Knowledge Series 6

(R)Evolution! (R)Evolution!

Shopping has never been the same ever since the emergence of

the neighbourhood super market. The entry of organised players in

the retail market has elevated the tedium of purchasing monthly

provisions to a pleasurable family experience. With the government

throwing open the debate on FDI in single-brand retail, DhanBank

PRU revisits the issue and the players.

Window Shopping

I ndia is a young country with one-third of its population below the age of 15, which bodes well for the country‘s

future growth. Besides, the number of young families and new households is also growing rapidly. This, along

with the rising middle class, augurs well for the development of modern retail distribution.

The Indian retail sector, one of the largest in the world and rapidly growing, has attracted much interest in recent

times. The traditional friendly neighbourhood stores are in the process of modernising. The sector is one of the

world‘s most fragmented -- the top five retailers hold only 2% of the marketshare and there are very few major

retail chains.

However, the retail business sector is undergoing

consolidation, as Indian companies, recognizing

its huge potential, are making sizeable invest-

ments.

While for a long time FDI regulations had tied

down foreign players from plucking this low

hanging fruit, in 2006 the gates were opened for

them in the single-brand and cash & carry whole-

sale segments (explained later in this report). The

global players, however, are yet to gain entry into

multi-brand retail.

Most Indian players entered this market only in

the past five years. However, its fragmented na-

ture encouraged them to diversify into a variety

of retail channels – from groceries to electronics

to clothing to home improvement stores -- over a

mere two-year span between 2006 and 2008.

The arrival of organised players in the retail scene

was marked by optimism, experimentation and a

certain lack of experience. As a result, ambitious plans

laid out by some big names -- such as the Reliance

Group -- did not particularly meet with spectacular suc-

cess. Reliance Retail, which looked to launch 4,000 outlets by 2010, today has less than a quarter of that number.

When the global economic crisis washed up on the Indian shores, some other players pulled down their shutters.

For instance, Subhiksha, earlier one of the top five retail majors, closed down all its 1,600 stores in 2008-09.

The next few years may see a lot of readjustment in the market, with some players -- burdened with debt and

stretched too thin due to over expansion -- slipping out of the market (Delhi-based Vishal Megamart, for instance,

is talking to two buyers for separately selling its retail and cash-and-carry businesses) even as new ones enter with

full steam.

However, it seems likely that the ones which will succeed will most certainly be those with deep pockets and, also,

perhaps with the financial backing of a larger parent company. The reason is simple: the sector involves a gesta-

tion period of a few years before an entity can turn profitable.

Old World Images

The Shape Of The Beast

T he $545-billion (2009-10) Indian retail sector – broadly categorised as unorganized and organised -- has

grown at a CAGR of 9% over the past five years, according to a Deloitte-Planet Retail report. Organised re-

tail accounts for a mere 4-5% of this pie, with the rest contributed by the unorganised segment.

Retailers Association of India (RAI), the apex body of organised retailers, pegged the organised segment at ap-

proximately $21 billion, growing by 20% in the September quarter (Q2) of FY10. As per a McKinsey report, the

organised sector‘s market share is expected to grow to 14-18% of the total market by 2015. Technopak, a consul-

tancy firm, has estimated that the segment will swell to nearly $80 billion by 2015.

The retail sector in India is, however, overwhelmingly dominated by unorganised players, who account for 95% of

total sales. The unorganised sector com-

prises largely of traditional mom-and-pop

stores -- kirana stores, as they are called

in large parts of India -- owner-manned

general grocery stores, chemists, foot-

wear shops, apparel shops, paan and

beedi vendors, hand-cart hawkers, pave-

ment vendors, etc.

Organised retail usually involves a chain

of outlets in various locations, all owned

or franchised by a central entity, or even

a single large store, a uniform and stan-

dardized format being their main charac-

teristic.

