Pantaloon Retail _Report

8/7/2019 Pantaloon Retail _Report

1/18

1 For Private Circulation

PANTALOON RETAIL INDIA PVT.LTD.,Annual Coverage Report05, Jan2011

Market Data

Sector Retail

BSE 523574

NSE PANTALOONR

Reuters PART.BO

Bloomberg PF@IN

ISIN Demat INE623B01027

Face Value 2.00

Book Value 146.68

52 week H/L 527.90-338.70

No. of shares o/s 19.61 Cr.

Beta 1.11Market Cap.(Rs. Cr) 7416.50

Avg. Volume 70985

Sensex 19521.25

Free Foat (Cr.) 4358

CMP 378.20

Target Price 401.97

Upside 6.28%

EXECUTIVE SUMMARY

Pantaloon Retail (India) Limited, is Indias leading retailer that operate

multiple retail formats in both the value and lifestyle segment of th

Indian consumer market.

PRIL operates over 16 million square feet of retail space, has over 100

stores across 73 cities in India and employs over 30,000 people.

PRIL to invest capex of around 21 Cr. for the next 3 years and the fun

will be used for adding 15-million sq.ft. retail space into its portfolio b

2014.

In the next 3 yrs The Govt. Of India will allow Foreign DirecInvestments (FDI) in Multi-brand retail.

PRIL board has approved rising up to Rs 750 Cr via Qualifie

institutional placement (QIP).

PRIL intends to set up 155 Big Bazaar stores by 2014, raising its tota

network to 275 stores.

PRIL has transferred its value retail business to its wholly ow

subsidiary, Future Value Retail Ltd.

Pantaloon retail merged the home solutions business of its subsidiar

Home Solutions Retail (India) Limited (HSRIL) with itself.

The Company has recorded growth in both the top line as well as i

bottom line despite the transferring of value retail business operation

PRIL had posted a consolidate turnover of Rs 9786.94 Cr in 2009-10 a

compared to Rs 7669.04 Cr. last year representing an increase of 28%.

It posted a consolidated net profit of Rs 67.49 Cr, as against Rs 10.07 C

the year-ago period which is increased by 51.1% for the year.

The consolidated EBITDA for FY 2009-10 is Rs 952.23 Cr, compared t

Rs 609 Cr, in FY 2008-09.

BSE India share index

Accumulate

Khalida Raffath

[email protected]
http://retail-guru.com/tag/pantaloon-retail-india/http://retail-guru.com/tag/pantaloon-retail-india/


2/18


Key Financials

Y/E June (Rs Cr) FY 2009 FY 2010 FY 2011E FY 2012E FY 2013P FY 2014P FY 2015P

Net Sales 7669.04 9786.94 12196.12 15648.48 19500.54 23715.82 29717.59

% Change 31% 28% 25% 28% 25% 22% 25%

Net Income 10.10 67.49 206.64 92.04 315.96 378.19 187.76

Net Income Margin (%) 0.1% 0.7% 1.7% 0.6% 1.6% 1.6% 0.6%

EBITDA Margin (%) 7.8% 9.6% 9.5% 7.6% 9.2% 9.2% 7.4%

EPS (Rs) 0.63 3.44 10.54 4.69 16.11 19.29 9.57

P/E() 60.47 10.99 35.89 80.58 23.47 19.61 39.50

P/BV() 2.43 2.58 2.36 1.51 1.08 0.85 0.66

RoE (%) 0.004 0.023 0.066 0.019 0.046 0.043 0.017

RoCE (%) 0.05 0.07 0.07 0.05 0.07 0.07 0.06

EV/Sales () 1.07 0.84 0.67 0.53 0.42 0.35 0.28

EV/EBITDA 13.50 8.63 7.04 6.85 4.53 3.76 3.73

Synopsis:

Revenues

Consolidated Total revenue for the year 2009-10 was reported to Rs 9913 Cr, as compared to Rs

7764.8 Cr in FY 2008-09, representing a growth percentage of 27.7% because of the improving

economic scenario and consumption growth. The home retail business, which was languishing

with an 11 per cent fall in revenues the previous year, saw 12 per cent growth in FY10. The

value retail business maintained a steady 9.5 per cent growth and Lifestyle business saw a 14%

growth from 6% growth last year. However the net sales fell by 3% from last year to continued

year of global economic crisis. So, while calculating the estimated sales I have decreased net

sales by 3% on y-o-y basis.

