering businesses that could potentially put them in direct competition.
Information available on the website of the Controller General of Patents Designs and Trademarks shows that elder brother Mukesh Ambani’s Reliance Industries Ltd (RIL) and its associates have filed for a bevy of trademarks such as Reliance Big Boy, Reliance Big Lots, Reliance Big Box and Reliance Big, among others.
The Reliance-Anil Dhirubhai Ambani Group (R-Adag) of Anil Ambani has, in turn, filed for names such as Big Reliance, Big Fresh Mall, Reliance Big Retail and Reliance Fast Retail.
R-Adag uses the ‘Big’ moniker for its entertainment and media businesses. While its FM radio business is branded Big FM, its chain of mulitplexes has recently been rebranded Big Cinemas from Adlabs Cinemas. The group’s direct-to-home television service is called Big TV, the movie rental venture is named Big Flix and its film production company is registered as Big Pictures.
The younger brother, in the past, fended off a trademark filing by Mumbai-based Apricot Media Pvt. Ltd. The company had sought brand protection for the ‘The Big TV’, but R-Adag opposed the move in the trademark office.
However, so far, the group is conspicuously quiet over the applications filed by the elder brother in the trademark office.
Similarly, the Mukesh Ambani group has kept quiet over the younger brother’s move to register Reliance Big Retail and Reliance Fast Retail. RIL operates a multi-billion-dollar retail venture under a company called Reliance Retail Ltd.
The trademark office, after receiving an application for a trademark, puts it in the public domain for three-four months, to give parties that perceive a conflict of interest an opportunity to protest. The two parties have, so far, not raised any objections against each other.
RIL, India’s largest company by market value, has also filed for brand protection for ‘Reliance Magicplex’ and ‘Qwikrent Books.Movies’ for providing retail services and entertainment, sporting and cultural activities.
The firm has created a spate of fully-owned subsidiaries whose stated business objectives could overlap with some existing R-Adag companies operating in the same space.
The moves also raise questions about the so-called non-compete clause in the family de-merger pact under which the brothers carved up the Reliance empire in June 2005. While the scheme of de-merger that split the Reliance empire was put to all the shareholders, the family agreement remains shrouded in mystery.
Some trademarks experts who Mint spoke with differed on the issue. While some said the two parties may have agreed on some sort of a “co-existence” pact, others said it was unlikely because similar brand names are bound to create confusion among consumers.
Pratibha Singh, a New Delhi-based trademarks and patents attorney, agreed that the “phenomenon was strange”, noting that avoiding public confusion about identities of products or entities is one of the main objectives of trademark law.
“We don’t know the origin of the word ‘Big’ within the Reliance group. If it came from a common pool of assets and marks that were meant to be shared, then it is okay, but if that is not the case, then prima facie it is a case for filing an opposition,” Singh said.
Trademarks lawyer H. Subramanium said the two parties could have common brands if they had “an internal agreement” that allowed them to do so. “Trademark law allows for an honest, concurrent user,” he said, adding that while tangible assets can be divided in a de-merger, it is difficult to split intangible assets and some parties may decide to share them.
It is, however, not clear whether such an agreement exists between the two Ambani brothers.
Responding to a detailed questionnaire sent by Mint, an RIL spokesperson said: “The names mentioned in the list were part of a comprehensive set of names, which was filed as a pre-emptive step with the authorities over two years ago. This exercise was undertaken prior to the finalization of the brand names of our various retail formats. As you will appreciate, since then we have pruned the actual list of brand names, which we would like to be registered.”
The trademark website, however, doesn’t say if the applications have been withdrawn. The website shows the brand name Reliance Big as registered by RIL. The RIL spokesperson added that the company was “committed to protect our trademarks and acknowledge the right of other corporates to protect their trademarks”.
An R-Adag spokesman didn’t respond to Mint’s questions.
Three years after their father died in 2002 without dividing the empire he built, the brothers agreed to split businesses with a 10-year non-compete agreement.
This implied one will not enter the business in which the other is already present. There is no clarity on whether the agreement puts restrictions on entering existing businesses at the time of the de-merger, or applies to new ventures as well.
Indian auto firms hit by slowdown
The economic slowdown has started taking its toll on the Indian auto industry. With retail sales hit hard, big auto companies have started defaulting on payments to component suppliers. As a result, the $18-billion auto-parts industry is fearing huge production cuts and layoffs.
The poor sales in October have created a virtual panic, with most players slashing production to cope with the weak demand. Along with this, many component makers have decided to halt production temporarily, while many have decided to cut back output and even lay off contractual staff.
In October, sales were down 9% this year for cars, utility vehicles and multi-purpose vehicles. That's the sharpest drop this financial year and among the steepest monthly slide in the past 12 to 18 months. Industry experts say this will pull down cumulative growth for the fiscal to around 4%.
The passenger vehicle tally in October was down to 124,000 units compared to around 136,000 units last October and 140,000 units in September this year. Worse, the gloom isn't limited to cars alone. Truck sales, always the first telltale indicator of the health of the economy, have started sending out some panic signals.
Until just before Diwali, the inventory pile-up at the dealer end was a staggering 19,000 vehicles, with another 6,000 trucks stuck with private banks and financiers due to defaults by transporters, according to a study by the Indian Foundation of Transport Research and Training (IFTRT).
The financing bite is beginning to hurt now, as more defaults and fewer footfalls take the life out of auto sales. In !the first half of the current fiscal year, passenger-vehicle sales grew by a respectable 7.5%, mostly on account of robust growth in utility vehicles. With sales of market leader Maruti turning flat and now negative, the car industry is stuck in first gear. And trucks are on skid row.
Two-wheelers, which had bucked the slide so far, have also hit skid row. The country's largest two-wheeler maker !Hero Honda Motors Ltd (HHML) posted a 3.44% decline in total sales in October to 352,000 units against 365,000 units last year. Several vendors say that auto companies are now deferring payments by many days.
"On an average, we used to receive payments in a time span of 30 to 60 days. However, companies are now de!ferring this and some have even held back the payments by even 100 days or more, which is really hitting us hard," said a vendor, who declined to be named.
Auto companies blame the poor demand at the retail end for this. "They are telling us that the vehicles are not selling and most of them are becoming their inventories or inventories of dealers. So how do they pay us?" the vendor !asked.
J.S. Chopra, president of the Automotive Component Manufacturers Association (ACMA), who also is head of the component company Delphi-TVS, confirmed that vendors are under a huge financial stress. "The crippling liquidity crunch has slowed down vehicle demand, especially in commercial vehicles. Payments from auto companies are getting delayed, loans for capacity expansion are difficult to secure and even disbursement of loans already approved by banks are being deferred," he said.
