Pantaloon Retail net up 5.97 pc to Rs 33.54 cr in Q2

Future Group&aposs retail arm Pantaloon Retail India Ltd today announced a net profit of Rs 33.54 crore for the second quarter ended December 31, 2008, up 5.97 per cent over the corresponding period a year ago.

The company had a net profit of Rs 31.65 crore in the same quarter last fiscal, Pantaloon Retail India said in a filing with the Bombay Stock Exchange.
Total income increased to to Rs 1,527.20 crore for the quarter under review from Rs 1,228.07 crore in the same period previous fiscal.
For the half-year period ended December 31, 2008, the company&aposs net profit rose to Rs 69.72 crore from Rs 6134 crore in the same period last year.
While, the total income of the company jumped up to Rs 3039.57 crore during the six-month period under review from Rs 2315.24 crore in the same period last fiscal.
Pantaloon Retail operates multiple retail formats in both the value and lifestyle segment of the Indian consumer marker. It operates over 1000 stores across 61 cities in India.
Its principal formats include Pantaloons, a chain of fashion outlets; Big Bazaar, an Indian hypermarket chain and Food Bazaar, a supermarket chain.

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.

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.

‘Brand Factory’ opens 7th outlet; undertakes two-fold expansion within a year

Brand Factory, the value fashion chain of Pantaloon Retail– the country’s largest listed retailer owned by Kishore Biyani-led Future Group– opened its seventh store on Thursday, the 24th July, in Bangalore.

Spread over a retail space of around 55,000 sq ft, the new store is also the second outlet of retail chain in the IT capital of India. Bangalore is an important market for the chain as in FY 2008 it accounted for 30% of total sales revenue for the chain. The first store of the chain in the city attracts a footfall of 5,000 persons every day.

Brand Factory outlets offer products of well known global and local fashion brands numbering around 200. These products are sold at discounts ranging between 20 to 50%, all round the year.

Brand Factory, according to a Business Line report, has also roped in the products of Planet M, Globus, Staples and Dollar stores. Apart from selling apparel and accessories, which contribute 80% of business, Brand Factory stores are also offering products across categories that among others include footwear, eyewear, watches, home and kitchen accessories, travel goods, and cell phones.

The value retail chain has planned to nearly double the number of its outlets from seven at present to 13 by June, 2009. This, according to , will entail an investment of Rs 6 to 10 crore per store. This expansion is expected to increase the sales revenue from Rs 200 crore in FY 2008 to Rs 500 crore in FY 2009 (ending June 30, 2009).

Value retailing is estimated to be a Rs 45,000 crore business in India, which is believed to be growing at a healthy rate of 20% per annum.