COMPANY ANALYSIS:

PANTALOON RETAIL (INDIA)

LIMITED

Industry Overview:
India is one of the largest emerging markets in the world with the second fastest
growing economy. However, the retail sector in India is still at a nascent stage but is
definitely showing growth trends. Retailing is one of the important sectors of an economy,
both in terms of contribution to GDP and share in the total employment. Indias retail sector
is estimated to reach US$ 833 billion by 2013 with a compound annual growth rate of 10%
which is quite fascinating. Retail sector of India contributes to about 22% of Indias GDP and
employs nearly 8% of the entire employable population.
India has emerged as the fifth most favourable destination for international retailers,
outpacing UAE, Russia, Indonesia and Saudi Arabia, according to A T Kearney's Global
Retail Development Index (GRDI) 2012. "India remains a high potential market with
accelerated retail growth of 15-20% expected over the next five years," highlighted the report
by A T Kearney.
Retail sector in India is divided into two types Organised and Un-organised Retail
with Organised Retail forming only 6% of the total retail industry in India. If we compare this
figure globally it is around 35% in Brazil, 55% in Malaysia and 85% in USA. Organised
Retailing refers to trading activities undertaken by licensed retailers i.e. those who are
registered for sales tax, income tax etc. these include corporate-backed hypermarkets and
retail chains, and also privately owned large retail businesses. Unorganised retailing, on the
other hand, refers to traditional formats of low-cost retailing like the local kirana shops,
owner manned general stores etc.

Investments:
-

International cash and carry chains in the retail sector plans to expand in India.
Waymart, the US$ 446 billion American retail giant, which operates cash and carry
outlets in India in a 50-50 per cent joint venture (JV) with the Bharti Group, expects to
open 12 to 15 wholesale outlets in 2012

According to a recent trend, retail companies such as Carrefour, IKEA, Tesco and WalMart are regularly sourcing well-priced, high-quality products for customers in Western
markets from India. Analysts estimate that these four retail majors together source
around US$ 3.5 billion-US$ 4 billion from India every year. "India continues to be an
important sourcing market," as per Wal-Mart

Some of the key Indian Retail issues which are a hindrance to its growth are:
-

Agri Produce Marketing Act (APMC) forces famers to sell at Specified Mandis through
authorized agents or aggregators. A retail outlet has to get licenses from APMC,
Municipal authority, and get NOC from Labor, Fire, Environment and various other
divisions which become a very tedious job.
Buying direct from farmers and contract farming are not allowed. Most farmers would
prefer to deal with organized retail as they get better prices, easy purchase process and
immediate payment terms etc.
Unlike USA, where customers are willing to drive longer distances and buy large
quantities, for Indian consumers proximity is very important.
Low productivity of labour
Long and inefficient supply chain.

However there is a huge potential for the organised retail sector in India due to the following
reasons:
-

Urbanization and growth of middle class

Increase in % of working women
Exposure to modern retail experience (Malls)
Increased demand for branded/Processed food
High growth in turnover

Hence it would definitely be profitable to take some policy measures and give a boost to this
emerging sector. One such measure which would have proved useful for the development of
this sector was to allow FDI in multi-brand retail which has now been put on a hold. Some of
the potential impact these measures could have on the retail sector are as follows:
-

Infusion of cash for cash intensive business

Infusion of technology and practices
Partnership with Indian players
Boost to Indian suppliers.

Some of the other actions that the government can take to help this sector grow can be in the
form of:
-

Amendment of the APMC Act

Implementation of Goods and Service Tax which would simplify taxation
Infrastructural development in forms of better road, infrastructure better distribution
facilities, facilities for cold storages etc.