While there are 575 component suppliers registered with ACMA, more than 1,000 companies from the unorganised sector are also catering to the auto industry, giving direct employment to about 250,000 people. A worrying trend is that the component industry's growth has come down from more than 20% between 2002 and 2007 to a poor 6% in the April-September 2008 period.
ACMA's executive director Vishnu Mathur said not only the domestic market, but exports are also in doldrums because of the downturn in US and European markets. Analysts, however, feel that exports may revive fast, as companies abroad would be looking at cost-cutting that could send business to low-cost markets such as India.
The uncertain outlook is forcing companies to go slow on new investment plans. The ACMA had earlier forecast that the annual investments would be as much as $ 1.5 billion, though Mr Mathur now cautions that this may not be so.
N.K. Minda of Minda Industries said his company is contemplating delaying fresh investment plans by at least six months. "The situation is tough and we !have reduced production days to four days from six," he said.
Jayant Davar, managing director of Sandhar Technologies that supplies a range of components to two-and four-wheel companies, said companies are only undertaking mandatory or unavoidable capital expenditure plans. "Companies are telling us not to stock inventory. Component makers are now actively looking at cutting costs. That includes laying off temporary workers," he said.And the situation seems to be getting worse for auto companies. After announcing a block closure at its Jamshedpur plant, Tata Motors is shutting commercial vehicle production at its Pune and Lucknow factories for six days this month. Component supplier sources point to production slowdowns in other companies, including the utility-vehicle major Mahindra and Mahindra (M&M).
Tata said it is shutting production to avoid inventory buildup. The Pune plant will be shut from next Friday to Nov 26, while output was halted at Lucknow from last Monday to today.
Unavailability of finance, coupled with high interest rates, is forcing customers to postpone purchases, the company said. "This will call for appropriate action from Tata Motors from time to time, to match production with demand and avoid unnecessary buildup of inventory in the company or with the company's dealers," the spokesperson said.
Vendor sources said Mahindra had slowed down production with expected weak sales forecast. The company shut down its plant for the first week of this month. Rajesh Jejurikar, chief of operations for Mahindra's automotive sector, said the !company was closely watching the market situation and will keep production in line with demand.
The poor sales in October have created a virtual panic, with most players slashing production to cope with the weak demand. Along with this, many component makers have decided to halt production temporarily, while many have decided to cut back output and even lay off contractual staff.
In October, sales were down 9% this year for cars, utility vehicles and multi-purpose vehicles. That's the sharpest drop this financial year and among the steepest monthly slide in the past 12 to 18 months. Industry experts say this will pull down cumulative growth for the fiscal to around 4%.
The passenger vehicle tally in October was down to 124,000 units compared to around 136,000 units last October and 140,000 units in September this year. Worse, the gloom isn't limited to cars alone. Truck sales, always the first telltale indicator of the health of the economy, have started sending out some panic signals.
Until just before Diwali, the inventory pile-up at the dealer end was a staggering 19,000 vehicles, with another 6,000 trucks stuck with private banks and financiers due to defaults by transporters, according to a study by the Indian Foundation of Transport Research and Training (IFTRT).
The financing bite is beginning to hurt now, as more defaults and fewer footfalls take the life out of auto sales. In !the first half of the current fiscal year, passenger-vehicle sales grew by a respectable 7.5%, mostly on account of robust growth in utility vehicles. With sales of market leader Maruti turning flat and now negative, the car industry is stuck in first gear. And trucks are on skid row.
Two-wheelers, which had bucked the slide so far, have also hit skid row. The country's largest two-wheeler maker !Hero Honda Motors Ltd (HHML) posted a 3.44% decline in total sales in October to 352,000 units against 365,000 units last year. Several vendors say that auto companies are now deferring payments by many days.
"On an average, we used to receive payments in a time span of 30 to 60 days. However, companies are now de!ferring this and some have even held back the payments by even 100 days or more, which is really hitting us hard," said a vendor, who declined to be named.
Auto companies blame the poor demand at the retail end for this. "They are telling us that the vehicles are not selling and most of them are becoming their inventories or inventories of dealers. So how do they pay us?" the vendor !asked.
J.S. Chopra, president of the Automotive Component Manufacturers Association (ACMA), who also is head of the component company Delphi-TVS, confirmed that vendors are under a huge financial stress. "The crippling liquidity crunch has slowed down vehicle demand, especially in commercial vehicles. Payments from auto companies are getting delayed, loans for capacity expansion are difficult to secure and even disbursement of loans already approved by banks are being deferred," he said.
While there are 575 component suppliers registered with ACMA, more than 1,000 companies from the unorganised sector are also catering to the auto industry, giving direct employment to about 250,000 people. A worrying trend is that the component industry's growth has come down from more than 20% between 2002 and 2007 to a poor 6% in the April-September 2008 period.
ACMA's executive director Vishnu Mathur said not only the domestic market, but exports are also in doldrums because of the downturn in US and European markets. Analysts, however, feel that exports may revive fast, as companies abroad would be looking at cost-cutting that could send business to low-cost markets such as India.
The uncertain outlook is forcing companies to go slow on new investment plans. The ACMA had earlier forecast that the annual investments would be as much as $ 1.5 billion, though Mr Mathur now cautions that this may not be so.
N.K. Minda of Minda Industries said his company is contemplating delaying fresh investment plans by at least six months. "The situation is tough and we !have reduced production days to four days from six," he said.
Jayant Davar, managing director of Sandhar Technologies that supplies a range of components to two-and four-wheel companies, said companies are only undertaking mandatory or unavoidable capital expenditure plans. "Companies are telling us not to stock inventory. Component makers are now actively looking at cutting costs. That includes laying off temporary workers," he said.And the situation seems to be getting worse for auto companies. After announcing a block closure at its Jamshedpur plant, Tata Motors is shutting commercial vehicle production at its Pune and Lucknow factories for six days this month. Component supplier sources point to production slowdowns in other companies, including the utility-vehicle major Mahindra and Mahindra (M&M).
Tata said it is shutting production to avoid inventory buildup. The Pune plant will be shut from next Friday to Nov 26, while output was halted at Lucknow from last Monday to today.
Unavailability of finance, coupled with high interest rates, is forcing customers to postpone purchases, the company said. "This will call for appropriate action from Tata Motors from time to time, to match production with demand and avoid unnecessary buildup of inventory in the company or with the company's dealers," the spokesperson said.
Vendor sources said Mahindra had slowed down production with expected weak sales forecast. The company shut down its plant for the first week of this month. Rajesh Jejurikar, chief of operations for Mahindra's automotive sector, said the !company was closely watching the market situation and will keep production in line with demand.
