Business - Biyani on a roll

Satish John

Mumbai: Other companies and entrepreneurs who entered the organized retail business in India may be slowing, but not the man who sees himself as India’s Sam Walton.
And so, Kishore Biyani’s Future Group will on 30 September open Big Bazaar stores in Pune, Delhi and Cuttack. With Friday’s launch of a store in Mysore, that will make four in the space of five days, and Biyani’s handlers are touting it as the fastest roll-out in the retail industry.
There’s another numerical significance to these four stores. With them, the number of Big Bazaar stores in the country will grow to 101. Biyani, never one to lose an opportunity to advertise, announced this fact to the world at large from a makeshift stage in the middle of Mumbai mall High Street Phoenix on Thursday evening.
“The story is not about us, but this story is about the people who visit our stores. This is a proud moment for India.”
Biyani’s, and Big Bazaar’s, march comes at a time when several new retailers are slowing expansion, reducing the number of outlets, effecting layoffs, even exiting the business. Basmati exporter REI Agro has shuttered dozens of the more than 200 grocery stores it opened; Indiabulls Retail Services Ltd has closed several of its hypermarkets; Mumbai-based HyperCity Retail has abandoned plans to open 250 grocery stores by 2012; Ludhiana textile firm Oswal Group has downed shutters on its two-dozen-store-strong lingerie chain; and Reliance Retail Ltd has fallen short of its September target of 2,000 stores of all formats by more than half.
But even as other entrepreneurs who have made a mark on Indian retail such as Subhiksha Trading Services Ltd’s R. Subramanian and Vishal Retail Ltd’s Ram Chandra Agarwal are slowing, Biyani is pushing ahead.
By 2011, he claims, there will be 300 Big Bazaars, and Pantaloon Retail (India) Ltd, his flagship, will have revenue of Rs13,000 crore. The company ended 2007-08 with Rs5,048 crore in revenue.
“We were not caught in the euphoria,” he said.
These facts haven’t missed the attention of analysts.

In a 22 September research report to clients, Vandana Luthra, Manish Sarawagi and Anuj Bansal of Merrill Lynch wrote: “We like Pantaloon’s speed in store roll-outs across formats, management’s long term focus on property lock-ins and industry-wide peaking of rent and salary costs.” But they still had an “underperform” rating on the company.
“We remain negative (because of): sharply higher interest costs, dull FY09 earnings and likelihood of sharp consensus downgrades.”
Restructuring and revaluation
It isn’t that everything Biyani touches turns to gold. But he has 25 retail formats to juggle with, and juggle them he does, tweaking and refining his portfolio till he has the right store for the right market.


In New Delhi, for instance, in the Raja Nagar area, he is converting an existing Pantaloon (apparel) store into a Big Bazaar. He’s doing the same thing in Ahmedabad.
And in a research report dated 21 September, CLSA’s Anirudha Dutta and Prakhar Sharma wrote that Pantaloon had moved out of its airport retailing joint venture with Alpha Airports and managed to book a profit of Rs29.8 crore in the process.
The analysts added that Pantaloon’s sales growth of 35% was below expectations (45%) and that Ebitda (earnings before interest, taxes, depreciation and amortization —a measure of operating profitability) growth was higher (than expectations) at 149%.
Still, the analysts put out an “underperform” rating on the stock. Biyani, however, is unfazed by these ratings. He isn’t keen on talking about Pantaloon’s financials or fund-raising plans (there is some speculation that Pantaloon may tap the markets for some money). The Merrill Lynch report said: “We forecast Pantaloon’s interest cost to grow 2.7 times over financial year 2008-10 thus limiting bottom line growth to sub-10%.”
If the numbers worry Biyani he doesn’t show it. Instead, he is keen to talk about the people who helped him grow Pantaloon. On Thursday, Biyani was flanked by some of the executives who have been with him since he launched the first Big Bazaar in 2001—in Hyderabad.
“The team is intact,” beamed Biyani.
Beaming beside him were Rajan Malhotra, who heads the Big Bazaar format and Hans Udeshi, CEO, general merchandise of Pantaloon.
Malhotra remembers the many trips he and others made to small stores in the back lanes of Chennai and Hyderabad, understanding consumer behaviour by watching them buy everything from groceries to innerwear.
That was seven years ago, but one question from those days that still greets Biyani is whether he plans to sell out.
Not here to sell
The frequency and pitch of that question have increased in recent times, after companies such as Reliance Retail, Bharti Enterprises Ltd and Aditya Birla Retail Ltd announced their entry into the business of organized retail. Some of these firms, and some others, have also formed partnerships with foreign retail firms. The Tata group that owns retail firm Trent Ltd has a partnership with Tesco, and Bharti with Wal-Mart Stores Inc.
“It is insulting,” Biyani replied calmly when asked whether he will look to partner with global retail firms.
“We will achieve scale (without partnering with a global firm),” said Biyani.
“We connect well with the Indian customer.”
“We have become the natural choice.”
“We built this retail model from scratch.”
“Why should we tie up with them? We can source it (merchandise) ourselves and we too can have a large scale.”
Last year, almost 112 million people walked into Pantaloon’s various store formats. This year, according to Malhotra, the number will be close to 120-130 million, almost 10-12% of the Indian population.
Some of those people looked on curiously on Thursday as Biyani and his executives took the stage.

High Street Phoenix stands where a textile mill once used to. Today, it is one of Mumbai’s most popular malls. And Pantaloon is the anchor tenant, the main draw. Biyani said real estate developers were keen to have his stores as anchor tenants because they “act as the glue to attract other tenants and shoppers”.
And his stores are loved, he added.
No opposition
Other retail firms may have faced opposition from small store owners and local politicians but not Pantaloon, Biyani said, because it believes in “preserving the ecosystem”.
His stores, he added, haven’t faced “any opposition from anybody from anywhere even for a single day”.
“Opposition may be in the minds of some people, but it never came to the fore. We believed in a model, where we never sold any product below the cost price.”
When Pantaloon opened its fourth store, its market capitalization was just around Rs200 crore. At its peak, Pantaloon’s market value was around Rs12,000 crore. On Friday, it was around Rs4,400 crore.
The fundamentals, however, are still strong, Biyani said.
And the allure of the retail business in India remains what it was seven years ago.
“Nearly 1.2 billion people in one part of the world were aspiring to shop. Then the story began and people began to believe in us and that’s how our financial journey started.”