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basant
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Quote basant Replybullet Posted: 24/Dec/2006 at 9:11pm
Depends on whether you are overweight or underweight. I would not add since it forms a large part of my portfolio but I think this stock has still a long way to go. Just do the number crunching and you would realise that the proposed AMC fees scheduled to flow in from Fy 07 onwards should be significant.
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Quote kulman Replybullet Posted: 24/Dec/2006 at 9:38pm
Cash flow from this along with their US $ 425 million consumer fund shall start kicking in from Fy 07 - no brokerage report has accounted for these gains till date.
-------------------------------------
 
Had I read this a few months ago, I would have ridiculed the writer; not now. I recall someone telling in a lighter vein:
Two economists-cum-expert-analysts were walking down the main busy street during peak rush hour. They see a Rs.500 note lying on the pavement....but neither of them picks it up thinking 'It can't be for real...if it were, someone would have picked it up by now'!
 
 


Edited by kulman - 24/Dec/2006 at 9:42pm
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Quote basant Replybullet Posted: 24/Dec/2006 at 9:49pm

Not all the AMC fees will flow into Pantaloon since their ESOP scheme is also running from this AMC but still they should get about 65% - 70% of these flows.Even a research house like Enam is not making any projection from these businesses because they are not sure how much profit will those ventures make etc etc. But for the investor this is like  a margin of safety. And  the person (Prashant Desai) handling these investor relations and these new businesses (Private Equity) was earlier with RARE ENTERPRISES!!!



Edited by basant - 24/Dec/2006 at 9:52pm
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Quote reetesh Replybullet Posted: 24/Dec/2006 at 2:27am

In my mind I think market will start discounting increasing competition in Retail sector in which Pantaloon had monopoly till now (almost) and that will refelect in Pantaloon stock price as well.

Volume story will pan out well but in my mind I have no doubt that margin will come down further, so only way they can increase there PAT is by increasing volume. As far as playing Pantaloon AMC`s business is concern I am not sure that is why we are buying or anyone should  buy Pantaloon. 
 
Sir: You keep saying that Walmart has not met with any success in any other country other than US, can you give me a reason why,?I am not satisfied by your reason that India is big country demand from North is different than South or anyother part.
 
Big Bazar sells almost all the things of  more or less same brand and same goods across India. May be something like IDLI maker will sell more in south than anyother part of the country. (One example)
 
So, in this case inventory is the problem than I must say that back end and processes of Walmart is there strength if they cant handle inventory problem than no one will.
 
To me why almost all major retailers are profitable in US is because of US consumer, if they are driving world consumption than we must not compare ourselfs with them and take Walmart failure in other countries including China as Walmart failure (be it back end,system,processes). It is our fault that we are comparing two different kind of consumer there spending power, etc.etc.
 
Having said that is no doubt it will happen, lets be realist we are noway close to it yet.
 
Mr.Desai being from RARE Enterprises is not good according to me and I will never give my money to Pantaloon AMC. (till he proves himself for a period of time)
 
Note: These are my personal and general views and is not targeted at any individual or his/her views or research, there are some questions asked from Basant sir (anyone can answer them) is just informal enquiry of his thought(s). Hope this will avoid unnecessary agruments.
 
 


Edited by reetesh - 24/Dec/2006 at 2:33am
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Quote deveshkayal Replybullet Posted: 25/Dec/2006 at 8:27pm

Will Wal-Mart Succeed in India? Perhaps...But It Won't Be Easy

"He doesn't realize it, but I know everything about him," says Indian retail magnate Kishore Biyani about a young man sitting with him in a Mumbai hotel meeting room in early December. "I see that he is wearing Colour Plus trousers. I know his waist size ... I know everything about him. We are a company of observers, and everybody is trained to observe customers," says Biyani, who is CEO of the Future Group and managing director of its flagship Pantaloon retail chain that last year had revenues of Rs. 2,018 crore ($450 million) and expects to become a $1 billion company by mid 2007.

Biyani often spends Sundays hanging about unobtrusively and watching shoppers at his company's 200 clothing stores in 32 Indian cities. The home-grown retailer's obsession for observing the average Indian consumer also at public places like temples and movie halls underscores what could be Wal-Mart's biggest challenge as it sets up shop in India in partnership with Bharti, a leading telecom services provider. "India is a very diverse country -- we have 6,000 castes and sub-castes in 28 states, and every community has its own tastes; every state has its own nuances," says Biyani. "To manage the diversity and the heterogeneity will be one of the biggest challenges for anybody who comes to this market."