Consumers Slash Spending
Consumers, taking a beating from the worst financial crisis in 70 years, sharply cut back spending in October, pushing retail sales down by a record amount.The Commerce Department reported Friday that retail sales fell by 2.8 percent last month, surpassing the record 2.65 percent plunge in November 2001 following the terrorist attacks.The October sales decline was led by a huge fall in auto purchases, but sales of all types of products suffered as consumers, worried about their jobs and market turbulence, reduced spending.The dismal report on retail sales was worse than the 2 percent decline that analysts expected. It marked the fourth straight decrease, the longest stretch of weakness on record.
Retailers are braced for what could be the worst holiday shopping season in decades with economists forecasting a recession that could turn out to be the steepest since the 1981-82 downturn.A survey of the nation's big chain retail stores found that retailers suffered through the weakest October in at least 39 years even though they tried to gin up more sales through frenzied price-cutting.Connecticut retailers aren't suffering as much as those in other parts of the nation, said Peter Gioia, who tracks the economy for the Connecticut Business and Industry Association, but some smaller stores are struggling even as the holiday shopping season begins. "I don't think it's going to be a total bust, but a lot of local retailers are going to feel it," Gioia said. "The situation is worse in Fairfield County. There are a lot of people who work in New York City, and right now New York is a basket case. They're cutting back."In the 2001 recession, the consumer did not go into recession. Consumer spending was there. Manufacturing and IT got clobbered, but the consumer didn't."As President George W. Bush and other world leaders gathered for a weekend summit to search for ways out of the current financial crisis, Federal Reserve Chairman Ben Bernanke hinted at another interest rate cut.Bernanke said financial markets remain under "severe strain" in a speech to a central banking conference in Frankfurt, Germany. He pledged to continue working with other countries to deal with the crisis and left open the door to a fresh interest rate cut to help brace the sinking U.S. economy.Bush is hosting a leaders' summit of the Group of 20, which includes not only the world's wealthiest nations but also major developing countries such as Russia, China, Brazil and India. The G-20 leaders are meeting in Washington for two days of talks that will wrap up Saturday.
Retailers are braced for what could be the worst holiday shopping season in decades with economists forecasting a recession that could turn out to be the steepest since the 1981-82 downturn.A survey of the nation's big chain retail stores found that retailers suffered through the weakest October in at least 39 years even though they tried to gin up more sales through frenzied price-cutting.Connecticut retailers aren't suffering as much as those in other parts of the nation, said Peter Gioia, who tracks the economy for the Connecticut Business and Industry Association, but some smaller stores are struggling even as the holiday shopping season begins. "I don't think it's going to be a total bust, but a lot of local retailers are going to feel it," Gioia said. "The situation is worse in Fairfield County. There are a lot of people who work in New York City, and right now New York is a basket case. They're cutting back."In the 2001 recession, the consumer did not go into recession. Consumer spending was there. Manufacturing and IT got clobbered, but the consumer didn't."As President George W. Bush and other world leaders gathered for a weekend summit to search for ways out of the current financial crisis, Federal Reserve Chairman Ben Bernanke hinted at another interest rate cut.Bernanke said financial markets remain under "severe strain" in a speech to a central banking conference in Frankfurt, Germany. He pledged to continue working with other countries to deal with the crisis and left open the door to a fresh interest rate cut to help brace the sinking U.S. economy.Bush is hosting a leaders' summit of the Group of 20, which includes not only the world's wealthiest nations but also major developing countries such as Russia, China, Brazil and India. The G-20 leaders are meeting in Washington for two days of talks that will wrap up Saturday.
Spencer’s ties up with international apparel brand
Retail chain Spencer’s has signed an exclusive tie-up with international apparel brand Beverly Hills Polo Club (BHPC) and their collection will be available at Spencer’s stores located in 66 cities.“BHPC epitomises refined comfort and stylish elegance for today’s successful and confident Indian youth and we are very proud to associate with them,” Sanjiv Goenka, vice chairman of RPG enterprises said here at a press conference Friday.
Spencer’s, which is a part of the RPG group, already has a private label programme in fashion that has internationally acclaimed brands like Island Monaks and Mark Nicolas.
Goenka said: “BHPC covers a wide range of lifestyle clothing for both men and women. Fashion has been a significant segment in the evolution of Indian retail industry; not due to its size but the way it has influenced lifestyle.
“It was apparel that led multi- national brands to explore and invest in the Indian market, which set the ball rolling towards organised retailing,” he added.
Referring to the growing importance of fashion in Spencer’s retail business, Goenka said: “Fashion currently contributes 10 percent to the company’s revenue which is expected to increase to 25-30 percent in the years to follow.”
BHPC’s fall/winter collection comprises polo t-shirts, sweat shirts and sweat pants, casual shirts and trousers for both men and women. The merchandise starts at Rs.399 and goes up to Rs.1,499.
Spencer’s, which is a part of the RPG group, already has a private label programme in fashion that has internationally acclaimed brands like Island Monaks and Mark Nicolas.
Goenka said: “BHPC covers a wide range of lifestyle clothing for both men and women. Fashion has been a significant segment in the evolution of Indian retail industry; not due to its size but the way it has influenced lifestyle.
“It was apparel that led multi- national brands to explore and invest in the Indian market, which set the ball rolling towards organised retailing,” he added.
Referring to the growing importance of fashion in Spencer’s retail business, Goenka said: “Fashion currently contributes 10 percent to the company’s revenue which is expected to increase to 25-30 percent in the years to follow.”
BHPC’s fall/winter collection comprises polo t-shirts, sweat shirts and sweat pants, casual shirts and trousers for both men and women. The merchandise starts at Rs.399 and goes up to Rs.1,499.
