Modern retail landscape in India

Little did we anticipated when Walmart walked out of the JV with Bharti Enterprises by saying India is too corrupt for FDI in pursuant to the probe originated from US for violations of US anti-bribery laws, leaving over 200 ‘Easy day’ outlets in India at bay and taking 20 cash-and-carry wholesale model under Walmart India and converting the $ 100 million debt (invested in the JV in 2010) into equity for Bharti Enterprises (as compensation for breaking the agreement term prematurely).

A deal signed as a 50:50 joint venture between the two companies in the year 2007 , relationship became another example of policy paralysis and was victimized to the ambition of foreign companies to enter emerging markets in account of risk appetite and growth hunger.

What next: Bharti Enterprises to sell equity to private equity funds or foreign investors. Current losses in Fiscal 2012-13 were 538 crore as against total sales of 1581 crores with exponential growth rate of 55% (far higher than the brick and mortar retailers).

Lets’ have a look at the growth rate of traditional retail brands.
·        
  • Reliance - Fresh 36% growth in sales ( 55 crores losses as against total sales of 5256 crores in FY 2012-13)
  • Aditya Birla more 10% growth in Sales ( 511 crores losses as against total sales of 1131 crores in FY 2012-13)
  •  Tata-Starbazaar 20% growth in sales (72 crores losses as against total sales of 801 crores in FY 2012-13)
Future:  Cash and carry business to grow to $ 22 billion by 2017


Lets’ have a look at the market capitalization of few of the leading brands
  •           Shoppers Stop 2852 crores or $ 450 million
  •           Future retail  1660 crores or $ 260 million


This seems to be too challenging ahead as we anticipate e-retailing heating up the retail space mainly because of the price and ROI factor and e-retailing facing the revenue heat on the same principal of investments vs returns.


Most of the investors are looking at to liquidate or consolidate the existing portfolio, resulting into  pull out from fresh investments with few exceptions.  A lot has been happening  on all fronts,  government considering of regulating with new policies, players shifting  from inventory based model to market place model and so on..this space would still be challenging for the existing players to float in such conditions.

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