In India, the unorganised retail segment

is represented by close to 15 million individual outlets, while the organised sector has seen the emergence of big

domestic players such as Pantaloon‘s, Shopper‘s Stop, Trent and Reliance Retail, and international biggies such as

Wal-Mart (in JV with Bharti Retail), Carrefour and Metro in the cash-and-carry segment, while Tommy Hilfiger

and Gucci, among others, are prominent players in the single-brand segment.

Besides, a few players have been around for some time now in regional markets and niche segments. For instance,

the Nilgiris food and bakery chain in south India and the Kerala-based Varkey‘s supermarkets. Archies, the popu-

lar gift and greeting card seller that began operations in the 1990s, now plans to expand its footprint by adding 30-

40 stores in 2010-11. Currently, it has 170 stores across whole of India.

Regulatory Scenario

The retail sector has not been conferred an industry status till now. Hence, there are no specific rules and regula-

tions governing the sector. However, there are certain laws pertaining to the establishment of stores and conduct of

activities, which retailers need to follow. The following are some of the legislations that regulate the sector:

The Shop and Establishments Act

The Standards of Weights and Measures Act

The Provisions of the Contract Labor (Regulations and Abolition) Act

The Income Tax Act

The Customs Act

The Companies Act

Observers point out that the regulatory environment is not very conducive to the growth of organised modern re-

New Age Experience

tailing in India. In addition to the above laws:

Retail companies have to follow certain regional rules and regulations on the basis of their stores‘ loca-

tion.; different states have different laws to regulate the retail trade.

Land conversion process is complex.

Licensing is cumbersome.

Taxes are different from state to state on goods movement. For example, some states levy entry tax; a few

levy exit taxes; there is the central sales tax (CST) on inter-state sales and value added tax (VAT) on dif-

ferent products.

For Multi-National Companies

Before 1996, there were no specific restrictions on entry of foreign retailers into the Indian market. But in1997, it

was decided to prohibit FDI in retailing. The current scenario as per FDI is as follows:

In 1997, 100% FDI was allowed in the wholesale cash-and-carry trade, under the government approval

route. In 2006, however, it was brought under the automatic route. During the decade -- April 2000 to

March 2010 -- FDI inflows of $1.779 billion were received in the sector, comprising 1.54% of total FDI

inflows received. International players such as Wal-Mart, Metro, Tesco, and Carrefour are already pre-

sent in this segment.

In 2006, FDI of up to 51% in single-brand retailing was permitted. Of the 94 proposals received since

then, 57 had been approved till May 2010. FDI worth $194.69 million flowed in during the four-year

period -- April 2006 and March 2010 -- comprising 0.21% of total FDI inflows in that period. The single-

brand retail outlets mainly pertain to high-end products and serve the ‗brand conscious‘ customers.

Hence, this target segment is different from the one catered to by the neighbourhood kirana stores. Under

this segment, big brands such as Gucci, Nike and Tommy Hilfiger, among others, have made their pres-

ence felt in the market.

There are some single-brand MNC retailers who do not make any equity investments but opt for the fran-

chisee route. Under this method, they provide all the basic inputs — such as, training, shop décor, service

standards, accounting software and sometimes even the management processes. The MNCs then allow

the Indian partner to invest in the fixed assets and enter into a revenue sharing arrangement with the fran-

chisee. In addition, the MNCs might also charge some other fees, such as royalty or brand fees. McDon-

ald‘s is a prime example of this route.

India Retail Ratings

D espite regulatory hurdles, India‘s rating as a destination for retail majors has remained pretty high for the

past few years. In fact, it has been ranked as the most attractive among 30 emerging markets for retail in-

vestments four times in the past seven years, as per AT Kearney‘s Global Retail Development Index (GRDI).

According to GRDI 2009: “India’s largely un-modernised retail sector remained attractive to both domestic

and international retailers, in spite of government regulations that prevent 100% foreign ownership of retail

stores. Overall…the country risk is low and the market potential is still very high, making it the most attractive

option for growth.”

India’s Retail Business Environment

High population density in the metropolitan cities and Tier-1 towns has been driving geographic penetration of

organised retail. While the situation in the segment is highly dynamic and ever changing, currently retail penetra-

tion is the highest in the southern states, reducing as one move towards the west, north and the east.

