Patanjali enters big retail with Future Group tie-up

Baba Ramdev’s Patanjali
Ayurved has entered into an exclusive
partnership with Future Group to make its
entire range of products available in Big
Bazaar outlets across the country.
Other food-based chains of the country’s
largest retailer such as Easyday, KB’s
Aadhaar and Nilgiris too will subsequently
sell Patanjali products, making them
available in more than 240 cities and
towns in the country, Future Group
founder and CEO Kishore Biyani told a
press conference on Friday.
The two companies are also looking at
forming a manufacturing partnership in
the future.
“Manufacturing is another relationship that
we are exploring,” Biyani said. “We have
our own dairy, rice mill, spice mill and a
lot of other edible product categories.
This gives us a chance to work together
on this relationship,” he said.
Ramdev confirmed “initial talks” on
production partnership. “We have planned
around five units for Patanjali for the
future expansion and wherever possible
we would discuss about this proposition
with Future Group in future,” he said.
“This is just the first step. We will explore
all the available option in the future.”
Under the marketing partnership, Future
Group will set up an office for
collaborating with Patanjali Ayurved in
Rishikesh to develop, market and
distribute these products exclusively in
modern trade. Patanjali products will also
be available at its own retail outlets which
number around 5,000 now.
Biyani is hopeful that Future Group stores
will do a business of Rs 1,000 crore in
20 months with Patanjali, which is
considered the fastest-growing consumer
products company in the country and is
already bigger than rivals such as Emami
and Jyothi Labs.
At the moment Unilever is the biggest
products partner for Future Group,
accounting for business of around Rs
1,300-1,400 crore, said Biyani, adding
that he wants to see Patanjali at the same
level.
The company expects to start with Rs 40
crore per month sales of Patanjali
products, which Biyani expects to go up
to Rs 80 crore in the next 12 months.
He also said that he believes that in
future this association could well become
a case study for the management schools
in the same way as the collaboration
between Procter & Gamble and Walmart in
the Unites States in the 1980s.
Biyani said he expected Patanjali to
become one of the top three FMCG
companies in a couple of years and help
Future Group to add additional one crore
customers.
The group gets around 35 crore footfall
yearly at its stores across the country,
and is expected to clock revenues of Rs
22,000-23,000 crore this fiscal, Biyani
said.
Patanjali Ayurved offers the entire range
of FMCG products in food, staples,
nutrition, hair care, skin care, dental care
and toileteries at a much competitive
price than other brands available in the
market.
Ramdev said Patanjali is expected to
become a Rs 5,000 crore brand by the
end of this financial year. “We will tell you
our plans of 2016-17 later because you
may not be able to believe the numbers
we are anticipating. In the coming five
years Patanjali would be the biggest
consumer brand in the country,” he said.
He also said Patanjali noodles would be
launched by October 15 and it would be
available across the country by the end of
this month.

Future Retail plans to raise up to Rs 1,500 crore

Future Retail plans to raise
up to Rs 1,500 crore through debt
instruments to replace high cost loans
and to invest on brand building and
marketing.
The company is seeking approval from its
shareholders for the proposal of raising
up to Rs 1,500 crore through issue of
non-convertible debentures on private
placement basis, Future Retail said in a
filing to the BSE .
“The amount to be raised by the way of
issuing non-convertible debentures on a
private placement basis however shall not
exceed Rs 1,500 crore in aggregate,” the
filing said.
Explaining the rationale behind the move,
the company said: “With overall reduction
in base lending rate by the banking
sector, there is further scope to borrow at
a reduced rate of interest.”
“The present borrowing initiative would
also help the company to replace some of
its present high cost near-term maturity
debts with lower cost and long-term
maturity debts and further reducing overall
cost of funding and improving debt
maturity profile of the company,” Future
Retail said.
It further said the funds would be utilised
for certain general corporate purpose,
including brand building and other
marketing expenses, acquiring assets
such as furniture and fixtures vehicles
and spend on lease improvements, among
others.
Moreover, the company is also seeking
shareholder approval for grant of stock
options to eligible employees and
directors.
Future Retail had recently concluded its
equity funding of around Rs 2,000 crore,
including preferential issue of equity
share and warrants convertible into equity
and Class B shares and rights issue.
“…major part of the fund raised is being
utilised for debt reduction, reducing
overall debt as well as finance cost of the
company thereby improving its debt equity
and debt servicing coverage ratio,” the
filing added.