RPG faces slowdown music in retail bazaar
NEW DELHI: RPG Enterprises, which runs Spencer’s, Music World and Books and Beyond retail stores, has slashed revenue target by 16-22% for its
retail business from Rs 1,800 crore to Rs 1,400-1,500 crore this fiscal on store closures and ‘challenging’ retail environment. “We closed 56 non-performing stores. Either the location of such stores was not good or we were paying very high rentals for the stores,” RPG Enterprises vice-chairman Sanjiv Goenka said, adding that the company didn’t intend to close down more stores. Spencer’s currently has 400 stores, including 32 large-format stores. Mr Goenka said company’s expansion plans remained intact, as it would spend Rs 2,500 crore on taking the total number to 750 stores by March ‘10. The company plans to add 50 stores by the end of the current fiscal. “The retail environment is challenging and the period up to March ’09 will be difficult,” Mr Goenka said, adding that a decline in inflation may prompt RBI to cut interest rates further fuelling demand from the beginning of the next fiscal. A stock market
turmoil, high rate of inflation and recent reports of job cuts have forced Indian consumers to defer purchases, putting pressure on retailers’ top line in the past six months. Diwali sales were weak at Spencer’s this year. “Earlier we used to have bumper sales on all 7-8 days leading up to Diwali. But this year, we saw such sales only on Dhanteras (two days before Diwali),” he said. Meanwhile, Spencer’s also announced a franchisee agreement with US-based apparel brand
retail business from Rs 1,800 crore to Rs 1,400-1,500 crore this fiscal on store closures and ‘challenging’ retail environment. “We closed 56 non-performing stores. Either the location of such stores was not good or we were paying very high rentals for the stores,” RPG Enterprises vice-chairman Sanjiv Goenka said, adding that the company didn’t intend to close down more stores. Spencer’s currently has 400 stores, including 32 large-format stores. Mr Goenka said company’s expansion plans remained intact, as it would spend Rs 2,500 crore on taking the total number to 750 stores by March ‘10. The company plans to add 50 stores by the end of the current fiscal. “The retail environment is challenging and the period up to March ’09 will be difficult,” Mr Goenka said, adding that a decline in inflation may prompt RBI to cut interest rates further fuelling demand from the beginning of the next fiscal. A stock market
turmoil, high rate of inflation and recent reports of job cuts have forced Indian consumers to defer purchases, putting pressure on retailers’ top line in the past six months. Diwali sales were weak at Spencer’s this year. “Earlier we used to have bumper sales on all 7-8 days leading up to Diwali. But this year, we saw such sales only on Dhanteras (two days before Diwali),” he said. Meanwhile, Spencer’s also announced a franchisee agreement with US-based apparel brand
Friday, September 26, 2008
Organised retail to form 18% of overall retail pie: McKinsey
This may be good news for leading global retail players waiting to enter the Indian retail bazaar scene: the organised segment of the retail industry is expected to grow from the current 5 per cent of the total market to about 14-18 per cent of the expected Rs 18-lakh crore market by 2015. But a report by leading management consulting firm McKinsey and Co cautions global players waiting to enter the great Indian retail bazaar that a ‘cut and paste’ format of their stores elsewhere would not work here.
“They need to have innovative formats based on where to participate in the retail value chain, which geographies to play in and what price points to offer. They also have to craft a customer-insight driven merchandise strategy and create an efficient retail operating platform,” suggests the report. Indian shopper
McKinsey’s retail report also talks about the uniqueness of the Indian shopper vis-À-vis the rest of the world: least loyal to a single retailer, dislike for pre-packaged fresh foods, willingness to pay more for convenience and services but not a premium price for a brand and demands ethnicity in apparel accessories. And, in the absence of quality control, information about the product and trust in retailers, brands serve as a proxy for all these factors.
Of the current 204 million households in India, the report estimates that only about 13 million households have the income to patronise organised retail. The great news is that this relevant consumer segment will grow five fold from 13 million to 65 million households in the next eight years but mom and pop stores would continue to be relevant across the country, in both small and large towns.
The report, titled ‘The Great Indian Bazaar: Organised Retail Comes of Age in India,’ also suggests retailing in India would require an approach that is distinctively different from the rest of the world. To achieve leadership position in the sector, players would have to integrate real estate into the business model, create an effective and scalable supply chain, increase basket size by shaping consumption, develop and retain talent, influence regulation to ensure healthy development of the sector and to de-risk margins.
“Given the nascent state of organised retail and the rapid evolution of the industry, it is imperative for retailers, manufacturers, real estate developers, logistics providers and partners along the value chain to work in a collaborative spirit,” says Mr Laxman Narasimhan, Director, McKinsey & Co and leader of the Consumer, Retail and Media Practice in India.
“They need to have innovative formats based on where to participate in the retail value chain, which geographies to play in and what price points to offer. They also have to craft a customer-insight driven merchandise strategy and create an efficient retail operating platform,” suggests the report. Indian shopper
McKinsey’s retail report also talks about the uniqueness of the Indian shopper vis-À-vis the rest of the world: least loyal to a single retailer, dislike for pre-packaged fresh foods, willingness to pay more for convenience and services but not a premium price for a brand and demands ethnicity in apparel accessories. And, in the absence of quality control, information about the product and trust in retailers, brands serve as a proxy for all these factors.
Of the current 204 million households in India, the report estimates that only about 13 million households have the income to patronise organised retail. The great news is that this relevant consumer segment will grow five fold from 13 million to 65 million households in the next eight years but mom and pop stores would continue to be relevant across the country, in both small and large towns.
The report, titled ‘The Great Indian Bazaar: Organised Retail Comes of Age in India,’ also suggests retailing in India would require an approach that is distinctively different from the rest of the world. To achieve leadership position in the sector, players would have to integrate real estate into the business model, create an effective and scalable supply chain, increase basket size by shaping consumption, develop and retain talent, influence regulation to ensure healthy development of the sector and to de-risk margins.
“Given the nascent state of organised retail and the rapid evolution of the industry, it is imperative for retailers, manufacturers, real estate developers, logistics providers and partners along the value chain to work in a collaborative spirit,” says Mr Laxman Narasimhan, Director, McKinsey & Co and leader of the Consumer, Retail and Media Practice in India.
Saturday, September 6, 2008
Hotspot and Mobile NXT new strategy
Organised mobile retailers like HotSpot and Mobile NXT have found a new way to deal with competition from mom & pop stores: make neighbourhood retailers their franchisees to sell mobile phones and accessories under their brand.
Currently, more than 70% of the mobile retail sector is unorganised and market analysts believe there is a huge potential for the franchise model. “The return on investment (RoI) for the franchisee is somewhere around 60-65%.
It will allow us to expand our presence and enter deep into the cities,” says HotSpot CEO Sanjeev Mahajan. HotSpot has recently adopted the franchise model with 25 stores operational in Delhi alone and has plans to expand to 100 such stores besides the 400 company-owned, company-operated (co-co) stores across the country.
“Customer experience and pricing is the crux of this business. Therefore, we provide stock management, professional training for the in-store sales team, and an after-sales customer support at all our franchised stores. The role of the franchisee is restricted to the operational level,” says Mobile NXT CEO Vijay Menon.
Mobile NXT adopted the franchise model in tier-II and tier-III cities across India in 2007. The company operates more than 55 stores all over the country.