Major Retailers in India:

Pantaloons Retail Limited

Reliance Retail Limited
Aditya Birla Retail Limited
Bharti Retail Limited
Tata Group
Spencers Retail Limited

Types of Organized retail formats:

Supermarkets & Convenience stores

Department Stores

Hypermarkets

Cash and carry

Specialty stores

Single brand Exclusive stores

Discount Stores/Factory outlets

SWOT Analysis of the Indian Retail Sector:

STRENGTHS:
-

Increasing demand driven by countrys young working population

rising disposable income
technology intensive industry
Major contributor to GDP
High potential

WEAKNESSES:
-

Shortage of quality retail space at affordable rates

Long and inefficient supply chain
Government restriction on FDI
Stringent labour laws.
Highly unorganised

OPPORTUNITIES:
-

Increase in the spending middle class population

Untapped rural markets
Upcoming international players
Infusion of capital and technology due to FDI

THREATS:
-

Indian taxation system favours small businesses

Competition among organized and unorganized sector
Poor monsoons and low GDP growth could affect consumer spending drastically.

PEST Analysis of the Retail Sector:

Political Factors:
-

FDI in multi brand retail still nor permitted

Some political parties are quite offensive towards the growth of organised sector to
protect small unorganised retailers
Tax structure is unfavourable. Implementation of Goods and Service Tax (GST) is still
pending

Economic Factors:
-

Increase in per capita income favourable for growth

Slowing growth in the last one year might prove a hindrance
High inflation holds a negative impact for the growth of this industry

Social Factors:
-

The majority of the Indian population is below is below 36 years of age which is the
major contributor to the growth of organised retail sector

Consumers today also look out for easy shopping which again is a positive factor for the
organised sector

Technological Factors:
-

Some of the technological factors contributing to the growth of retail sector are online
shopping, customer relationship management, supply chain management, online goods
and inventory tracking system etc.

Porters Five Force Analysis:

Threat of New Entrants:
-

FDI approval will result in rise of organised retail

Barriers to entry are low in this sector is low since mostly it is unorganised retail
Foreign entrants will have to comply with government regulations which acts as a
deterrent

Bargaining Power of Buyers:

-

Large number of customers, hence bargaining power is low

Bargaining Power of Suppliers:

-

High competition among suppliers, hence bargaining power is less

Low cost of switching suppliers

Threat of Substitutes:
-

Chances of shifting to other products is very high

A retailer has to keep multiple options of same product line
Consumers dont differentiate much between different alternatives, instead go which is
cheaper

Competition:
-

Cut throat competition since a kirana shop can be found in almost every locality
Entry of foreign players will increase the already high competition.

Pantaloon Retail (India) Limited

Pantaloon Retail (India) Limited is one of Indias leading retailers. It is part of the Future
Group which was founded by Mr Kishore Biyani. Future Group mainly operates in three
business areas Retail, Allied Services and Finance. Pantaloon Retail Limited serves its

customers in 85 cities and 60 rural locations across the country through over 15 million
square feet of retail space. The company has its headquarters in Mumbai and employs around
35000 people. The net increase in retail space during the year was 2.26million square feet,
taking the total operational space to 15.24 million square feet. The company also owns 65
warehouses spread across 3.6 million square feet of operational warehouse space.
The company operates in multiple retail formats in both value and lifestyle segment of the
Indian market. 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, Depot, Shoe Factory, Brand Factory, Blue Sky, Fashion Station, aLL, Top
10, mBazaar and Star and Sitara. The company also operates an online portal,
futurebazaar.com. A subsidiary company, Home Solutions Retail (India) Limited, operates
Home Town, a large-format home solutions store, Collection i, selling home furniture
products and E-Zone focussed on catering to the consumer electronics segment.

Company History:
The company was incorporate as Manz Wear Private Limited in 1987. The company was
converted into a Public Limited Company in the year 1991 and thereafter the name was
changed to Pantaloon Fashions (India) Limited. Then in the year 1999 the name of the
company was changed to Pantaloon Retail (India) Limited.

The following is a chart showing the different types of businesses operated by the Future
Group.