Retail companies have broadly followed three routes to enter the market:

Acquisition: It gives a jump-start, using the springboard of fixed assets, known income streams, experi-

enced manpower and infrastructure.

JVs: Preferred by companies seeking

foreign collaboration for technical

know-how, assistance in back-end op-

erations and future export opportunities.

Greenfield investment

Some companies have also followed a mixture

of acquisition and JVs for easier and faster mar-

ket access. There are basically two segments in

which retail companies have positioned them-

selves under the multiple retail format:

Lifestyle retailing: Involves lifestyle-

oriented products such as fashion ap-

parel, high-end consumer durables,

home décor, etc. However, some com-

panies consider home décor a separate segment called ‗home retailing‘.

Value retailing: It is related to pricing strategy — that is, discount stores, a form of value retail. They

deal in a variety of goods, ranging from food articles, household durables and electrical appliances to

apparel.

India‘s organised retail segment is dominated by few major players.

Pantaloon: Pantaloon Retail (PRIL), founded by Kishore Biyani in 1987, is the largest player in the retail sector

and is present in both lifestyle as well value retailing segments. It has marked its presence at almost all price

points, forming strategic JVs and subsidiaries to cater to all age-groups and offering all product categories under

multiple retail formats.

Effective January 1, 2010, PRIL demerged its value retailing division into its wholly-owned subsidiary, Future

Value Retail, to unlock value for its shareholders and increase its focus on individual retail segments. Excluding

Future Value Retail, PRIL‘s turnover touched Rs 602.1 crore for the March 2010 quarter. It had 10.9 million

square feet (mn sq ft) of retail space and more than 891 stores under its wings.

Pick ‘N’ Choose

Shopper’s Stop: A lifestyle retailer, this venture, run by the C K Raheja wing of the K Raheja family, focused on

the luxury segment, particularly high opportunity segments. This includes home improvement through ‗Home

Stop‘, infant and mothers-to-be through Mothercare (a franchise with Mothercare plc), cosmetics and beauty care

through M A C, Clinique (a retail agreement with Estee Lauder) and Arcelia, books and music through Crossword

and airport retailing through a JV with Switzerland‘s Nuance.

In June 2010, Hypercity Retail became its subsidiary when it acquired 32% stake in it, bringing its total equity

holding to 51%. The company currently operates 1.89 million sq ft of space. The company had a conversion ratio

of 29% and a sales turnover of Rs 378.3 crore in the quarter ending March 2010.

Vishal Retail: Promoted by Ram Chandra Aggarwal, it operates in the value retailing category, focusing mainly

on tier-II and III cities. It posted a sales turnover of Rs 254.6 crore with losses of Rs 168.3 crore. Huge expan-

sions, financed by debt, put the company in a spot. Due to the slowdown, which resulted in falling sales, its inven-

tory piled up and financing costs rose, Vishal Retail was pulled into the red. Bankrupt, it finally got a restructuring

package from Texas Pacific Group, which has agreed to infuse Rs 500 crore into the retailer on the condition that

it will transfer all its fixed assets into a special purpose vehicle owned by TPG. A private equity player, TPG plans

to run Vishal Retail as a wholesale cash-and-carry entity, since present regulations don‘t allow FDI in multi-brand

retail. Vishal is also believed to be talking to a number of companies for selling its retail operations separately.

Koutons Retail: It is an integrated retail player which owns the Koutons and Charlie Outlaw brands. The com-

pany had 727 Koutons stores and 647 Charlie Outlaw stores, with total retail operations space at 1.4 million sq ft.