Mr Menon, however, concedes that the franchise model in mobile retailing is difficult to adopt since there is no uniqueness in the product and the return on investment is not very attractive.
That is why players like Subhiksha and Mobile Store are refusing to join the bandwagon. They believe the franchise model is not profitable at this stage, given the low profit margins and low market penetration.
“We are concentrating on a co-co model based on pricing. We don’t think franchise model is the way to go, since the business already accounts for low margins; expanding through franchise would dent the margins further,” says Subhiksha president-marketing Mohit Khattar. Subhiksha operates the largest chain of mobile stores with around 1,300 stores all over the country.
Mobile Store CEO Rajiv Agarwal also feels that the franchise model in the current scenario does not hold much ground. “There is the risk of our brand value being diluted. This is a business where you cannot allow your service proposition to get diluted,” says he. Mobile Store has significant presence in the country with more than 800 stores.
However, RPG Cellucom head-marketing Biswajit Pandey feels that with improving margins and marketing strategies, the franchise model may take the front stage in future. The company currently operates over 25 stores.
“It’s a win-win situation since it allows rapid expansion and presence in local areas for the franchiser and an opportunity for the traditional retailer to enter the newfound trend of organised retail. Moreover, the operational costs in case of franchise model is low in comparison to co-co model, giving both the parties a better RoI,” says global management consulting firm Technopak chairman Arvind Singhal.
Currently, more than 70% of the mobile retail sector is unorganised and market analysts believe there is a huge potential for the franchise model. “The return on investment (RoI) for the franchisee is somewhere around 60-65%.
It will allow us to expand our presence and enter deep into the cities,” says HotSpot CEO Sanjeev Mahajan. HotSpot has recently adopted the franchise model with 25 stores operational in Delhi alone and has plans to expand to 100 such stores besides the 400 company-owned, company-operated (co-co) stores across the country.
“Customer experience and pricing is the crux of this business. Therefore, we provide stock management, professional training for the in-store sales team, and an after-sales customer support at all our franchised stores. The role of the franchisee is restricted to the operational level,” says Mobile NXT CEO Vijay Menon.
Mobile NXT adopted the franchise model in tier-II and tier-III cities across India in 2007. The company operates more than 55 stores all over the country.
Mr Menon, however, concedes that the franchise model in mobile retailing is difficult to adopt since there is no uniqueness in the product and the return on investment is not very attractive.
That is why players like Subhiksha and Mobile Store are refusing to join the bandwagon. They believe the franchise model is not profitable at this stage, given the low profit margins and low market penetration.
“We are concentrating on a co-co model based on pricing. We don’t think franchise model is the way to go, since the business already accounts for low margins; expanding through franchise would dent the margins further,” says Subhiksha president-marketing Mohit Khattar. Subhiksha operates the largest chain of mobile stores with around 1,300 stores all over the country.
Mobile Store CEO Rajiv Agarwal also feels that the franchise model in the current scenario does not hold much ground. “There is the risk of our brand value being diluted. This is a business where you cannot allow your service proposition to get diluted,” says he. Mobile Store has significant presence in the country with more than 800 stores.
However, RPG Cellucom head-marketing Biswajit Pandey feels that with improving margins and marketing strategies, the franchise model may take the front stage in future. The company currently operates over 25 stores.
“It’s a win-win situation since it allows rapid expansion and presence in local areas for the franchiser and an opportunity for the traditional retailer to enter the newfound trend of organised retail. Moreover, the operational costs in case of franchise model is low in comparison to co-co model, giving both the parties a better RoI,” says global management consulting firm Technopak chairman Arvind Singhal.
Wednesday, August 27, 2008
Tesco plans faster expansion than Wal-Mart in India
It took Tesco 21 months after the US-based Wal-Mart Stores pipped the UK retailer in its partnership talks with Delhi-based Bharti Group.
However, Tesco now looks much prepared for a faster roll out than the world’s largest retailer Wal-Mart, especially with having Tata group’s existing supermarket chain as its franchise partner and a customer.
The UK-based world’s third largest retailer, Tesco, plans to open its first cash-and-carry store by December 2009, taking only 16 months since its announcement. It has already got Tata’s four-year-old supermarket chain Star Bazaar as its customer, which plans to expand to 54 stores in the next five years from four now.
Wal-Mart, which got into a joint venture with Bharti group in November 2006, plans to open their first store by March 2009, after deferring its plan to open in 2008. That makes 28 months after their first announcement, and a year longer than what Tesco plans.
Tesco’s ability to roll out faster also lies in the fact that unlike Wal-Mart, it has decided to go alone for the wholesale cash-and-carry stores. Its partnership with Tata is only a franchise agreement for providing technology and marketing support for a fee.
"Joint ventures in general have had issues across the industries in terms of operations," said Govind Shrikhande, chief executive officer of Mumbai-based retailer Shoppers Stop.
Industry observers feel that the move by Tesco to go alone is strategically suited with India's compulsion, which doesn't allow foreign investment in multi-brand retail business. There is no restriction on the foreign direct investment in the wholesale cash-and-carry retail operations.
In fact, Tesco is considered to be relatively slower and methodical retail operator which has opted for an organic growth route while Wal-Mart is considered to be aggressive, taking an organic route wherever possible.
"It is a politically correct announcement," said Arvind K Singhal, chairman of business consulting firm Technopak, explaining that the company had shown confidence by going alone in the cash-and-carry operation.
In late 2007, Tesco entered the US to challenge Wal-Mart on its home turf. Now, India is the third international market after China and Japan where Tesco is not only set to challenge Wal-Mart but is also prepared to catch up on the opportunity lost in 2006 when its talks with Bharti failed.
Wal-Mart is often criticised for squeezing farmers’ margins and paying less to its employees to maintain "every day lower price" marketing strategy. On the other hand, Tesco is known for customer relationship.
"Their Club Card has been extremely successful," said Noel Tata, managing director of Tata’s retail company Trent. According to an estimate, half of the UK households use Tesco’s Club Card, the loyalty card of the company.
However, retail remains to be extremely sensitive to local demands. And as Shirkhnade said, "We have to wait and watch to see the most successful model."
Vishal Retail net rises 34.66% (QoQ) in Jun`08 qtr
Vishal Retail disclosed a 34.66% rise in its standalone net profit for the quarter ended June 2008. During the quarter, the profit of the company stood at Rs 140.11 million compared with Rs 104.04 million in the quarter ended March 2008.
Net sales increased 18.25% to Rs 3,765.49 million, while total income for the quarter rose 17.59% to Rs 3,784.31 million when compared with the previous quarter ended March 2008.
The company reported 35.79% increase in earnings of Rs 6.26 a share as against Rs 4.61 a share over the previous quarter.