Expenses

Consolidated Cost of sales increased from FY 2008-09 Rs 7764.8 Cr to Rs 6682.84 Cr

representing a growth of 30.33%. Depreciation costs increased from Rs 206.57 Cr last year to Rs

278.32 Cr present year and it will continue to remain higher due to the further expansion ofstores. Interest & Financial charges outflow has increased from Rs 418.54 Cr in 2008-09 to Rs

493.38 Cr in 2009-10. The increase in interest and financial charges is on account of HSRIL

Merger impact and additional borrowing for funding the growth plans of the company and in

future it can be controlled by better working capital management. For calculating the estimated

expenses I have increase it by 0.50% y-o-y basis because to bring in new customers and

acquiring larger share the company adopts new approaches to understand customers and for

advertising strategies.


3/18


Profitability

The consolidated EBIDTA for FY 2009-10 is Rs 952.24 Cr, compared to Rs 609 Cr in FY 2008-09.

The consolidated PAT for FY 2009-10 is Rs 76.35 Cr, compared to a loss of Rs 7.46 Cr in FY 2008-

09. Profit after minority interest increased from Rs 10.07 Cr in FY 2008-09 to Rs 67.49 Cr in FY

2009-10, representing an increase of 570%. With the opening up of FDI, foreign players alongwith new domestic players will enter in the near future, enhancing the modern retail market

which is currently 5%-7% penetrated, because of this the company will continue with an

upward trends in top-line as well as in bottom line in future also.

Forward Plans

(i) The company has planned to add around 2.5 million to 3.5 million square feet of

space during the forthcoming year and to maintain this pace for the next two to

three years.

(ii) The company has planned to complete the initiative of concentrating in pure

retail play and would be coming up with few more approvals to demerge / sale /transfer the other non-retail non-core businesses.

(iii)Pantaloon also announced plans to raise money through the sale of shares or

convertible warrants for funding its expansion and diversification plans.

Risk & Concerns

The external environment and economy poses the main risk to the company in the form of

another downturn. Also, increasing inflation is considered a threat which would increase overall

input cost, as well as, conversion costs. Currently, with the turnaround in the economy, rising

interest and people cost poses a business risk and needs to be monitored.

Valuation Methodology

DCF Valuation method has been used for arriving at the fair value of Pantaloon Retail India Pvt.

Ltd., as explained below:

Assumptions:

Risk Free Rate (Rf) of 8.1%, based on 10-year Government Bond Rate.

Beta () of 1.11, calculated using slope function.

Market Return Rate (Rm) of 2.6%, based on Sensex returns of 18-years period

from Sep-1992 to Dec-2010 CAGR.

Based on above and using Capital Asset Pricing Model (CAPM), I have arrived at a cost of Equity

of 14% and a WACC of 11.15%.


4/18


DCF Calculation

Rs in Crores 2011E 2012E 2013P 2014P 2015P

EBITDA 1166.93 1200.28 1815.53 2188.66 2203.00

EBIT 820.79 757.02 1263.93 1518.51 1364.12

(-) Cash Taxes @35% (287.28) (264.96) (442.38) (531.48) (477.44)

Tax Effected EBIT 533.51 492.07 821.56 987.03 886.68

(+) Depreciation & Amortization 346.14 443.25 551.60 670.15 838.88

(-) Capital Expenditure (700) (700) (700) (700) (700)

(+/-) Changes in net working Capital (795.87) (1079.81) (1353.86) (1327.03) (1785.28)

Unlevered Free Cash Flow (FCF) (616.22) (844.49) (680.70) (369.85) (759.72)

WACC@ 11.15%

NPV of Unlevered FCF @ 11.15% (2423.92)