Its sales turnover for Q4 FY10 was Rs 386.04 crore. It targets the middle and higher end segments through its

Some Organised & Unorganised Formats In India

Retail Format Description Example

Mom-and-Pop Stores Family-owned businesses catering to neighbour-

hood; small, individually-run and handled Kirana stores

Category Killers Small specialty stores expanded to offer a range

of products in the same category

Electronics ; Sports

goods

Department Stores

General merchandise retailers offering various

kinds of quality products and services; don’t offer

full service category products

Shopper's Stop, Life-

style, Westside

Malls

Largest form of retail formats; provide ideal shop-

ping expereience by providing a mix of products

and services, food and entertainement under one

roof

Inorbit, Oberoi, Sa-

hara, DLF

Specialty Stores Retails chains catering to specific categories and

provide deep assortment in them

RPG's Music World,

Crossword

Discount Stores

Stores or factory outlets that provide discount on

MRP items; focus is on mass selling and reaching

economies of scale or selling left-over stock after

season is over

Arvind Brand's Mega-

mart

Hypermarkets/

Supermarkets

Large self-service outlets offering a variety of

categories and with deep assortments Big Bazaar, Hypercity

Convenience Stores

Small stores located near residential areas; open

for extended period of the day; limited variety of

stock and convenience products; prices slightly

higher due to convenience given to customers

More, Big Apple, Spin-

ach

E-tailers Online buying and selling facility of products via

internet

Amazon.com, fab-

mart.com, rediffshop-

ping.com

Vending

Newer format; smaller products such as bever-

ages and snacks can be bought through vending

machines

Installed in malls,

shopping complex,

airports, etc

stores and the fashion conscious young generation through its Charlie Outlaw stores. It has a strong presence in

northern India and is expanding now in the west and south.

Trent: Promoted by the Tata group, Trent is present in lifestyle retailing with Westside, value retailing with Star

India Bazaar and speciality retailing with Landmark Bookstore. One distinctive feature of Trent is that it offers all

its products under its own brand names such Westside, Trent, SRC, Richmond and Sassy. It posted sales turnover

of Rs 162.5 crore for the quarter ending March 2010.

Financial Performance

Since the industry is highly fragmented, only some players‘ performances have been taken into account to gauge

the sector‘s health. The organised retail sector has performed moderately. However, a notable point is that while

players have done exceptionally (Pantaloons for instance) others (such as Vishal Retail) have been major disap-

pointments.

Pantaloon Retail, the largest organised player in India, influences the sector‘s overall performance to a great ex-

tent. On January 1, 2010, it demerged its value retailing division, comprising Big Bazaar and Food Bazaar, into a

wholly-owned subsidiary ―Future Value Retail‖. But as of now, the results include this division, which contributes

around 55% to the total revenues of Pantaloon.

Financial Performance Annual (Rs crore)

Retailers

Mar

2010 YoY

(%)

Mar

2010 Growth

FY-o-FY

(%)

Mar

2010 Growth

FY-o-FY

(%)

Mar

2010

Mar

2010 Growth

FY-o-FY

(%) Income Net

sales Interest Tax

Net

profit

Pantaloon 6348 26 6342 26 318.2 72 75 141 12

Shopper's

Stop 1410 11 1408 11 18.7 -6 15 50 179

Vishal Retail 1342 -3 1106 -16 89.8 -7 0 -415 -339

Rei Six Ten 691 -17 691 -17 0.1 17 15 26 17

Brandhouse 660 19 658 19 19.2 118 16 16 21

Trent 621 14 588 14 6.1 362 10 40 50

Store One 19 -83 17 -84 18 27 0 -51 43

Some Annual Balance-Sheet Numbers (Rs Cr)

Retailers

Mar ’09 Mar ’10 Mar ’09 Mar ’10 Mar ’09 Mar ’10

Paid up

capital

Paid up

capital Reserves Reserves Borrowings Borrowings

Pantaloon Retail 31.86 38.06 1751.5 2211.47 2255.04 2873.84

Shopper'S Stop 34.87 34.91 198.22 243.26 207.76 222.13

Vishal Retail 22.4 22.4 154.28 -255.55 762.35 730

Rei Six Ten Retail 28.73 28.73 28.95 52.03 3.75 NA

Brandhouse Retails 53.6 53.6 58.42 71.24 101.55 187.58

Trent 19.53 20.04 587.23 613.47 165.55 250.52

Store One Retail India 20 20 -168.3 -219.5 192.28 NA

Large and mid-size retail companies reported healthy growth in sales for the March quarter of FY10, mainly

driven by a revival in the economy that led to higher consumer spending.