Company Board of Directors:

Chairman
Shailesh Haribhakti

Managing Director
Promoter & Non-Executive Director
Chief Executive Officer
Joint Managing Director
Independent Non-Executive Director

Whole Time Director

Company Secretary
Deepak Tanna
Statutory Auditors
NGS & Co
Risk Advisors
Ernst & Young Pvt. Ltd

Company Headquarters:
Pantaloon Retail (India) Limited
Knowledge House, Shyam Nagar,
Off Jogeshwari-Vikhroli Link Road,
Jogeshwari (East), Mumbai 400 060
Tel: + 91 22 3084 1300
Fax: + 91 22 3084 2201
WEBSITE
www.pantaloonretail.in

Company Shareholding Pattern:

The Shareholding Pattern page of Pantaloon Retail (India) Ltd. presents the Promoter's
holding, FII's holding, DII's Holding, and Shareholding by general public etc.

Shareholding pattern - Pantaloon Retail (India) Ltd.

Holder's Name

No of Shares

% Share Holding

Promoters

94145418

43.66%

Foreign Institutions

47920410

22.22%

Other Companies

27912429

12.94%

General Public

19223670

8.91%

Others

11272341

5.23%

NBanksMutualFunds

9238376

4.28%

Financial Institutions

5796634

2.69%

Foreign NRI

106561

0.05%

Directors

37600

0.02%

BANKERS
-

Bank of India
Axis Bank Ltd.
Andhra Bank
Corporation Bank
HDFC Bank Ltd.
IDBI Bank Ltd.
State Bank of Travancore
UCO Bank
Standard Chartered Bank
The Federal Bank Ltd.
Union Bank of India
Bank of Baroda
Allahabad Bank

FINANCIAL ANALYSIS

Important Figures for fiscal year 2010-11:

-

24.8% growth in turnover

85.96% growth in Profit after Tax (PAT)
105.7% growth in Earnings per Share (EPS)
27% growth in Pantaloons sales during the year
Company announced a record dividend of Rs. 0.90 (45%) on equity shares with face
value of Rs. 2
The core retail business of the company grew at the compounded growth rate of 31.84%
during these last three years.
The year on year same-stores-sales growth in lifestyle segment was 15.56%, value
segment was 10.31%, and in home segment was 8.32%.

Comparison of some important Financial Data for past 3 years:

Net Sales
EBIDTA
PAT
EPS

2009
7669
609
-6
0.56

2010
9787
952
76
3.18

2011
12212
1204
142
6.54

The above data clearly shows that the company is continuously improving its business.

Revenue Mix:
Outlet
Big Bazaar and Food Bazaar
Pantaloons
Central
Others

% of Total Sales
70
13
12
5

Hence, most of the sales of Pantaloon Retail Ltd. Comes from Big Bazaar and Food Bazaar
which is now a part of Future Value Retail, a wholly owned subsidiary of Pantaloon Retail
(India) Limited.

Ratio Analysis:

Current Ratio 1.84

Quick ratio 0.44

Debt-equity ratio 1.60
ROCE 14.38 %

Notes:
-

Ideal Current Ratio should be 2:1. In this case the companys current ratio is less than
2:1 which indicates that the short-term financial position of the company is not very
sound.
Also a weak quick ratio which ideally should be 1:1 validates the above statement.
Debt-equity ratio normally should be 2:1. But here a low ratio shows that the the
company has substantial amount of proprietor holdings
ROCE ratio of the company is good which indicates that the investors money is earning
good profits.

Pantaloon Retail Limited has however shown a down trend in its business particularly in the
financial year 2011-12. Some of the details that validate the above observation are as follows:
-

11th Nov, 2011 - Pantaloon Retail has posted consolidated net profit of Rs 150.5 million
for the quarter ended Sept. 30, 2011 as compared to Rs 236.4 million for the quarter
ended Sept. 30, 2010, representing a decrease of 36.34%.

