Pantaloon Retail - Expecting Breakout

Pantaloon - Expanding Aggresively

Close on the heels of the quick deployment of the Kshitij real estate fund (KVC) Fund 1, the Pantaloon group-promoted Future Capital Holdings is planning to set up Kshitij 2, another real estate fund, to focus on several upcoming projects in Tier-III cities. The first Kshitij fund, which closed in the middle of last year, focuses primarily on projects in the metro cities. The group is contemplating a corpus of around Rs 300-500 crore for Kshitij 2, it is learnt. Yet another fund, Horizons, which has a lot of foreign investors, closed recently at $ 263m, sources said. Horizons, which has a lot of foreign investors, focuses on areas of more than 50,000 sq ft. Kshitij 1 closed last year at around $350m.

Confirming these plans, Shishir Baijal CEO & MD of Kshitij and Horizon funds, said the group is planning a fund to tap the growing real estate in the smaller cities. “Kshitij 1 is already fully committed and we are just planning another one to focus on smaller projects.” Kshitij 1 is understood to have invested in projects around Tier-II cities like Ahmedabad, Baroda University, Cochin, Jaipur and Trivandrum. Horizon International Fund is aimed at foreign direct investors coming to India under the new 100% FDI norms.

The Horizon Fund has already identified four potential investments in Mumbai, Chennai, Bangalore and Kolkata, with an approximate total retail GFA (gross floor area) of 4.1m sq ft and an estimated total project cost of $330m. These properties are to be completed by ’08-09.

Further, Big Bazaar, the hypermarket from the Pantaloons Retail (India) Ltd is expanding in the east, and it is the tier-II towns where most of the expansion will take place. Haldia in West Bengal will get its Big Bazaar by June-July this year, while the one in Barddhaman will open some time in September or October 2006, according to Manish Agarwal, regional head (east), of Pantaloons Retail. In the next two years, Big Bazaars will also reach Kharagpur and Siliguri in West Bengal, as also Ranchi in Jharkhand, Agartala in Tripura and Patna in Bihar.

The mall in Haldia will be spread over 40,000 square feet and will be located in a shopping complex on Durga Chowk, while in Bardhaman, it will be situated in the Dhiraj Promoters' retail-cum-entertainment project being built on Jailkhana More. In Kharagpur and Siliguri, the Big Bazaars will be part of the malls being developed by Kshitij, the asset-management venture of Pantaloons. A Big Bazaar has been operational at the Durgapur City Centre for over a year, and according to Agarwal, has been doing very well. With footfalls of 3,000 on weekdays going up to 5,000 on weekends, a conversion rate of 60 per cent and average billing of around Rs 500, the Durgapur store compares quite favourably with the two stores in Kolkata with conversions of 55 per cent and average billing of Rs 625.

"There is tremendous potential in these cities," says Agarwal. According to Rajan Malhotra, head of Big Bazaar category management (apparels), the company has plans to increase the presence of all its formats -- Pantaloons, Big Bazaar, Food Bazaar and other speciality formats -- to 40 or 50 stores in the region. A number of these will be in and around Kolkata itself, a city where the company began its journey with the first Pantaloon store in Gariahat. Pantaloons will stamp its presence on all the new malls coming up all over the city, including the Riverside Mall, the South City Mall and the Calcutta Central mall, to name a few.

For Pantaloon Retail, the ‘Blue Sky' is not the limit. It is considering increasing this stand-alone retail format for watches and sunglasses to 35 by 2007 from 13 currently. The company will open two Blue Sky stores in Mumbai and Ahmedabad. Blue Sky stores are mostly shop-in-shop counters and only four stores- in Baroda, Lucknow, Ahmedabad and Bangalore - will be modelled on the stand-alone format.

"There are lots of opportunities in the branded watches and sunglasses space in India. Thus, we are seriously looking at standalone Blue Sky stores in the future," Jaydeep Shetty, chief of new business, told DNA Money. About 90% of watches sold in India are in the price points below Rs 1,000. Blue Sky operates in the mass-to-premium space, strictly keeping luxury brands like Tag Heuer and Dior out of its ambit. The brands that typically find shelf space at Blue Sky are mid-market labels like Swatch, Q&Q, Fossil, etc with price points ranging from Rs 599-10,000. In sunglasses, the range varies from Rs 499-8,000.

Though sunglasses are a rapidly expanding segment in India, with some of the stores witnessing almost 100% growth in sales volumes, branded watches are moving at a more conservative 15% clip. The total market for watches in India is pegged at 30 million units. Organised retail market comprises 10% of the total demand. The sunglasses market is pegged at Rs 600 crore, of which the branded segment comprises 20%. The company will invest around Rs 1.4 crore for expanding its Blue Sky stores. The cost on each store will be around Rs 40-50 lakh, including inventory, said Shetty.