Cash and Carry

India's retail industry is one of its fastest growing (with a 5% compounded annual growth rate) and has $320 billion in annual revenues this year, according to a report titled, "Retail in India: Getting Organized to Drive Growth," released recently by consulting firm A.T. Kearney and the Confederation of Indian Industry (CII). Never mind that Wal-Mart's $315.6 billion in global sales last year is about the size of the entire Indian retail industry. "Rising incomes and increased consumerism in urban areas along with an upswing in rural consumption will further fuel this growth to around 7%-8%," the authors say, pegging India's consumer class with rising disposable income at 400 million people.

But now that Wal-Mart plans to enter India, attention is focused on the retail giant's India strategy. Wharton professor of marketing Jagmohan Raju says one big challenge Wal-Mart will face in India has to do with how it is perceived by consumers. "In the U.S., when you think of a big warehouse store, you think of lower prices, and small, boutique stores have higher prices," he says. "In India, the perception is exactly the opposite -- the bigger store has higher prices; smaller shops can offer lower prices because their overheads are lower. How will Wal-Mart's positioning of lower prices carry forward in a mindset where customer perceptions of big versus small are so different?"

Consumer Behavior

David Bell, Wharton professor of marketing, says Wal-Mart's business model is founded on "everyday low prices for consumers and squeezing costs out of the system, and customer service with friendly people who greet you." But those, he argues, do not guarantee shopper traffic, as consumer behavior is dramatically different across global markets. Coca-Cola might adjust to people's preferences in different markets by making its drink sweeter or more effervescent. Or McDonalds could allow people to consume alcohol at its restaurants in France and make hamburgers with rice patties in Japan. "But there's considerably more variation in the way people shop for products than their underlying preference for the products themselves," Bell says. "This is what makes it more difficult -- not just for Wal-Mart in particular, but for any retailer -- to be truly global."

Changes in consumer preferences that Wal-Mart will encounter have to do with simple things like how often people like to go to a store or what motivates them to choose one store over another. "In local markets, you have dynamics of retail competition, variations in the frequency with which people like to shop, variation in the kind of products that drive people to the store, variation in the importance of the retail assortment."

It is too early to tell if some of the controversies Wal-Mart has faced in the U.S. will crop up in India, too. "In the U.S., a number of small towns did not like Wal-Mart for a couple of different reasons," says Bell. "One is purely aesthetic -- these big boxes look pretty ugly -- and the practice of having huge buying power can be detrimental to the local economy -- people who try and compete on price. Thirdly, they are criticized for their employment practices, such as their benefits, and ethnic and gender discrimination in hiring."

Wal-Mart's most immediate challenge could be finding real estate at preferred locations and financing it at the prevailing prices. Biyani says his group bought most of its real estate long before the current price boom. "If we were to do business at today's rates, we'd have to shut down," he says. "The Wal-Mart model is very real estate hungry," says Raju. "They need a lot of real estate, close to where people live, and have easy access to them. The Wal-Mart model also relies on the fact that everything is on display, which requires lots of space."

Raju notes that if, as many industry watchers expect, Wal-Mart sets up its stores on the outskirts of urban centers, other challenges could emerge. "If you are going to travel by train, you'll have to carry your purchases in a bag, and then you'll buy less," he says. "If you drive your car there and load it up, Wal-Mart should have a place to park all those cars." Some industry experts have argued that the typical Indian consumer does not travel more than 6 km (3.75 miles) or 7 km to shop, and that few suburbanites own cars.

Raju says he expects Wal-Mart to adopt a blended model of its traditional format tweaked to fit the reality of Indian real estate. "It would be stores where you have all the products on display, but you don't pick it up and put it in your cart yourself." This would involve something like a handheld computerized device, he says, into which customers enter information about the products they want to buy. They would then collect their purchases at a checkout point at street level and drive away, or have them delivered to their homes.

More blending might be on the way, especially in cultural nuances. Wal-Mart's recent debacles in Germany and Korea, where it sold out to local retail players and exited, could be wake-up calls. In Germany, Wal-Mart's low price strategy failed to win it a distinctive market position simply because two other well-entrenched retailers -- Aldi and Lidl -- have been following that strategy for years, says Bell. He notes that Wal-Mart was also faulted for relying too heavily on a U.S.-driven view of how Germans shop, made worse by populating its top management in the country with U.S. expatriate executives, many of whom couldn't speak German. Thirdly, the Wal-Mart strategy of a price-service combination with friendly greeters and so forth backfired. "Culturally, greetings and friendliness in stores are viewed by the Germans with a lot of suspicion," says Bell.