10th Feb, 2012 - Pantaloon Retail, the country`s largest retailer has posted
a substantial drop of 71.67% in net profit to Rs. 56.40 million for the quarter ended
December 31, 2011 as compared to Rs. 199.10 million for the quarter ended December
31, 2010.

15th May 2012 - Pantaloon Retail reported a consolidated net (loss) of Rs. (0.60)
million or (6 lakh) for the quarter ended Mar. 31, 2012 as compared to net profit of Rs.
40.90 million for the quarter ended Mar. 31, 2011

Recent Happenings:

Pantaloon Retail Limited to demerge Pantaloon format stores: The Company has
announced demerger the flagship Pantaloon retail format store from the listed entity. It

will also transfer a debt of Rs 8 billion to the demerged entity. Aditya Birla Nuvo will
invest Rs 8 billion in the demerged entity by subscribing to debentures issued by
Pantaloon Retail. The debentures, in-turn, will get converted into equity in the demerged
entity on completion of the demerger process. AB Nuvo will also make an open offer of
26% for the demerged entity. As per AB Nuvo, post completion of listing as well as open
offer process, it will hold minimum 50.01% in demerged entity; effectively become a
subsidiary of AB Nuvo.

Strategic rationale for the transaction: The deal helps Pantaloon Retail Limited to reduce its
Core Retail debt by Rs 16bn. Core retail debt stood at Rs52bn as on Dec11 and has been a
key overhang for the companys stock. For Pantaloon, this transaction helps in reducing
interest costs by approximately Rs 1.8-2bn, assuming interest rate of 11-12%.

Other Recent News:

Pantaloon Retail sold a 4 % stake in the company for 2 billion rupees to Bennett,
Coleman & Co Ltd, which owns the country's biggest-selling English newspaper, through
the issue of 8.16 million preferential shares at 245 rupees a share.

15-JUN-12: Pantaloon Retail (India) has announced on Thursday that i the Committee of
Directors of the Company at their Meeting held on June 14, 2012, have made allotment of
800 optionally fully Convertible Debentures (OFCDs) of Rs 1,00,00,000/- each
aggregating to Rs 800,00,00,000/- to Peter England Fashions and Retail Ltd owned by
Aditya Birla group

Pantaloon Retail (India) Ltd has informed BSE that the Board of Directors have passed a
resolution by circulation for extending the financial period of the Company by six months
from June 30 to December 31. Accordingly, the current financial period shall be a period
of 18 months beginning from July 01, 2011 and ending on December 31, 2012.

Pantaloon Retail Limited also announced that it plans to change its name to Future Retail
(India) Limited.

The company has booked more than 9 million square feet of prime spaces in Indias
largest cities.

Pantaloon Retail is planning to exit its joint venture with the world's largest office
products firm Staples Inc. by June 2012 which could fetch the Indian retail giant, part of
the Future Group, Rs. 200 crore, said two analysts.

Strategic Alliances:

Jet Airways ties up with Future Group: In a bid to attract more customers and provide
exclusive offers to current members, Jet Airways has partnered with Future Group. Jet
Privilege members can now earn one JPMile for purchase of INR 100 and above at each
of the EZone stores or online at futurebazaar.com.

Clarks sets up first India store in JV with Future Group: Clarks Future Footwear, a 50:50
joint venture between PRIL and UK-based footwear company Clarks, opened its first
exclusive retail store in New Delhi in Q3FY11. The joint venture, which will import 70%
of the stock from its UK facilities, is targeting sale of 1 million pair of shoes in the first
two-three years of operations in India. The balance stock will be sourced from third-party
suppliers based in Chennai to be retailed across the country.

Hero Cycles announces strategic tie-up with PRIL: The worlds largest bicycle
manufacturer Hero Cycles announced a strategic tie up with PRILs sports division. This
association will enable Hero Cycles to display its merchandise and make its new range of
premium bicycles available across Planet Sports and its shopping shop formats within
Central, Pantaloons, Brand Factory and Sports Warehouse across all metros and tier I
cities.