Monday, August 25, 2008
Reliance Retail close to break-even
Reliance Retail Ltd, which runs at least 590 stores across 57 cities in India, has already managed to achieve a near break-even by posting a loss of less than Rs1 crore in its first full year of operations, just 17 months after opening its first store.
Closely held Reliance Retail posted a net loss of Rs0.82 crore on sales of Rs1,486 crore for the fiscal ended 31 March.
The results appear to underscore why Reliance Retail, owned by India’s largest private company by sales, Reliance Industries Ltd, has eagerly embraced an early mover strategy despite bearing the brunt of protests, including vandalism, from small shopkeepers and wholesalers in some of the 13 states where it operates its stores in.
The results for Reliance Retail, which is normally reticent about discussing its financial profile given the continuing backlash against organized retail in India, are tucked away on Page 149 of the 2007-08 annual shareholder report from Reliance Industries, which is controlled by Mukesh Ambani.
Organized retailers such as Reliance Retail were not expected to show a profit in their first several years of operations, partly because of high capital expenditure involved in setting up a chain of stores, especially with spiralling real estate costs of the past two years in India that have led to a doubling of lease rentals in some cities.
Reliance Retail’s first-year results, while not necessarily an automatic indicator of how the still-rapidly expanding business will perform in year two, are nonetheless impressive given the state of profit margins in the retail business, where most Indian companies are still learning and experimenting with branded stores.
Indeed, even for Chennai-based Subhiksha, which opened its first store in 1997 and claims to be India’s largest supermarket brand, net profit margins are only around 2%, said R. Subramanian, founder and managing director of Subhiksha Trading Services Ltd, in an earlier interview with Mint.
But, that hasn’t stopped large industrial groups such as Reliance, Kolkata-based RPG Group and diversified conglomerate Aditya Birla Group, from entering the organized retail market. On deck is a similar venture from the Bharti family, promoters of India’s largest mobile phone company. Part of that stems from the desire to grab customers’ wallets and minds before what is seen as the inevitable saturation of India with branded stores. The Indian retail market is estimated at Rs14.1 trillion and the share of organized retail was around 4% or Rs51,100 crore in 2006, according to India Retail Report 2007 prepared by Technopak Advisors, a management consulting firm.
But, the land rush also stems from large industrial houses such as Reliance having deep pockets and the ability to sustain substantial investments.
Indeed, Reliance Retail’s reported revenues are just around 1% of Reliance Industries’ total sales of Rs1.39 trillion for the fiscal 2008.
Reliance Retail already has 3.5 million sq. ft of trading space and has outlined a total investment of Rs25,000 crore over the next few years, even though protests from small retailers and wholesalers have slowed some of its expansion plans. So far, Reliance Industries has invested nearly Rs4,400 crore in Reliance Retail in the form of equity and preference shares. The equity investment amounts to Rs3,785 crore, giving Reliance Industries a 98.74% stake in the retail venture, according to the annual report.
Not all the performance is rosy. Other retail subsidiaries of Reliance Industries such as Reliance Fresh Ltd (formerly known as Ranger Farms Ltd) and Reliance Dairy Foods Ltd have reported losses for the year ended March. Reliance Fresh has a loss of Rs20 crore on a revenue of Rs357 crore, while Reliance Dairy Foods incurred a loss of Rs3 crore on revenues of Rs66 crore.
The interlinkages between Reliance Retail results and these losses were unclear. Reliance Retail operates under 12 different store formats ranging from convenience store concept to consumer durables concept and automotive speciality formats. It has also entered into two joint ventures —Pearle Europe for optical retailing and Marks and Spencer for apparel retailing.
Saturday, August 23, 2008
Reebok Retail India set to bring in Classics
Reebok India, in an effort to capture the fitness-inspired lifestyle clothing market, is bringing its global lifestyle brand ‘Reebok Classics’ to India. The company will set up separate stores for Classics, 75 outlets by March 2009.
Reebok India has built up a lifestyle-product portfolio for apparel, shoes and accessories. It has signed up style icon Bipasha Basu and youth icon Yuvraj Singh to represent the fusion of fitness and lifestyle through Reebok merchandise. To be rolled out in the menswear and womenswear segment, Classics will cater to niche market of style-and-fitness conscious youth in the country.
Reebok India MD Subhinder Singh Prem told ET: “The lifestyle space will be a focused business for Reebok. We see more people interested in wearing stylised sportswear, and hence we will be rolling out up to 70 specialty lifestyle retail outlet stores by this year-end, besides existing 700 Reebok performance stores.” With the introduction of this new vertical, Reebok India expects to garner revenues of Rs 1,400-crore by this year-end. Reebok, currently, claims to enjoy 51% marketshare in the Indian sports-footwear and apparel market.
The global Classics collection to be launched in India will include lifestyle merchandise for dance, biking, NFL sports gear and street style. Besides these four ranges, the company will also launch designer products—a collection
under Hollywood actress Scarlett Johansson name, jeans styled by cricketer MS Dhoni, Manish Arora collection, besides many other inspired by global sports like skating, et al.
Reebok India has built up a lifestyle-product portfolio for apparel, shoes and accessories. It has signed up style icon Bipasha Basu and youth icon Yuvraj Singh to represent the fusion of fitness and lifestyle through Reebok merchandise. To be rolled out in the menswear and womenswear segment, Classics will cater to niche market of style-and-fitness conscious youth in the country.
Reebok India MD Subhinder Singh Prem told ET: “The lifestyle space will be a focused business for Reebok. We see more people interested in wearing stylised sportswear, and hence we will be rolling out up to 70 specialty lifestyle retail outlet stores by this year-end, besides existing 700 Reebok performance stores.” With the introduction of this new vertical, Reebok India expects to garner revenues of Rs 1,400-crore by this year-end. Reebok, currently, claims to enjoy 51% marketshare in the Indian sports-footwear and apparel market.
The global Classics collection to be launched in India will include lifestyle merchandise for dance, biking, NFL sports gear and street style. Besides these four ranges, the company will also launch designer products—a collection
under Hollywood actress Scarlett Johansson name, jeans styled by cricketer MS Dhoni, Manish Arora collection, besides many other inspired by global sports like skating, et al.
Birla plans big expansion of lifestyle retail chain
Kumar Mangalam Birla is putting his best foot forward almost 10 years after storming the fashion space with the acquisition of Madura Garments. In his most ambitious retail foray move, he is scripting India’s high-street luxury retail play similar to Barneys or Harvey Nichols.