Rites of Passage

Wal-Mart also had some lessons to learn in South America a couple of years ago, when it discovered that the design and layout of its stores did not match shopper preferences. "In South America, shopping for some families is a social or an entertainment-driven event," says Bell. "You have the whole family or the extended family shopping together, so you need much wider aisles." That, he says, is unlike what Wal-Mart is used to in the U.S., where a single person typically shops for the entire household, while other family members are looking after the children or at work. "It seems like a fundamental thing, but you could never predict that coming from the outside unless you have a local partner."

Chastened by these experiences, Wal-Mart may not face the same problems in India. Bharti, its local partner, is a leader in the mobile phone services industry and must have deep insights into Indian consumer behavior patterns. Even so, there could be surprises, as Biyani's Big Bazaar store chain learned the hard way a couple of years ago. The chain had bought 100,000 white cotton shirts, expecting good demand. But sales were slow, and promotional campaigns fell flat. It soon figured out why: The demographic profile of Big Bazaar's middle-class shoppers meant people who commute in crowded trains and buses and not in air-conditioned cars. For them, white shirts are high-maintenance hassles, needing frequent laundering. The group eventually liquidated its unsold inventory of white shirts through heavily discounted sales.

Wal-Mart's legendary success at procuring its supplies at extremely competitive prices has no doubt pleased its customers to whom those savings are passed on, but critics have accused it of compelling its suppliers to survive on very thin margins. Here, Biyani says he works differently. "We are not like Wal-Mart; we believe in a situation of win, win and win," he says. "The supplier should win, we should win and the customer should win. In Wal-Mart's strategy, and maybe that of other international retailers, the company wins and the customer wins. Somebody has to lose for those two to win." Future Capital Holdings, a Biyani-run private equity firm, last month raised $830 million that it has begun investing as vendor financing in manufacturers of foods, garments and fashion jewelry, among others. Products of these companies get captive shelf space at the Future Group stores.

Raju says existing national brands will need to plan their response to Wal-Mart very carefully to ensure that while they get to supply the retail giant, they also don't alienate their smaller store buyers. "They are used to it in the U.S.," he says. "Right now, Hindustan Lever deals with a lot of small stores. Tomorrow they will be dealing with large buyers like a Wal-Mart or Reliance Retail, so the relative power structure of buyers and who is supplying will change. This is a challenge they have faced in developed markets where they deal with the Tescos and Safeways." He expects the national brands in India, such as Hindustan Lever and Procter & Gamble, to figure out ways to help small stores with specially tailored services "to ensure they also thrive and do well."

Raju sees bigger benefits flowing to other players in the retail supply chain, such as farmers. "Companies like Wal-Mart coming to India, I hope, will help farmers because there will be fewer players in the chain," he says. "Farmers could form cooperatives to supply directly to Wal-Mart rather than have to deal with multiple intermediaries."

Party Spoilers

India's retail promise must seem tempting, but that outlook "is tempered by the fact that the country is grappling with severe infrastructure and policy issues," says the CII in the report it produced with A. T. Kearney. "Cold chains [distribution chains for perishable items], warehousing and logistics infrastructure will fast become unmanageable challenges for India if proactive action is not taken." It points to policy regimes that vary across states, "inadequate quality control and the lack of a skilled workforce."

Biyani doesn't buy all that, arguing that "India is a nation of dukaandars (shopkeepers) and that enough retail talent is available. He also dismisses concerns about distribution and logistics infrastructure with a simple, rhetorical question: "Have you [in the recent past] faced a shortage of anything you wanted to buy?" Biyani scoffs at Wal-Mart's logistics and supply-chain strengths. "Where will they run their Volvo trucks here?" he asks, adding in a lighter vein, "They will probably have to have bullock carts and handcarts in their supply chain."

Raju points out that Wal-Mart's efficiencies stem from the scale of its purchases, which determines what prices it pays suppliers. "Suppliers are willing to work with them because if they don't work with them they lose a big part of the market," he says. The Wal-Mart buying center at its Bentonville, Arkansas, headquarters "is huge, and that's why most of the companies' vendors have their branch offices in the city where Wal-Mart's headquarters are located," adds Raju.

Coping with Oversupply

Organized retail is just beginning in India, but plans call for some 600 malls to be built over the next decade across the country. The nascent industry in India could learn valuable lessons about what went wrong with retailers in the U.S., leading to bankruptcies, closures and sell-offs at companies like K-Mart, Caldor and Bradlees.