Most retailers are carrying out expansion by taking higher amounts of debt. Some, such as Subhiksha and Vishal

Retail, faced huge problems because of being over-leveraged, and not being able to meet even the financing costs.

Vishal Retail succumbed to its debt-led expansion drive. Its operations could not sustain during the slowdown,

Also, its scale of operations became too big for its management to handle, causing its collapse. It had a huge debt

of Rs 730 crore at the end of FY10.

With such high debt-equity ratios for most retailers, it is important to have the

financial backing of larger parent company. The stress should be on more effi-

cient operations and cornering a larger market share, which will enable them to

reduce prices even as economies of scale and efficiency benefit them.

The retail associations have been lobbying for industry status. Recently, indus-

try lobby Assocham supported this demand by submitting a note to the minis-

tries of commerce & industry, consumer affairs and finance, stating that this

would be first step towards reforming the sector. It also emphasised that the

government should treat this as a thrust area (like food processing) as it has

forward and backward linkages. It provides employment to a large section of

the country.

Getting industry status would lead to:

an increasing in the share of organised retail in India

more fiscal incentives for investment in this high potential sector

availability to easier finance facilities

establishment of insurance norms for the sector

easier approvals and clearances to start businesses and branches

Benefits of Organised Retail

Growth of organised retail could accrue many benefits for India, mainly in the following categories:

Increased productivity:

May add $3-5 billion in GDP growth over next five years

May raise productivity of factors of production and growth by a substantial amount

Efficiency:

Will make supply chains efficient, leading to lesser wastage

Could increase farmers‘ income through elimination of middle-men and efficient transfer of

goods, leading to improved pricing

Reduced prices for consumers:

Could absorb some part of total inflation

Will lead to lower prices for consumers

Higher tax contribution of retail:

More retail sales through organised channels will lead to higher tax contribution

Increase in formal employment:

Will increase job creation in the formal retail sector

Will add a larger number of back-end jobs

Additionally:

Investment and innovation in technology

Manpower and skill development

Greater sourcing from India

Could result in improved agricultural practices and productivity

Spur investment in supply chain infrastructure, such as warehouses and cold chains

Efficiency in small and medium enterprises

Growth in market size

SWOT Analysis

Strengths

Demographically, India is the second largest nation in the world, with over 1.2 billion people, giving the

Indian retail segment a definite edge.

Democracy provides a stable economic and social environment, putting international players at ease.

The average 7% GDP growth for many years now has fuelled prosperity and consumerism.

With over 30% of the population below 15 years of age, the country‘s future holds huge promise. The

consumer market encompasses over 400 million people with rising disposable incomes.

Populations shifts towards urban areas, income shifts towards higher income classes, and increasing in-

comes in the hands of a younger population with lesser dependencies. All these factors point towards

more income availability for spending rather than savings and investment.

Low labour costs and high number of English speaking people.

Changing consumer preferences, shopping habits, and lifestyle.

Easy credit facility and plastic card revolution is increasing the purchasing power, particularly of the

younger generations.

Greater availability of quality retail area.

Weaknesses

There are many policy-related issues:

No industry status.

An annoying mesh of licences, permits and registration requirements to start business.

Non-transparent, monopolistic nature of State Agricultural Produce Marketing Committee Act.

Lack of investment in logistics, leading to inefficient market mechanism.

Lacks requisite storage infrastructure which leads to loss of perishable farm produce, especially fruits

vegetables, worth up to Rs 1 lakh crore per annum.

Intermediaries flout mandi rules, thanks to lack of price transparency, and dominate the value chain. In-

dian farmers realise only one-third of the price paid by the final consumer, against two-third received by

farmers in countries with higher share of organised retail.

