Food Inflation can be Controlled without 51% FDI in Multi-Brand Retail

September 29, 2012 · Filed Under retail · Comment 

The new policy by the corrupt Politicians of Congress in the Government allowing FDI in MultiBrand Retail Trade – MBRT has several shortcomings. In our view, claimed benefits with respect to crop storage, preventing wastage, employment, consumer prices are

The claimed lower food inflation ensuing from FDI in MBRT needs to be grounded to the underlying causes, which in our view are a) government policies encouraging high food prices1 since 2006 (aggressive procurement and pricing), b)
increasing input and land costs, c) rising labor cost and d) rising financial strength in the intermediation Read more

Big Bazaar likely to be Hived off by Feb-2010

December 22, 2009 · Filed Under retail · Comments Off on Big Bazaar likely to be Hived off by Feb-2010 

Pantaloon Retail’s (PRIL) planned hive-off of Big Bazaar is on track and is likely to be consummated by February 2010, according to management. Pantaloon’s management indicates that hive-off of Big Bazaar and Food Bazaar is on track. The hive-off will pave the way for fund-raising at the Big Bazaar level and induction of a foreign food retailer. The latter, which management has hinted at in many forums, is likely to provide the next leg-up to Big Bazaar’s growth trajectory. Big Bazaar and Food Bazaar account for 70% of PRIL’s (standalone) revenues and 67% of its total retail space. Read more

Government unlikely to relax FDI norms for the retail sector

July 2, 2009 · Filed Under retail · Comment 

India’s organized retail sector has been facing tough times because of the ongoing economic slowdown and resulting job losses and salary cuts that have had downsizing impact on spending power of consumers. As a result, the foot-falls and the average revenue per sq. feet for the retailers have been strongly impacted. Lack of financing is another issue that has hit the industry hard in recent times.

In this backdrop, the industry wants the government to take a series of initiatives in the forthcoming Union Budget to help it beat the slowdown. On top the agenda is the industry’s demand to allow foreign direct investment (FDI) in the multi-brand retail. While the government allows FDI in single-brand retail, the same is not allowed in multi-brand segment.

The retailers also want the government to extend industry status to retail business contending that it was a very big sector and a major employer. Another demand of the sector is that the government should take measures that would result in increase in consumption.

However, most of the demands of the industry, especially the one relating to FDI, are not likely to be met, at least in the current fiscal. While the government is interested in the long run development of organised retail, it wants to ensure that the development does not harm the smaller players in the segment.

Godrej Industries approves merger of group companies + Swap Ratio

May 28, 2009 · Filed Under retail · Comment 

Godrej Industries has announced that the board of the company has given its nod for the merger two group companies with Godrej Consumer Products (GCP).

As per the approval, Godrej Consumer Biz (GCB), a 100% subsidiary of Godrej & Boyce Manufacturing Company and Godrej Hygiene Care (GHC), a 100% subsidiary of Godrej Industries will be merged with the GCP along with transfer of their assets and liabilities to the consumer products major, on June 1, 2009.

GCB and GCH hold 29% and 20% in Godrej Sara Lee (GSL) which is a 49:51 joint venture (JV) between the Godrej Group and Sara Lee Corporation, US. Post merger GCP will directly hold 49% stake in GSL. The promoters’ stake in GCP will go up to 74.77% from current 69.73% once the merger is concluded.

The swap ratio for both the companies has been fixed at 10:11 i.e. the shareholders of GCB and GHC will receive 10 shares of GCP for every 11 shares held.

Pantaloon Renamed as Future Markets and Consumer Group Limited

April 14, 2009 · Filed Under retail · 1 Comment 

We have received fax from our reporter about the recently concluded board meeting of India’s largest retailer – Pantaloon Retail India Ltd in which the board has approved to change the name of this listed entity to Future Markets and Consumer Group Limited. Further, it will raise Rs2.8bn through a preferential allotment to promoters / their associates, implying equity dilution of 9.5%. Additionally, it will issue 5m warrants (at Rs183) convertible over the next 18 months.

Future group / Pantaloon Retail Corporate Governance under Scanner:
There is no clarity (as yet) on the terms of transfer of the operating businesses to wholly owned subsidiaries. Our concerns are based on – whether disclosures will improve / deteriorate, as these businesses are transferred, the potential adverse impact on PART’s minority shareholders – holding company structures by their very nature trade at a discount to their underlying operating assets. The fund infusion is a mixed positive – PRIL requires funds to meet its expansion plans, and given the tight equity / credit markets, we don’t envisage any other route to access capital.

Titan + Pantaloon – What’s in Store this Quarter’s ?

April 8, 2009 · Filed Under retail · Comment 

Pantaloon Future Group Retail – We expect revenue, operating profit, and adjusted net profit growth of 25%, 43%, and 16% YoY, respectively in F3Q09. Gross margins are expected to drop 100bp YoY on a higher proportion of value retail sales. However, EBITDA margins are likely to improve by 125bp, but a 70% rise in interest cost is likely to limit earnings growth. For January-February 2009, SSG for Value and Life Style Retailing was 4.5% and 8.2%, respectively. PRIL added 0.27mn sf for January and February 2009.

Titan Retail – We expect Titan to deliver revenue, reported operating profit, and reported earnings growth of 11%, -18%, and -35%, respectively, in F4Q09. The decline in reported PAT is accentuated by a lower tax rate for  F4Q08. Watch revenues are expected to decline 5% YoY and margins are expected to come in at 18.5%. On the jewellery front, we expect 20% YoY revenue growth  primarily due to higher gold prices, and look for margins to fall sequentially at 4.3% primarily on higher lease rates.

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