Madura Garments Lifestyle Retail Company, a 100% subsidiary of AV Birla Nuvo, is working on setting up 12-14 stores to meet the fashion needs of the urban Indian man. The new store chain — The Collective — will open doors in Bangalore, Mumbai and New Delhi initially.
The retail initiative will bring in some of the world’s edge of the fashion, super-premium brands like 7 For All Mankind and True Religion to India for the first time. Then there is the enduring high-end names like Kenneth Cole, Ted Baker and Valentino entering the market through a distribution deal.
Going beyond apparel and accessories play, the company has roped in Paris-based Jean Claude Beguine to set up salon within the stores while Sonodea from the US will decide the music for the store. The retail chain is also enlisting the leading names on Saville Row for tailored suits, besides offering laundry and fabric-care services.
“There should be more than one reason to come to our stores,” says The Collective CEO George Santacroce, who has in the past steered several international brands in the US market. Mr Birla’s luxury foray is targeted at men in the 30-45 age bracket, with income ranging from $50,000 to $200,000. AV Birla Nuvo will invest around Rs 275 crore from internal accruals in the project over the next 3-4 years, adds company director Vikram Rao.
Mr Santacroce says the chain will essentially be a bridge between premium and luxury brands, with some degree of overlapping with luxury market. “There’s a long list of brands entering India’s pureplay luxury segment, and we leave that space to them,” he adds. However, be sure to find the apparel pricing in the store in the range of Rs 4,000 to about Rs 1 lakh for a suit.
So the brand check list will include Armani Collezioni, Versace Collection, Z-Zegna, Cheap Monday, Rock & Republic and footwear and accessories brands like Puma Black, Mandarina Duck, Bally and Church’s Footwear. It is believed that The Collective has inked agreements with 35 apparel and around 20 accessories brands.
“Accessories are the first acquisition in an emerging market as people change their bags, shoes and watches more readily,” says Mr Santacroche.
Madura Garments Lifestyle Retail Company, a 100% subsidiary of AV Birla Nuvo, is working on setting up 12-14 stores to meet the fashion needs of the urban Indian man. The new store chain — The Collective — will open doors in Bangalore, Mumbai and New Delhi initially.
The retail initiative will bring in some of the world’s edge of the fashion, super-premium brands like 7 For All Mankind and True Religion to India for the first time. Then there is the enduring high-end names like Kenneth Cole, Ted Baker and Valentino entering the market through a distribution deal.
Going beyond apparel and accessories play, the company has roped in Paris-based Jean Claude Beguine to set up salon within the stores while Sonodea from the US will decide the music for the store. The retail chain is also enlisting the leading names on Saville Row for tailored suits, besides offering laundry and fabric-care services.
“There should be more than one reason to come to our stores,” says The Collective CEO George Santacroce, who has in the past steered several international brands in the US market. Mr Birla’s luxury foray is targeted at men in the 30-45 age bracket, with income ranging from $50,000 to $200,000. AV Birla Nuvo will invest around Rs 275 crore from internal accruals in the project over the next 3-4 years, adds company director Vikram Rao.
Mr Santacroce says the chain will essentially be a bridge between premium and luxury brands, with some degree of overlapping with luxury market. “There’s a long list of brands entering India’s pureplay luxury segment, and we leave that space to them,” he adds. However, be sure to find the apparel pricing in the store in the range of Rs 4,000 to about Rs 1 lakh for a suit.
So the brand check list will include Armani Collezioni, Versace Collection, Z-Zegna, Cheap Monday, Rock & Republic and footwear and accessories brands like Puma Black, Mandarina Duck, Bally and Church’s Footwear. It is believed that The Collective has inked agreements with 35 apparel and around 20 accessories brands.
“Accessories are the first acquisition in an emerging market as people change their bags, shoes and watches more readily,” says Mr Santacroche.
Biyani sees Future in restaurant business
Indivision India Partners, the private equity arm of the Future Group, is close to picking up a stake, which could be in the range of 40%-50%, in food & beverages (F&B) entity Blue Foods, which operates a chain of restaurants across the country.
The company’s flagship brands include Copper Chimney, Bombay Blue, Noodle Bar, Gelato Italiano, Spaghetti Kitchen & Cream Centre. It also has a franchiseee agreement with California-based coffee chain Coffee Beans & Tea Leaf.
Sources said the new promoters will merge Pan Foods Solutions — a JV between Pantaloon Retail and Blue Foods — with Blue Foods and pick up stake in the merged entity. Blue Foods owns all the brands managed by it except Copper Chimney and Cream Centre, which are licensed to the company.
The financial details are currently unavailable since the size is being finalised and expected to be closed in the next week. When contacted, Future Capital CEO Sameer Sain and Future Group CEO Kishore Biyani declined to comment.
Sunil Kapur, an entrepreneur who runs Blue Foods, was not reachable for comment. Unconfirmed industry speculations say the Anil Ambani Group was also a serious contender for the restaurant business and had bid upwards of Rs 600 crore.
Mr Sain and Mr Biyani are closely involved in finalising the deal with Mr Kapur, the managing director of Blue Foods. It is learnt that Mr Kapur had to simplify an earlier complicated structure and buy out stakes of the other three partners in the business.
Following the merger, Mr Kapur will continue to be on the board of the company. The new promoters will infuse funds into the business to scale up the restaurants across various Future Group and other formats.
Blue Foods operates across six verticals — food courts, casual dining, family restaurants, premium restaurants, the outdoor catering business and banquet services. Sources said it is one of the largest integrated F&B firms in the country.
The company operates on a hub and spoke model with a centralised kitchen in every city that sources and stocks all raw materials required for its various restaurants.
Blue Foods was set up as a chain of multi-cuisine lifestyle restaurants sometime in 2002 by two promoters -- Sunil Kapur of Copper Chimney and Sanjiv Chona of Cream Centre in Mumbai in a strategic alliance with the promoters of Royal Sporting House of Singapore. The company has been grappling with high operational costs in a business where economies of scale needs to be significant for being profitable.
While these are well-known brands, analysts say the restaurant business is highly complicated and achieving profitability is a challenge. Under the proposed structure, Future Group’s scale in real estate and its access to a wide consumer base is expected to be a differentiating factor to grow the business, sources said.
Restaurant chains, which are part of the five and four star hotels, do not have much cause for concern, say industry observers. Industry margins average at 10-12%. It is the standalone restaurants that have been under pressure across the country. The high real estate cost in key metro markets has put capacity expansion on the back burner for many restaurant chains.
The company’s flagship brands include Copper Chimney, Bombay Blue, Noodle Bar, Gelato Italiano, Spaghetti Kitchen & Cream Centre. It also has a franchiseee agreement with California-based coffee chain Coffee Beans & Tea Leaf.