EBITDA Multiple Method

Terminal Value Undiscounted Discounted Implied Perpetual Growth

Rate

EBITDA Multiple 6.00 13217.99 7.792.04 4%

8.50 18725.49 11038.72 6%

DCF Range(Implied Enterprise Value) 5368.12 8614.80

Equity Value 4636.00 7882.68

Implied Price Per Share 236.41 401.97

DDF Sensitivity Analysis

Terminal EBITDA Multiple

8.0x 9.0x 10.0x

WACC

9.0% 416.36 489.37 562.38

10.0% 393.53 463.28 533.04

11.0% 371.96 438.63 505.29


5/18


Financial Statement

Pantaloon Retail (India) LimitedFinancial Summary

(All figures in Crores, except per share data)

Actual Estimated Projected

Fiscal 2008 2009 2010 2011E 2012E 2013P 2014P 2015P

Total Revenue 5,866.50 7,764.80 9,913.00 12,328.48 15,787.46 19,646.47 23,869.05 29,878.48

% Growth 64.5% 32.4% 27.7% 24.4% 28.1% 24.4% 21.5% 25.2%

Gross Profit 1,957.20 2,637.55 3,230.16 4,061.56 5,403.68 6,428.37 7,912.27 10,307.52

% Growth 63.0% 34.8% 22.5% 25.7% 33.0% 19.0% 23.1% 30.3%

Gross Profit Margin 33.4% 34.0% 32.6% 32.9% 34.2% 32.7% 33.1% 34.5%EBITDA 326.49 609.00 952.23 1,166.93 1,200.28 1,815.53 2,188.66 2,203.00

% Growth 43.4% 86.5% 56.4% 22.5% 2.9% 51.3% 20.6% 0.7%

EBITDA Margin 5.6% 7.8% 9.6% 9.5% 7.6% 9.2% 9.2% 7.4%

EBIT 208.28 402.43 673.91 820.79 757.02 1,263.93 1,518.51 1,364.12

% Growth 16.1% 93.2% 67.5% 21.8% (7.8)% 67.0% 20.1% (10.2)%

EBIT Margin 3.6% 5.2% 6.8% 6.7% 4.8% 6.4% 6.4% 4.6%

Net Income#

21.93 10.07 67.49 206.64 92.04 315.96 378.19 187.76

% Growth (38.3)% (54.1)% 570.2% 206.2% (55.5)% 243.3% 19.7% (50.4)%Net Income Margin 0.4% 0.1% 0.7% 1.7% 0.6% 1.6% 1.6% 0.6%

Diluted EPS 1.45 0.63 3.44 10.54 4.69 16.11 19.29 9.57

% Growth (43.7)% (56.9)% 450.2% 206.2% (55.5)% 243.3% 19.7% (50.4)%

Actual 2010

Rs %

Cash & Equivalents

(Closing bal.)

286.45 Total Debt / Total

Capitalization

89.8%

Total Debt / EBITDA 1.0x

Total Debt 660.79 0.6% Net Debt / EBITDA 0.7x

Minority Interest 318.30 29.2% S&P Bond Rating AA-

Total Stockholders'

Equity

110.75 10.2% Moody's Bond

Rating

Aa3

Total Capitalization 1,089.84 100.0% Fitch Ratings A-

Note: Fiscal year ends June 30 of the next year.


6/18


Pantaloon Retail (India) Limited

Income Statement

(All figures in crores, except per share data)


Fiscal 2009 2010 2011 2012 2013 2014 2015

Revenue

Net Sales 7,669.04 9,786.94 12,196.12 15,648.48 19,500.54 23,715.82 29,717.59

Other Income, net 95.76 126.06 132.36 138.98 145.93 153.23 160.89

Total Revenue 7,764.80 9,913.00 12,328.48 15,787.46 19,646.47 23,869.05 29,878.48

Cost of Sale(COGS) (5,127.25) (6,682.84) (8,266.92) (10,383.78) (13,218.10) (15,956.77) (19,570.96)