Future Retail to raise Rs700 crore to cut debt

In a bid to reduce debt levels,
Future Retail Ltd, the operator of Big
Bazaar and Food Bazaar retail chains,
plans to raise Rs.700 crore by selling
some of its investments in subsidiary
Future Supply Chain Solutions Ltd .
The Future Retail board has approved the
divestment and an authorized committee
will consider various options such as
offer for sale as part of initial public
offering, sale to private equity or strategic
investor, the company said in a BSE filing
in Thursday.
In January, the company raised Rs.1,600
crore through a rights issue.
Still, the company’s debt levels remain
high.
“The retailer will still have about Rs.4,000
crore of debt on its books and will need
to do a few more big divestments before
they can be in a comfortable place. The
ideal scenario will be when the debt
comes down to Rs.2,500 crore to
Rs.3,000 crore,” said Santosh Verma,
director, investment banking, IDFC Capital
Ltd .
As of 31 March 2014, Future Retail, had a
debt of Rs.6,200 crore.
In a meeting with Mint in January, Kishore
Biyani , chief executive officer, Future
Group, had identified a number of
possible divestment options for the
company.
Biyani had said the company would
consider selling stake in its insurance
joint venture once the regulations
governing foreign investment for the
sector are notified by the government.
Other exit opportunities in 2015 could
include the sale of Biyani’s remaining
17-18% stake in Pantaloons to a private
equity firm. The transaction, if completed,
could be worth about Rs.225 crore, Biyani
said. Biyani also has two equal joint
ventures with Apollo Textile Mills and
Gold Mohur Mills in Mumbai, 10% stake
in Future Consumer Enterprise Ltd ,
15-18% in Future Lifestyle Fashion and a
joint venture with the US-based Staples
Inc.
The company posted a stand-alone net
profit drop of 75.52% to Rs.5.32 crore for
the quarter ended 31 December, from
Rs.21.74 crore a year-ago. Total income
increased by 14.08% to Rs.2,659.73
crore for the third quarter of the fiscal
year from Rs.2,331.33 crore a year-ago.
A Bloomberg poll of four analysts had
estimated a stand-alone net loss of
Rs.20.43 crore for the quarter and net
sales of Rs.2,528.10 crore.
Finance costs rose 18.91% from a year
ago to Rs.177.50 crore.
On Thursday, the company also
announced the structuring of a share-
based employee benefit scheme with a
ceiling limit of up to 2% of the paid-up
equity share capital of the company,
computed as at the end of the previous
financial year.
Shares of Future Retail closed at
Rs.116.20 on BSE, down 4..16% from
previous close, while India’s benchmark
Sensex Index rose 0.95% to 28,805.10
points.

Indian retail industry is expected to grow over 15% in coming decade particularly organised retain

Indian Apparel Retail Market The Indian retail market, estimated at US$ ~500 billion in 2012, is expected to demonstrate a robust growth rate of 13% p.a. over the coming years to become US$ ~1.3 trillion by 2020 (Source: IBEF Retail Sector Report). Apparel retail market’s share out of this is ~8%, which puts the market size at approx. US$ 40 billion in 2012. The overall consumption growth story of India, driven by favourable demographic trends and rising income level fuelling consumerism, is expected to continue to gain momentum. In addition, favourable government policies to boost investor confidence are increasing investments in organised retail. Currently, organised retail’s penetration in India is only 7%, which is expected to increase to ~18% by 2016. Rise of E-commerce retailing (also known as ‘E-tailing’) is another dominant force adding momentum to apparel retail market growth. In terms of size, India’s online retail industry is currently small compared to both organized and overall (organised + unorganised) retail in the country. We expect the industry’s revenues to more than double to around 18 per cent of organized retail by 2016 from around 8 per cent in 2013. Yet, its share of the overall retail (organized + unorganized) pie will be just over 1 per cent. That compares with 9-10% in the US and UK and around 4-5% in China. Rapid percolation of technology enablers, i.e. increased adoption of smart phones, tablets and laptops and speedily increasing online consumer base are the drivers of this growth. In branded apparel and retail space, you Company is following hybrid of brands and retail businesses, a proven model in emerging markets like middle east. In chosen category, your Company has built strong portfolio of foreign brands that straddles consumer segments across price points. It is our ambition to be number one player in menswear and kidswear and number two player in innerwear segment. While our Power Brands like Arrow, US Polo Association, Tommy Hilfiger and flying machine very rapidly and dominating the respective space; the growth brands like Nautika, CK & Gants are showing promise of leading the second phase of growth. Megamart, our value retail format having undergone major restructuring, is becoming more robust. With recent acquisition of license for GAP, your Company is making foray in specialty retails space.