Sources said the new promoters will merge Pan Foods Solutions — a JV between Pantaloon Retail and Blue Foods — with Blue Foods and pick up stake in the merged entity. Blue Foods owns all the brands managed by it except Copper Chimney and Cream Centre, which are licensed to the company.
The financial details are currently unavailable since the size is being finalised and expected to be closed in the next week. When contacted, Future Capital CEO Sameer Sain and Future Group CEO Kishore Biyani declined to comment.
Sunil Kapur, an entrepreneur who runs Blue Foods, was not reachable for comment. Unconfirmed industry speculations say the Anil Ambani Group was also a serious contender for the restaurant business and had bid upwards of Rs 600 crore.
Mr Sain and Mr Biyani are closely involved in finalising the deal with Mr Kapur, the managing director of Blue Foods. It is learnt that Mr Kapur had to simplify an earlier complicated structure and buy out stakes of the other three partners in the business.
Following the merger, Mr Kapur will continue to be on the board of the company. The new promoters will infuse funds into the business to scale up the restaurants across various Future Group and other formats.
Blue Foods operates across six verticals — food courts, casual dining, family restaurants, premium restaurants, the outdoor catering business and banquet services. Sources said it is one of the largest integrated F&B firms in the country.
The company operates on a hub and spoke model with a centralised kitchen in every city that sources and stocks all raw materials required for its various restaurants.
Blue Foods was set up as a chain of multi-cuisine lifestyle restaurants sometime in 2002 by two promoters -- Sunil Kapur of Copper Chimney and Sanjiv Chona of Cream Centre in Mumbai in a strategic alliance with the promoters of Royal Sporting House of Singapore. The company has been grappling with high operational costs in a business where economies of scale needs to be significant for being profitable.
While these are well-known brands, analysts say the restaurant business is highly complicated and achieving profitability is a challenge. Under the proposed structure, Future Group’s scale in real estate and its access to a wide consumer base is expected to be a differentiating factor to grow the business, sources said.
Restaurant chains, which are part of the five and four star hotels, do not have much cause for concern, say industry observers. Industry margins average at 10-12%. It is the standalone restaurants that have been under pressure across the country. The high real estate cost in key metro markets has put capacity expansion on the back burner for many restaurant chains.
Tuesday, August 12, 2008
Vishal Retail offers good potential
Vishal Retail, one of the leading and growing companies in manufacturing and retailing of readymade garments (apparels), non-apparels and FMCG products, is a pioneer in discount retailing, focused on tier II and III cities in the country and is expanding its operations at a rapid pace. It operates in the industry which has posted tremendous growth numbers led by value retail and driven space addition and better growth in the existing stores over the last five years.
The company endeavors to facilitate the one-stop convenience with reasonably-priced products manufacturing at its own plant in Gurgaon, Haryana, Dehradun and Manesar with a capacity of 5,000 garment pieces per day in each unit.
The company has added of 3 million pieces per annum of garment manufacturing capacity in Dehradun and Manesar, 9 new warehouses with an area of 581,640 square feet and also implemented modules of SAP with an investment of around Rs 75 million.
The company plans to diversify the portfolio from apparel segment which accounts 61.2% of product mix to FMCG and non apparels both of which have a share of around 18% in folio mix. It has recently entered into an agreement with HPCL for opening retail outlets (store size varying from 500-1,000 sq ft) at selected fuel stations (around 1,000-1,500 locations). As per the contract, HPCL shall provide space to the company for either retail stores or warehousing at its mutually selected retail outlets. Launch of loyalty cards to attract customers, particularly females is also under planning process.
| Vishal Retail | |||
| Particulars | 2007 | 2008 | % Change YoY |
| Sales * | 6026.50 | 10053.10 | 67.00 |
| Net Profit * | 250.70 | 406.96 | 62.00 |
| EPS | 14.00 | 19.00 | 36.00 |
| EBIDTA | 694.30 | 1291.00 | 86.00 |
| Debt/equity | 1.9 (x) | 2.0 (x) | |
| *Sales, Net profit and EBIDTA in Rs million | |||
Vishal Retail registered a rise of 62% in net profit after tax at Rs 406 million for the financial year 2008 as against Rs 250.7 million in the previous year. The company reported earnings of Rs 19 a share in the year as against previous year`s earnings of Rs 14 a share. The total revenues of the company has increased by 68% from Rs 6,050.4 million to Rs 10,144.6 million for the period in comparison due to addition in retail space and increased footfalls.
During the fiscal 2008, EBIDTA margin has surged by 86% to Rs 1,291 million. The operating margin of the company seems to be under pressure due to organic expansion in manufacturing and human resource department, while strong network and rise in contribution from private labels can prove to be boosters for the same.
The total number of stores of the company has reached 126 stores spread across India, covering an area of 2,392,000 square feet. It has also maintained it consistency in customer service and operation which can be seen through rise of 2.03 times in daily footfalls at 182,396.
Vishal Retail has witnessed a rapid growth rate during the current financial year. Its garment manufacturing capacity is now around 4.5 million pieces per annum. With addition of new warehouses, it now has 29 warehouses with a space of 1.1 million square feet located in 8 key distribution centers and a fleet of 98 trucks and lorries.
All company locations are now linked through a company-wide VNC (virtual network connection) and video conferencing together with hotlines to provide online connectivity. This can be attributed to the implementation of SAP module with an investment of around Rs 75 million.
The Delhi-based company plans to open 70 more stores at a cost of around Rs 7 billion by the end of this year for which it is planning to raise around Rs 2 billion through a private equity route, while the remaining fund will be arranged through debt.
Vishal Retail is currently trading at a price of around Rs 390.40 a share. Shares of the company are trading at huge discount when compared with its peers. The company is valued at 20.55 times of FY2008 earnings.
However, the company faces significant competition in the retail industry. The competition can be faced from prominent players like Pantaloon Retail, Shoppers` Stop RPG, Trent and Lifestyle. Barring Kolkata, all the properties of the company are leased or licensed in company`s favor under various agreements. Disputes that may arise with owners of such properties may affect the profitability of the company. Raw materials including fabric are sourced from external suppliers, which constitute the largest component of manufacturing costs for garments. Rise in these input cost amid higher rate of inflation can dent the margins of the company.
To conclude, players focusing on value retail have grown much faster than those focused on lifestyle. The retailers are expected to pump in over USD 25 billion into the sector over the next four years to scale up their retailing operations and strengthen back-end systems. According to a research study, the domestic retailers who enjoy early entrant advantages at key retailing locations can look to gain a pan-India presence.
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