Gross Profit 2,637.55 3,230.16 4,061.56 5,403.68 6,428.37 7,912.27 10,307.52

Dep. & Amort. (206.57) (278.32) (346.14) (443.25) (551.60) (670.15) (838.88)

Operating, SG&A Exp. (2,028.55) (2,277.93) (2,894.63) (4,203.40) (4,612.84) (5,723.61) (8,104.52)

Operating Income (EBIT) 402.43 673.91 820.79 757.02 1,263.93 1,518.51 1,364.12

Interest Expense

(Finance charges)

(418.54) (493.38) (482.63) (594.98) (757.18) (915.79) (1,054.12)

Pre-Tax Income (16.11) 180.53 338.15 162.04 506.75 602.72 310.00

Income Taxes 10.25 (107.30) (118.35) (56.72) (177.36) (210.95) (108.50)

Earlier year's Income

tax

(0.30) 3.17 (3.17) (3.17) (3.17) (3.17) (3.17)

Share in loss of

associated co.

(5.84) (6.31) (6.31) (6.31) (6.31) (6.31) (6.31)

Goodwill written

back/written off

(1.08) - - - - - -

Profit on sale ofsubsidiary/joint venture

- - - - - - -

Prior period items (1.30) (0.05) (1.00) (1.00) (1.00) (1.00) (1.00)

Minority Interest 24.45 (2.55) (2.68) (2.81) (2.95) (3.10) (3.25)

Net Income 10.07 67.49 206.64 92.04 315.96 378.19 187.76

Diluted Shares O/S 16.10 19.61 19.61 19.61 19.61 19.61 19.61

Diluted Earnings per

Share

0.63 3.44 10.54 4.69 16.11 19.29 9.57

EBITDA 609.00 952.23 1,166.93 1,200.28 1,815.53 2,188.66 2,203.00

EBITDA Margin 8% 10% 9% 8% 9% 9% 7%


7/18



Balance Sheet(All figures in crores, except per share data)


Fiscal 2009 2010 2011 2012 2013 2014 2015

ASSETS

Current Assets

Cash & Equivalents 202.54 286.45 200.00 200.00 200.00 200.00 200.00

Sundry Debtors 306.61 391.43 487.79 625.86 779.93 948.52 1,188.56

Inventories 2,191.25 2,491.18 3,036.38 3,756.99 4,710.06 5,598.51 6,759.33

Loans & Advances 1,910.55 2,661.95 3,317.22 4,256.23 5,303.95 6,450.47 8,082.89

Other Current Assets 12.16 15.71 19.58 25.12 31.30 38.07 47.70

Total Current Assets 4,623.11 5,846.72 7,060.97 8,864.20 11,025.24 13,235.56 16,278.48

Net PPE 2,200.93 2,646.81 3,000.67 3,257.42 3,405.82 3,435.67 3,296.79

Capital work-in-progress 429.72 304.38 379.31 486.68 606.48 737.58 924.24

Investments 897.81 909.77 1,133.72 1,454.64 1,812.72 2,204.56 2,762.47

Other Assets and

Deferred Charges

2.49 - - - - - -

TOTAL ASSETS 8,154.06 9,707.68 11,574.67 14,062.95 16,850.26 19,613.37 23,261.98

LIABILITIES

Current Liabilities

Current Liabilities 1,351.94 1,970.63 2,455.72 3,150.87 3,926.49 4,775.25 5,983.73

Provisions 52.99 80.17 99.90 128.18 159.74 194.27 243.43

Total Current Liabilities 1,404.93 2,050.80 2,555.63 3,279.05 4,086.23 4,969.52 6,227.16