"What went wrong [in the U.S. market] is oversupply," says Martyn Chase, chairman of Donaldson, a London-based company that manages 350 retail malls across Europe. "One mall gets built, and somebody builds a new and bigger mall nearby, so the previous one is killed." He doesn't see an immediate threat of that happening in India, but says "you will get casualties in 10 years when you have too many of them." He attended a CII-organized two-day conference on the retail industry in Mumbai in late November, and is trying to persuade his European retail mall clients to invest in India.

Chase says the way to prevent hemorrhaging and consolidation in the industry is to bring regulatory oversight. "You need proper regulations governing mall locations, mall size and the like," he says. "Before you are allowed to build a mall in the U.K., you have to demonstrate there is a need for it, by proving that there is enough demand from people who live in that area to make the mall work."

Biyani argues that the underlying dynamics of standalone retail are not attractive. (Pantaloon's urban locations put it in a different market segment from that of the big box centers Wal-Mart might put up on city outskirts.) "In India, no retailer has made big money so far," says Biyani. (Pantaloon's profits last year were 3% of revenues.) "The money is in the peripheral activities; it's never in the retail itself. It's the power of retail that gets you the money; it's never the transaction that gets you the money."

Source: Knowledge@Wharton

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Quote manishdave Replybullet Posted: 25/Dec/2006 at 9:32pm
This artlicle is very good.
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Quote basant Replybullet Posted: 25/Dec/2006 at 9:50pm
Actually this is full of insight. I like Biyani's way of chashing in. he admits that profit margins in retail cannopt be expanded so he is going into an all out effort to monetise his customer base. Soon he would be selling insurance, mutual funds, media rights inside his malls, getting into Mall management, real estate and consumer funds. 
 
The company expects cash fkow from these businesses to equal that of the primary retail activities in the next 5 years.
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Quote nikhil090 Replybullet Posted: 04/Jan/2007 at 8:16pm
Birla's move into retail
 
Trinethra gives Birlas retail edge
BS Reporter / Mumbai January 4, 2007
The acquisition of Trinethra Super Retail would put the Aditya Birla group ahead of competition, including Reliance, analysts tracking the development said.
 
Trinethra is an Indian Value Fund supermarket chain based in Hyderabad.
 
They believe the buyout will help the group to consolidate its position before its actual foray into the retail sector.
 
“The Birla group can leverage the acquisition of Trinethra, a well established player, in its expansion in south India. The buyout will give the group a headstart among all the new entrants including Reliance that has already started its operations,” retail analyst Susil Dungarwal said.
 
The group bought 90 per cent in Trinethra through Aditya Birla Retail – its unlisted retail arm – for an undisclosed sum, while the remaining 10 per cent will stay with India Value Fund.
 
Dungarwal believes the acquisition is just a part of the group’s larger retail strategy.
 
“Trinethra may not fit perfectly into their (the Birlas’) basket and not a match to the group. But given Kumar Birla’s passion for quality, the supermarket may get a completely different look and styling,” he said.
 
However, the group was not forthcoming on its plans. “We may enter larger formats also and have a pan-India presence. We are not eyeing any other acquisition for the moment,” a group official said.
 
Despite the entry into the retail bandwagon of Reliance, Bharti, the Tatas and now the Birlas, smaller retail players are confident of their existence.
 
“Many new entrants are opting for inorganic growth. Smaller retailers confident of doing well and sustaining profits will not sell off. Only those who think they cannot compete with big players will move out,” said Dippankar S Halder, CEO, Spinach – a food and grocery retail chain.
 
On smaller retail chains becoming the targets of the biggies, he said, “It depends on how big is your appetite. If you are satisfied with your wealth creation, you can sell off. Otherwise, you can stay afloat.
 
Analysts said the group would be able to leverage the retail experience gained through group companies – Birla Sun Life Insurance and Idea Cellular.
 
Birla group sources said Trinethra CEO Pranab Barua and MD George Thomas would continue to look after the affairs of the retail chain. The chain would maintain its southern focus for the time being, they added.
 
However, Aditya Birla Retail will have group finance officer Sumant Sinha as the CEO. The group has recently hired executives from Pantaloon’s Food Bazaar and other retail ventures.
 
Trinethra is believed to have posted a turnover of around Rs 240 crore in 2005-06. It has 83 outlets in Andhra Pradesh, 26 in Bangalore and 15 in Chennai.
 
Some of its stores are coming up in Kerala, and it plans to enter several tier-II cities in the south.
 
The chain operates its stores under the Trinethra brand in Andhra Pradesh and Tamil Nadu and under Fabmall in Karnataka. It also has a format called ‘Quality First’ for commodities such as rice, wheat and pulses.
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