Public procurement and public distribution system appear inefficient. Yet, the bill on food subsidies

keeps rising even as food price inflation remains a concern. Absence of ‗farm-to-fork‘ retail supply sys-

tem has led to the final consumer paying a premium during shortages as also for wastage.

Inadequate manpower

Lack of trained employees at all levels.

Stringent employment and industry laws.

Taxation hindrances:

VAT and multiple tax levies.

Inconsistent octroi and entry tax structure.

Presence of large grey market.

Lack of basic infrastructure involving power, transport and communication creates impediments for retail

operations across a vast geographical spread.

Opportunities

India was ranked as the most attractive market for global retailers, as per the AT Kearney‘s Global Retail

Development Index in 2009.

Only 5% of the sector is tapped, implying a huge opportunity for growth.

India enjoys locational advantage, as it shares its borders with six countries. This is besides its maritime

location at the heart of one of the world‘s most important trade routes that traverses the Indian Ocean.

With an embryonic movement towards a common south Asian market, a modern retail sector will prepare

India better for such a future.

Retail sector in rural India is almost untouched, presenting tremendous opportunity,

The reform-oriented Central government may eventually garner support to change FDI laws.

Threats

The small trader community -- large in number and a huge political constituency – could trip plans.

Violent attacks on large stores by opponents (and alleged supporters of small scale retailers) have led to

big players scrapping plans to roll out hypermarkets. Instead, they have opted for smaller chains of

smaller stores in multiple formats. Despite all this, the number of modern stores has increased quickly.

Price of land and lease rentals are high while margins are low.

Foreigners are prohibited from land ownership.

With mega malls already becoming an integral part of the Indian urban landscape, commercial space

crunch may pose difficulties for retailers.

Recent Developments

On July 6, 2010, the department of industrial policy and promotion (DIPP) floated a discussion paper on FDI in

multi-brand retail. A sensitive topic, there have been long-standing issues around it. As expected, this paper has

spurred the debate on whether FDI in multi-brand retail should be allowed? And, if yes, on what conditions?

A section of small traders, middlemen and some political parties feels FDI in multi-brand retail will lead to 15

million small players facing competition from MNCs with deep pockets. Concerns have been raised around the

following:

Retail sector is the second largest employer in India

after agriculture. It employs 7.2% of total workforce

and provides jobs to 33.1 million people.

Opening up FDI in multi-brand retail will lead to un-

fair competition and ultimately lead to large-scale exit

of domestic retailers, mainly the small family man-

aged outlets. This may in turn lead to large scale dis-

placement of persons employed in this sector. Also,

the manufacturing sector is not growing at a pace,

sufficient enough to absorb these displaced people.

Indian retail sector, especially organised retail, is still

under-developed. Hence, it is important that the do-

mestic retail sector is allowed to grow and consolidate

first, before opening it to foreign investors.

However, an ICRIER study on the impact of organised retail-

ing on the unorganized sector, published in 2008, observed that

initially there may be some impact on the volume of business

and profit of the unorganised retailers in the vicinity of organ-

ised retailers, but this would weaken over time.

Secondly, there is no evidence to substantiate a decline in over-

all employment in the unorganised segment due to the entry of

organised players. The rate of closure of unorganised retail

shops was found to be 4.2% per annum, which is much lower than the comparable international trends. The clo-

sure rate due to competition from organized sector was found to be even lower at 1.7% per annum. Surprisingly, it

was found that unorganized retailers responded competitively through improved business practices and technology

upgrades. Also, it is still initial days and understanding the extent of organized retail‘s direct impact on the unor-

ganized sector is likely to take some more time.

The above clearly hints that the unorganised sector may have some problems initially, but in the long term, the

impact is almost negligible. Hence, the study looked at how FDI affects the other groups.

Consumers gained from organised retail on several grounds:

Overall consumer spending increased with entry of organised retail.

All income groups saved through organised retail purchases, but the lower income groups saved

more.