Long-Term Debt -

Secured loans

3,285.99 3,257.13 4,352.04 4,352.04 4,352.04 4,352.04 4,352.04

Unsecured Loans 572.27 1,094.91 1,094.91 1,094.91 1,094.91 1,094.91 1,094.91

Deferred Income Taxes& Other

4.02 110.17 110.17 110.17 110.17 110.17 110.17

Minority Interest 384.59 318.30 318.30 318.30 318.30 318.30 318.30

TOTAL LIABILITIES 4,246.87 4,780.51 5,875.42 5,875.42 5,875.42 5,875.42 5,875.42

SHAREHOLDERS' EQUITY

Common Stock - Share

capital

107.59 110.75 110.75 110.75 110.75 110.75 110.75

Share Application Money 44.96 16.42 16.42 16.42 16.42 16.42 16.42

Equity Warrants 22.88 122.88 122.88 122.88 122.88 122.88 122.88

Share capital (Pending

allotment)

- 64.66 - - - - -

Reserve & Surplus 2,326.83 2,561.66 2,893.57 4,658.42 6,638.56 8,518.38 10,909.35

TOTAL SHAREHOLDERS'

EQUITY

2,502.26 2,876.37 3,143.62 4,908.47 6,888.61 8,768.43 11,159.40

TOTAL LIABILITIES &

SHAREHOLDERS' EQUITY

8,154.06 9,707.68 11,574.67 14,062.94 16,850.26 19,613.37 23,261.98


8/18



Cash Flow Statement

(All figures in crores, except per share data)

Estimated Projected

Fiscal 2011 2012 2013 2014 2015Cash From Operating Activities:

Net Income 206.64 92.04 315.96 378.19 187.76

Plus: Depreciation & Amortization 346.14 443.25 551.60 670.15 838.88

Changes in Working Capital:

(Increase)/Decrease in Sundry Debtors (96.36) (138.08) (154.06) (168.59) (240.04)

(Increase)/Decrease in Inventories (545.20) (720.61) (953.07) (888.45) (1,160.82)

(Increase)/Decrease in Other Current Assets (3.87) (5.54) (6.18) (6.77) (9.63)

(Increase)/Decrease in Loans & Advances (655.27) (939.01) (1,047.72) (1,146.51) (1,632.42)

Increase/(Decrease) in Provisions 485.09 695.14 775.62 848.76 1,208.47

Increase/(Decrease) in Current Liabilities 19.73 28.28 31.55 34.53 49.16

Total Change in Working Capital (795.87) (1,079.81) (1,353.86) (1,327.03) (1,785.28)

Total Cash From Operating Activities (243.09) (544.52) (486.30) (278.69) (758.63)

Cash From Investing Activities:

(Increase)/Decrease in Capital work in

progress

74.93 107.37 119.80 131.10 186.66

(Increase)/Decrease in Investments (223.95) (320.92) (358.08) (391.84) (557.91)

(Increase)/Decrease in Capital Expenditures (700.00) (700.00) (700.00) (700.00) (700.00)

Total Cash From Investing Activities (849.02) (913.55) (938.28) (960.74) (1,071.25)

Cash From Financing Activities:

Issuance of Common Stock - - - - -Common Stock Dividends (15.69) (16.47) (17.30) (18.16) (19.07)

Net (Purchase) / Reissuance of Treasury

Stock

- - - - -

Cash Available / (Required) Before Debt (1,107.80) (1,474.55) (1,441.88) (1,257.59) (1,848.95)

Debt Borrowing / (Repayment) 1,021.35 1,474.55 1,441.88 1,257.59 1,848.95

Total Cash From Financing Activities 1,005.66 1,458.08 1,424.58 1,239.43 1,829.89