Using Big Bazaar channel to drive Nano sales: Tata Motors has tied up with the Future
Group to sell the Nano in Big Bazaar outlets. This is the first time a retail chain is selling
a car in the country and market experts believe the decision to tie up with the countrys
largest retailer is a brilliant move which could help Tata Motors push Nano sales.

SWOT Analysis:

Strengths:
-

Pioneer in the industry

Largest market share and capitalization
Presence in major cities
Competitive pricing
Understands the taste of Indian consumers.
Large variance under on roof

Weaknesses:
-

No international presence
Operates across many product lines due to which it lacks specialization in some of the
areas
Rising debt

Opportunities:
-

Huge untapped market

Organized retail is still to establish in India
Can enter into international markets
Entry in rural areas

Threats:
-

Entry of foreign players could disturb its market share

Price wars between competitors
More no. of players is now entering into this sector.
Macro-economic slowdown

Financial Comparison of Leading Indian Retailers:

Peer Comparison
Company

Market Cap

P/E (TTM)

P/BV

EV/EBIDTA

ROE

ROCE

D/E

(Rs. in Cr.)

(x)

(TTM)
(x)

(x)

(%)

(%)

(x)

Pantaloon Retail

4,399.45

109.83

1.51

19.21

2.8

6.7

0.63

Bombay Rayon

3,257.32

15.79

1.11

11.36

9.9

8.4

1.22

Page Industries

3,196.43

38.32

19.28

19.58

62.2

73.6

0.18

Shoppers St.

3,185.06

50.21

4.84

20.43

10.2

18.1

0.08

Trent

2,940.14

78.41

2.19

34.44

3.3

2.9

0.18

Raymond

2,310.65

47.89

2.09

10.37

4.7

10.1

0.75

Rupa & Co

1,113.00

26.82

5.85

0.00

21.1

20.5

1.01

Mandhana Indus

775.01

10.60

1.84

8.70

24.5

17.7

1.78

Kewal Kir.Cloth.

658.61

13.72

2.92

8.44

24.6

36.5

0.00

KSL and Indus

598.51

0.00

1.43

6.84

-0.6

5.0

1.85

Lovable Lingerie

554.32

25.60

3.49

19.25

17.1

23.3

0.00

Welspun India

474.24

3.28

0.61

12.56

-15.7

1.8

2.64

K P R Mill Ltd

418.81

13.41

0.71

5.25

12.7

10.9

1.00

Zodiac Cloth. Co

358.23

34.88

2.18

13.90

11.2

13.0

0.23

Trident

286.57

0.00

0.44

5.35

11.7

9.0

3.51

Notes:
-

Pantaloon Retail Limited is still the biggest company by market capitalization

The companys ROCE ratio is average
However, the companys P/E Ratio is very high compared to its peers which suggests
that the company stock is over-priced as compared to its competitors
Also, the companys ROE ratios is the least compared to most of its competitors, which
indicates that the company is not in a good position while most of its competitors are
having a good position
Hence we can conclude that although Pantaloon Retail Limited is still the market leader,
but in the present scenario its competitors are faring much better and that the company
would have to take certain steps to again get into competition.

References:
-

http://www.pantaloonretail.in/

http://www.ibef.org/industry/retail.aspx

http://myiris.com/shares/company/writeDet.php?icode=panfasia#fut

http://articles.economictimes.indiatimes.com/2012-03-01/news/31113750_1_kishorebiyani-rakesh-biyani-joint-venture

http://www.indiainfoline.com/Markets/company/Pantaloon-Retail-India-Ltd/523574

http://www.bseindia.com/stockinfo/anndet.aspx?newsid=122B63BA-93014E3A-9260-5510AC5B1F9C&flag=I&type=A&scrip_CD=523574

http://www.moneycontrol.com/stocks/stock_market/corp_notices.php?
autono=563859

Edelweiss Research (www.edelresearch.com)

Research Report by Prabhudas Lilladher Pvt. Ltd.