The profit earned by farmers on selling directly to organised retailers was about 60% higher than that

received from selling in the mandis.

Large manufacturers, on feeling the pinch of competition from organised retailers in the form of price and pay-

ment pressures, responded through building and reinforcing their brand strength, increasing their own retail pres-

ence, adopting small retailers, and setting up dedicated teams to deal with organised retailers. Small manufacturers

did not report any significant impact of organised retail.

Needed: Logistical Leap

The FDI Conundrum

T o drive growth, employment and economic prosperity in rural India, the agriculture sector needs well-

functioning markets. To provide dynamism and efficiency in the marketing system, large investments are

required for the development of post-harvest and cold-chain infrastructure nearer to the farmer‘s field. To fund this

investment, FDI in front-end retail is a must since it generates sufficient cash to spur investments. To ensure that

investment in organised retail works for India‘s benefit, global players should be mandated to bring in technical

know-how and management expertise.

FDI in organised retail also helps address the two basic customer concerns: cost and quality. It is now well recog-

nised that organized retail works towards stabilising prices and reducing inflation, which is achieved through di-

rect buying from farmers, removing supply chain inefficiencies to lower transit losses, improving storage capabili-

ties to control demand/supply mismatches, implementing better quality and safety standards and increasing proc-

essing of produce.

Having said this, it is also important to know that it will not be a cakewalk for organised retail players as they will

face growing challenges from the unorganised sector. As per the National Accounts Data, from Central Statistical

Organisation, the growth rate of private organised retail decelerated from 27% in 2005-06 to 15% in 2008-09,

while that of the private unorganised retail sector remained almost stable at 14.9% in 2008-09, from 15.6% in

2005-06.

This could be due to both competition from the unorganised retail and entry of other players. It is quite evident

that without filling up the gaps in value chain, organised retail sector can neither be profitable nor make any great

difference to the sector.

There is definitely a large requirement of funds for back-end infrastructure, which can be met by opening up the

sector to foreign investment. However, it can be done in a regulated and phased manner, and by ensuring that

small retailers are integrated into the value chain.

Outlook

The retail industry is expected to add a capacity of 17.04 mn sq ft in 2010-11, as per CMIE. The graph above

shows the investment trend in this sector which had slowed down from December 2008 till September 2009. How-

ever, it‘s looking up again as the consumer confidence is back, and corporates are finding the scenario favourable.

Forty one fresh projects were announced and 14 completed in the June 2010 quarter. Some of the new projects to

be completed in the near future are:

The largest project with an outlay of Rs 8,000 crore was announced by jewellery maker, Rajesh Exports.

It plans to scale up its stores pan-India, under the brand name ‗Shubh‘, to 325 from the existing 25. Of

these, it plans to complete 100 stores with an outlay of Rs 700 crore, by March 2011.

Globus Stores plans to add 74 stores to its network, with an investment of Rs 350 crore by December

2010.

Mantri Developers, a Bangalore-based realty major, announced two mall projects, one each in Chennai

and Hyderabad, and both require an outlay of Rs 700 crore each.

Pantaloon Retail plans to complete its ―Multi-location 10 Central Malls Project‖ with an investment out-

lay of Rs 250 crore by December 2010.

Reliance Retail too has announced two projects. One is a multi-location project in a tie-up with UK-based

toy retailer Hamleys, involving an investment of Rs 150 crore, and the other is a multi-location project in

50:50 JV with Italian sportwear brand Paul & Shark.

Provogue, a leading fashion apparel seller and brand, announced a multi-location retail outlet project to

set up 50 new stores, entailing an outlay of Rs 35 crore. It currently has 226 stores.

Most organised retailers are planning their expansion in the coming months. The retail sector is set for a boom and

the reasons are obvious: the India growth story is there for everybody to see, both consumer and corporate confi-

dence have returned with a bang and the investment outlook looks positive. The government is also considering

setting up a retail sector watchdog, hinting that it may give the sector its long due importance, perhaps even an

industry status, when the decision on FDI in the multi-brand retail is taken.

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