Beginning Cash Balance 286.45 200.00 200.00 200.00 200.00

Change in Cash (86.45) - - - -

Ending Cash Balance 200.00 200.00 200.00 200.00 200.00

Average Cash Balance 243.23 200.00 200.00 200.00 200.00


9/18


Financial Ratios


Financial Ratios

(All figures in crores, except per share data)Actual Estimated Projected

Fiscal 2009 2010 2011 2012 2013 2014 2015

Price Multiple

P/E Ratio 60.47 10.99 35.89 80.58 23.47 19.16 39.50

Price-to-Book Ratio 2.43 2.58 2.36 1.51 1.08 0.85 0.66

Price-to-Sales Ratio 0.79 0.76 0.61 0.47 0.38 0.31 0.25

Price-to- Cash Flow Ratio 10.00 7.79 6.36 6.18 4.09 3.39 3.37

Liquidity Analysis Ratios

Current Ratio 3.29 2.85 2.76 2.70 2.70 2.66 2.61

Quick Ratio 1.73 1.64 1.57 1.56 1.55 1.54 1.53

Net Working Capital Ratio 0.42 0.39 0.37 0.36 0.36 0.35 0.34

Profitability Analysis Ratios

Gross Profit Margin 0.34 0.33 0.33 0.34 0.33 0.33 0.34

Net Profit Margin 0.001 0.007 0.017 0.006 0.016 0.016 0.006

Return on Asset (ROA) 1.04 1.10 1.15 1.22 1.26 1.30 1.39

Return on Equity (ROE) 0.004 0.023 0.066 0.019 0.046 0.043 0.017

Return on Capital Employed

(ROCE)

0.05 0.07 0.07 0.05 0.07 0.07 0.06

Return on Investment (ROI) 0.50 0.75 0.80 0.58 0.77 0.76 0.55

Earnings Per Share (EPS) 0.63 3.44 10.54 4.69 16.11 19.29 9.57

Activity Analysis Ratios

Assets Turnover Ratio 1.04 1.10 1.15 1.22 1.26 1.30 1.39

Inventory Turnover Ratio 2.59 2.85 2.99 3.06 3.12 3.10 3.17


10/18


Capital Structure Analysis

Cost of Debt 0.11 0.11 0.09 0.11 0.14 0.17 0.19

Debt to Equity Ratio 1.70 1.66 1.87 1.20 0.85 0.67 0.53

Interest Coverage Ratio 0.96 1.37 1.70 1.27 1.67 1.66 1.29

Market Value

Market Cap 6089.02 7416.50 7416.50 7416.50 7416.50 7416.50 7416.50

Book value per share 155.42 146.68 160.31 250.30 351.28 447.14 569.07

Dividend Per share 0.60 0.80 0.80 0.84 0.88 0.93 0.97

Cash Flow Indicator

Operating cash flow to sales 0.09 0.05 0.02 0.03 0.02 0.01 0.03

Growth Percentages

Total Operating Income 0.93 0.67 0.22 (0.08) 0.67 0.20 (0.10)

EBITDA 0.87 0.56 0.23 0.03 0.51 0.21 0.01

EBIT 0.93 0.67 0.22 (0.08) 0.67 0.20 (0.10)

Net Profit (0.54) 5.70 2.06 (0.55) 2.43 0.20 (0.50)

Sales 0.31 0.28 0.25 0.28 0.25 0.22 0.25

Dividend Policy Ratio

Dividend Yield 0.002 0.002 0.002 0.002 0.003 0.003 0.003

Dividend Payout Ratio 0.96 0.23 0.08 0.18 0.05 0.05 0.10


11/18


Graphs

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

-

5,000.00

10,000.00

15,000.00

20,000.00

25,000.00

30,000.00

35,000.00

Percent

RsCr.

Year

Total Revenue Growth Trends

Total Revene % Growth

31.5%

32.0%

32.5%

33.0%

33.5%

34.0%

34.5%

35.0%

-

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

2008 2009 2010 2011E 2012E 2013P 2014P 2015P

Percentage

RsCr.

Year

Gross Profit and Gross Profit Margin Trends

Gross Profit Gross Profit Margin


12/18


0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

-

500.00

1,000.00

1,500.00

2,000.00

2,500.00

2008 2009 2010 2011E 2012E 2013P 2014P 2015P

Percentage

RsCr.

Years

EBITDA AND EBITDA Margin Trends

EBITDA EBITDA Margin

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

-

200.00

400.00

600.00

800.00

1,000.00

1,200.00

1,400.00

1,600.00

2008 2009 2010 2011E 2012E 2013P 2014P 2015P

Percentage

RsCr.

