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India Equity Research Reports, IPO and Stock News
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What’s making news?
News reports suggest that the government may move on FDI policy (BS)
The DIPP, which had floated the discussion paper last summer, is reportedly close to completing its final
report on the issue of FDI in multi brand retailing after getting approval from concerned ministeries
The rule change would likely be done in a phased manner, keeping in mind possible opposition and
may include conditions around use of FDI funds and cities that FDI funded retailers can operate in
We note that such reports have been persistent since the DIPP paper in July
Tesco’s cash & carry plans hit snag (Hindu)
The Karnataka state government has refused to issue the company a license for sale of food products in
the state, bowing to pressure from local traders
Tesco was planning to set up its first cash & carry store in Bangalore
The existing portfolio of 700 stores sells fabrics, garments and accessories
KFC to expand in India (IndiaRetailing)
The company plans to scale up to 500 stores by 2015 against 114 store currently across 24 stores
Each outlet entails an investment of Rs20-25m. KFC is also planning to expand its menu
ICICI Ventures to pick up stake in Devyani International (ET)
ICICI ventures has reportedly invested Rs2.25-2.5bn for a 10% stake
Devyani International is a franchisee for Yum Brands (KFC & Pizza Hut) and the master franchisee for
Costa Coffee in South Asia. It currently operates ~200 stores with ~150-160 more planned.
What’s making news?
Joyalukkas planning Rs6.5bn IPO (Hindu)
The jewellery retailer is planning a 26.5% dilution and hopes to IPO within two months
The company plans to open 14 new outlets over 30 months, against 24 outlets currently
The funds would be used for store expansion (Rs4.2bn), debt reduction (Rs1.2bn) and working capital
Spencer’s may break even in 18 months (BS)
The business had earlier expected to break even in FY11 after store level breakeven in 1QFY11
Spencer’s will focus on large format stores and plans to increase space from 1m sq ft to 2.5m by 2014
FY11 loss stood at Rs1.3bn, down 41% YoY
Timex expanding product range (Hindu)
Timex is launching brands specially designed and developed for the Indian market
The company has launched Helix, a youth brand priced at Rs1,400-2,500. This follows a string of
launches over the past two years
Timex currently has 80 franchise run outlets and plans to double this over three years
ITC tries new lifestyle retail formats (Mint)
ITC’s Wills Lifestyle is experimenting with new formats including menswear only and boutique store
The company plans to set up 25 new stores across India in the next 15 months against 75 currently
ITC is also planning to add a higher proportion of franchisee stores (15/25 against 15/75 currently)
Inflation beginning to bite
Net sales growth
4QFY11 saw retailers registering healthy YoY growth in net
sales, led in most cases by strong same store sales
However, the pace of growth has slowed visibly
Titan sales grew 36% YoY in 3QFY11, led by jewellery
Shopper’s Stop grew 22% (16% same store growth)
Jubilant Foods, registered 56% revenue growth (33%
same store growth) with a net turnover of Rs1.94bn
Pantaloon revenue growth was disappointing at 18% with
same store growth of 10% each in value and lifestyle, and
9% in home formats
Gross margin
4QFY11 saw gross margins flat to slightly down on a year
on year basis for all major retailers except Titan with
inflationary pressures seemingly getting passed
Garment retailers in particular have been flagging off price
hikes ahead to offset the rise in cotton prices and
absorption of these remains uncertain as yet
Ebitda margin
Unlike 3Q, 4Q saw as many retailers see margin declines
as had margin gains
Pantaloon and Titan saw Ebitda margins decline. Titan’s
performance was dampened by a one-off staff bonus
payment in the quarter. Pantaloon saw a QoQ uptick.
Shoppers Stop saw margins increase
Jubilant Foods saw the benefits of operating leverage help
improve margins although margins were down QoQ
Net margin
Net margin trends were better than YoY trends.
For Titan and Jubilant, which saw the most substantial
improvement, this was driven by improved balance sheet
position (low interest/high other income)
Shoppers Stop’s net margin decline was driven by a low
tax rate in the base quarter, whilst Pantaloon’s increase
was underpinned by a high tax rate in the base quarter
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
What’s making news?