Year

EBIT & EBIT Margin Trends

EBIT EBIT Margin


13/18


Peer Group Comparison

(All figures in Rs cr, except per share data)

Name of the Cos CMP (Rs.) Market Cap. P/E()Face

ValueSales Volume

Pantaloon Retail India 378.20 7416.50 10.99 2.00 9786.94 132303

Vishal Retail Ltd. 32.50 72.80 -0.17 10.00 269.42 10014Shopper Stop Ltd. 768.00 2833.92 51.92 10.00 454.52 10185

Trent Ltd 945.40 2741.66 47.10 10.00 182.80 1500

Provogue (India) Ltd 64.25 735.02 25.73 2.00 142.58 41197

0.0%

0.2%

0.4%

0.6%

0.8%1.0%

1.2%

1.4%

1.6%

1.8%

-

50.00

100.00

150.00

200.00

250.00

300.00

350.00

400.00

Percent

age

RsCr

.

Year

Net Income & Net Income Margin Trend

Net Income Net Income Margin


14/18


Company Overview

Pantaloon Retail (India) Limited, is Indias leading

retailer that operates multiple retail formats in both

the value and lifestyle segment of the Indian

consumer market. Headquartered in Mumbai(Bombay), the company operates over 16 million

square feet of retail space, has over 1000 stores

across 73 cities in India and employs over 30,000

people.

The companys leading formats include Pantaloons, a

chain of fashion outlets, Big Bazaar, a uniquely Indian

hypermarket chain, Food Bazaar, a supermarket

chain, blends the look, touch and feel of

Indian bazaars with aspects of modern retail like choice, convenience and quality and Central, a

chain of seamless destination malls. Some of its other formats include Brand Factory, Blue Sky,

aLL, Top 10 and Star and Sitara. The company also operates an online portal, futurebazaar.com.

The company operates120 Big Bazaar stores, 170 Food Bazaar stores, among other formats, in

over 70citiesacross the country, covering an operational retail space of over 6 million square

feet. As a focussed entity driving the growth of the group's value retail business, Future Value

Retail Limited will continue to deliver more value to its customers, supply partners,

stakeholders and communities across the country and shape the growth of modern retail in

India.Pantaloon Retail is the flagship company of Future Group, a business group catering to

the entire Indian consumption space.

During the fiscal year ended June 30, 2010 (fiscal 2010), the Company launched Sach

toothpaste and Ektaa. During fiscal 2010, its operational store space increased to 13.25 million

square feet, which includes around two million square feet of home business. During fiscal2010, the Company acquired the South African retailer Shoprites India business.

The company was formerly known as Pantaloon Fashions (India) Limited and changed its name

to Pantaloon Retail (India) Limited in July 1999. Pantaloon Retail (India) Limited was

incorporated in 1987 and is headquartered in Mumbai, India.

PantaloonRetail India Ltd.

Lifestyleretailing

Pantaloons Central Fashion Station ALL Mela

Value Retailing

Big Bazaar Food Bazaar

EntertainmentLeisure &

Sports

44.78

24.4

18.53

12.29

share holding Pattern (%)

As on Sep'10

Promoters

FII

DII

Others

Pantaloon Retail Operations
http://www.futurebazaar.com/http://www.futurebazaar.com/http://www.futurebazaar.com/


15/18


Retail Industry Overview

The Indian retail industry is the fifth largest in the world.

Comprising of organized and unorganized sectors, Indiaretail industry is one of the fastest growing industries in

India, especially over the last few years. Though initially,

the retail industry in India was mostly unorganized,

however with the change of tastes and preferences of

the consumers, the industry is getting more popular

these days and getting organized as well. With growing

market demand, the industry is expected to grow at a

pace of 25-30% annually. The India retail industry is

expected to grow from Rs. 35,000 cr. in 2004-05 to Rs.

109,000 cr. by the year 2010.

Growth of Indian Retail

According to the 8th Annual Global Retail Development

Index (GRDI) of AT Kearney, India retail industry is the

most promising emerging market for investment. In

2007, the retail trade in India had a share of 8-10% in the

GDP (Gross Domestic Product) of the country. In 2009, it

rose to 12%. It is also expected to reach 22% by 2010.

According to a report by Northbride Capita, the India

retail industry is expected to grow to US$ 700 billion by

2010. By the same time, the organized sector will be 20%

of the total market share. It can be mentioned here that,the share of organized sector in 2007 was 7.5% of the

total retail market.

Challenges facing Indian retail industry

The tax structure in India favors small retail

business

Lack of adequate infrastructure facilities

High cost of real estate

Dissimilarity in consumer groups

Restrictions in Foreign Direct Investment Shortage of retail study options

Shortage of trained manpower

Low retail management skill
http://3.bp.blogspot.com/_1pKvii0Z9Cs/RnoUNuBUKVI/AAAAAAAAAr0/Qy6nWSQgpck/s1600-h/percentageshare.gifhttp://4.bp.blogspot.com/_1pKvii0Z9Cs/RnoUo-BUKXI/AAAAAAAAAsE/qRVFAuHn_8g/s1600-h/urban+rural+share.gifhttp://3.bp.blogspot.com/_1pKvii0Z9Cs/RnoUNuBUKWI/AAAAAAAAAr8/klSKm-jML7s/s1600-h/rura+urban+share.gif


16/18


The Future

The retail industry in India is currently growing at a great pace and is expected to go up to US$

833 billion by the year 2013. It is further expected to reach US$ 1.3 trillion by the year 2018 at a

CAGR of 10%. As the country has got a high growth rates, the consumer spending has also gone

up and is also expected to go up further in the future. In the last four year, the consumerspending in India climbed up to 75%. As a result, the India retail industry is expected to grow

further in the future days. By the year 2013, the organized sector is also expected to grow at a

CAGR of 40%.

Format-wise urban investment in retail expected in next 5 years

Format % Share

Hypermarket 38%

Supermarket 28%

Specialty Store 22%Cash N Carry 16%

Department Store 2%

Format Expected By 2011

Format Hypermarket Supermarket

Specialty

&

Dept.Store

Cash N Carry Total

New Retail Space(Min. Sq. Ft.)

218 79 93 66 455

Retail Space/Floor

Staff400 300 400 600 1700

No. of Front end Staff 544 264 132 110 1149


17/18


Investment Opinion

Pantaloon retail has a strong retail presence across India with 16 million retail space and it isexpected to grow by more 2.5 million to 3.5 million square feet of space during the forthcoming

year. The company enjoys a strategic advantage over its competitors in terms of its strategy to

focus on value retail, understanding of the consumer mindset, sourcing capabilities and

presence across all formats. I prefer the company because it has performed well in spite of the

tough economic conditions which have severely impacted its peers. PRIL is capable of enjoying

profits at the time when its competitors were reeling under sales and margin pressure. Thus, I

expect the company to grow further. Due to the correction in the stock markets, PRIL is

available at an attractive market price. Backed by its expansion plans and an improving Industry

conditions, I expect the stock to perform well in the coming years. I recommend an

Accumulate on the stockwith a Target Price of Rs 401.97.

Rating (Returns)

BUY (> 15%) Accumulate (5% to 15%) Neutral (-5% to 5%)

Reduce (-5% to 15%) Sell (< - 15%)


18/18


Disclaimer:

This document is solely for the personal information of the intended recipient and must not be

exceptionally used as the basis for any investment decision. Nothing in this document should

be construed as investment, Legal, taxation or financial advice. This report is not soliciting any

action based upon it. Each recipient of this document should make necessary investigations asthey consider important to arrive at an independent evaluation of an investment in the

securities of the companies referred to in this document (including the merits and risks

involved). This report has been made based on information that I consider reliable and are

publicly available but I do not state that it is accurate or complete and it should not be solely

relied upon such, as this document is for. I shall not be in any way held responsible for any loss

or damage that may arise to any person from any inadvertent error in the information

contained in this report. Accordingly, I cannot testify, nor make any representation or

warranty, express or implied, to the accuracy, contents or data contained within this document.

This document is being supplied to you solely for your information, and its contents,

information or data may not be reproduced, redistributed or passed on, directly or indirectly.

Documents

Pantaloon Retail _Report