News reports suggest that the government may move on FDI policy (BS)
The DIPP, which had floated the discussion paper last summer, is reportedly close to completing its final
report on the issue of FDI in multi brand retailing after getting approval from concerned ministeries
The rule change would likely be done in a phased manner, keeping in mind possible opposition and
may include conditions around use of FDI funds and cities that FDI funded retailers can operate in
We note that such reports have been persistent since the DIPP paper in July
Tesco’s cash & carry plans hit snag (Hindu)
The Karnataka state government has refused to issue the company a license for sale of food products in
the state, bowing to pressure from local traders
Tesco was planning to set up its first cash & carry store in Bangalore
The existing portfolio of 700 stores sells fabrics, garments and accessories
KFC to expand in India (IndiaRetailing)
The company plans to scale up to 500 stores by 2015 against 114 store currently across 24 stores
Each outlet entails an investment of Rs20-25m. KFC is also planning to expand its menu
ICICI Ventures to pick up stake in Devyani International (ET)
ICICI ventures has reportedly invested Rs2.25-2.5bn for a 10% stake
Devyani International is a franchisee for Yum Brands (KFC & Pizza Hut) and the master franchisee for
Costa Coffee in South Asia. It currently operates ~200 stores with ~150-160 more planned.
What’s making news?
Joyalukkas planning Rs6.5bn IPO (Hindu)
The jewellery retailer is planning a 26.5% dilution and hopes to IPO within two months
The company plans to open 14 new outlets over 30 months, against 24 outlets currently
The funds would be used for store expansion (Rs4.2bn), debt reduction (Rs1.2bn) and working capital
Spencer’s may break even in 18 months (BS)
The business had earlier expected to break even in FY11 after store level breakeven in 1QFY11
Spencer’s will focus on large format stores and plans to increase space from 1m sq ft to 2.5m by 2014
FY11 loss stood at Rs1.3bn, down 41% YoY
Timex expanding product range (Hindu)
Timex is launching brands specially designed and developed for the Indian market
The company has launched Helix, a youth brand priced at Rs1,400-2,500. This follows a string of
launches over the past two years
Timex currently has 80 franchise run outlets and plans to double this over three years
ITC tries new lifestyle retail formats (Mint)
ITC’s Wills Lifestyle is experimenting with new formats including menswear only and boutique store
The company plans to set up 25 new stores across India in the next 15 months against 75 currently
ITC is also planning to add a higher proportion of franchisee stores (15/25 against 15/75 currently)
Inflation beginning to bite
Net sales growth
4QFY11 saw retailers registering healthy YoY growth in net
sales, led in most cases by strong same store sales
However, the pace of growth has slowed visibly
Titan sales grew 36% YoY in 3QFY11, led by jewellery
Shopper’s Stop grew 22% (16% same store growth)
Jubilant Foods, registered 56% revenue growth (33%
same store growth) with a net turnover of Rs1.94bn
Pantaloon revenue growth was disappointing at 18% with
same store growth of 10% each in value and lifestyle, and
9% in home formats
Gross margin
4QFY11 saw gross margins flat to slightly down on a year
on year basis for all major retailers except Titan with
inflationary pressures seemingly getting passed
Garment retailers in particular have been flagging off price
hikes ahead to offset the rise in cotton prices and
absorption of these remains uncertain as yet
Ebitda margin
Unlike 3Q, 4Q saw as many retailers see margin declines
as had margin gains
Pantaloon and Titan saw Ebitda margins decline. Titan’s
performance was dampened by a one-off staff bonus
payment in the quarter. Pantaloon saw a QoQ uptick.
Shoppers Stop saw margins increase
Jubilant Foods saw the benefits of operating leverage help
improve margins although margins were down QoQ
Net margin
Net margin trends were better than YoY trends.
For Titan and Jubilant, which saw the most substantial
improvement, this was driven by improved balance sheet
position (low interest/high other income)
Shoppers Stop’s net margin decline was driven by a low
tax rate in the base quarter, whilst Pantaloon’s increase
was underpinned by a high tax rate in the base quarter
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