Study of Business Performance

Pantaloon Retail Industries Ltd

Lines of Business

Marketing Management

Everything , Everywhere for Everyone

Product Types

Marketing Tactics Adopted

Ansoff’s Product/Market growth matrix

Product Differentiation

Pricing Strategy

Change in Sales due to Change in Expenses

Competitive Strengths & Performance with respect to Competitors

Marketing Awards, Recognition and Excellence

Marketing performance metrics

Shifts in Marketing Strategy

Product Offerings

MARKET PENETRATION

Number Big Bazaar stores2002: 42007: 56

PRODUCT DEVELOPMENTFood Bazaar

Fresh fruits, vegetables, ready to cook and FMCG products

MARKET DEVELOPMENTaLL

a fashionable ready-made garment store for plus sized people.

DIVERSIFICATIONValue Retailing (Big Bazaar)

Value through volumes and discounting

Current

Markets

New

Markets

Current Products New Products

Ansoff’s Product – Market Expansion Grid

Marketing Expenditure impact on Sales

Change in Sales With Change in Expenditure

00.5

11.5

22.5

33.5

2005 2006 2007

Year

Rat

io

AE/Sales (%)

ME/Sales (%)

DE/Sales (%)

Source : Prowess

Competitor Comparison

02468

10

Mar ' 07 Mar ' 06 Mar ' 05

Year

Selli

ng

Expe

nditu

re/S

ales

Shoppers Stop

PRIL

Human Resource Management

Proud to be PantalooniansOrganization structure:

Inverse pyramid structure

Functional Structure

Income per employee and PAT per Employee:

Year 2004 2005 2006 2007

PAT Per employee (In lakhs) 0.56 0.55 0.49 0.70

Income per employee (In lakhs) 18.81 15.50 15.09 19.96

Recruitment policies & measures

Tie Up with institutes

Women recruitment and Diversity Recruitment

Attracting Industry talent and consultants

Increasing Manpower in line with business growth

2003-04 2004-05 2005-06 2006-07

3500 7000 13000 17000

Retention policies and measures

Seekho: Tie up with Institutes

Golden Handcuff Scheme – Insurance Schemes

Employee stock options plans

Employee Growth Trust Fund

Recognition for work - “Pantaloon Day” , Prema

Increasing manpower costs as a percentage of total income and

expenditure

Result: Low attrition Rate

2005-06 : 8.36% (Sectoral Average - 25%)

2006-07 : 8.12% (Sectoral Average – 20%)

Front-line staff: 8 per cent, down from 12 per cent in 04-05

Training and development programs:

  All figures in % 2004 2005 2006 2007

Training and staff welfare/sales 0.17 0.19 0.27 0.19

Training and staff welfare/compensation 4.32 4.70 5.40 3.56

Orientation Programmes - Prarambh and Parikrama

GuruKool – Outbound Program

Learning and Development team

Smile – For New store Managers

Tie Ups with Management Institutes

Encouragement for Creativity and innovation : “Future Ideas”

CheckBox1

Performance Management , Rewards and appraisals

Balanced scorecard - easier because of SAP

Employee connect

Recognition for work – “Pantaloon Day” and “Prema”

Perks and Perquisites

Average compensation per employee

Year 2004 2005 2006 2007

Average compensation per employee (In lakhs) 0.78685 0.725 0.867076 1.222

Balanced scorecard

Operations Management

Control Costs and Improve Revenue

Source : http://voicendata.ciol.com/content/goldbook/goldbook07/107031205.asp

Measures to achieve operational excellence

Effective inventory replenishment

Out of stock reduction through effective backroom

management

Store operations optimization

Linking marketing & operations

Interaction between Inventory, dispatching policies &

routing decisions

Mobile queue busting system

Business Solution Processes

Implementation of SAPConnecting nation wide locationsRFID for Inventory trackingAuto replenishment of stocksMerchandise Assortment Planning (MAP)Robust transaction management systemEnterprise wide platform

Key Initiative : To gain Competitive edge

Investment on IT Systems/Computer

0

50

100

150

2003 2004 2005 2006 2007

Year

Am

ou

nt

Rs

Cro

re

Inventories as percent of current assets

0

20

40

60

80

2003 2004 2005 2006 2007

Year

% o

f C

urr

en

t A

ss

ets

Measure of: Implementation of Technology

in improving Operations Efficiency

Supply Chain Management Initiative

Balance between back end & front end operations

Working on a vendor network & logistics network

Future Logistics

Economies of scale

Reducing warehouse costs

‘Weekly discount sale’

Key Performance Indicators(1/3)

Retail Sales per Sq.Ft

7066

8306 8575 8294

0100020003000400050006000700080009000

10000

2003-04 2004-05 2005-06 2006-07

Period

Valu

e( in

Rs.

)

Retail Sales per Sq.Ft

Source : Prowess

Performance Indicators(2/3)

Customer Conversion Ratio

57.11

45.83 43.75 46.11

0.00

10.00

20.00

30.00

40.00

50.00

60.00

2003-04 2004-05 2005-06 2006-07

Period

Cu

sto

mer

co

nve

rsio

n R

atio

Customer ConversionRatio

Source : Prowess

Performance Indicators(3/3)

Labour Productivity

5.246.07

6.76 6.50

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

2003-04 2004-05 2005-06 2006-07

Period

Per

cen

tag

e

Total Labour cost/Netsales

Source : Prowess

Financial Management

Source : Rediff Stocks

Evaluation Metrics

1. Profit and loss (5 years consolidated)

2. Balance Sheet (5 years consolidated)

3. Cash flow analysis

i. Common size statement

ii. Trend Analysis

iii. Competitor Comparison

4. Ratio Analysis

i. Year wise comparison

ii. Competitor comparison

5. Altman Z test for Fiscal Fitness of the company

Economic GrowthSales Growth

0

500

1000

1500

2000

2500

3000

3500

FY-03 FY-04 FY-05 FY-06 FY-07

Years

Rs

(Cro

res)

0

10

20

30

40

50

60

70

80

90

Gro

wth

%

Sales

Growth %

34.05%7,995.98Shopper’s Stop

43.25%4,557.82Trent

89.83%6,026.53Vishal RetailLimited

70%32,367.40Pantaloon RetailIndia Limited

FY04-07FY07

Sales CAGRSales (Rs. mn) Company

34.05%7,995.98Shopper’s Stop

43.25%4,557.82Trent

89.83%6,026.53Vishal RetailLimited

70%32,367.40Pantaloon RetailIndia Limited

FY04-07FY07

Sales CAGRSales (Rs. mn) Company

•CAGR of 70% since ’04

•Area of operations increased to 45 lakh sq ft

•About 200 more stores coming up by end ‘08

•Largest revenue generator

•Highest CAGR only next to vishal

Margins

Drop in Operating Margins Net Income is quite stable Rent & Employee costs are increasing due to expansion

Margins

0

1

2

3

4

5

6

7

8

9

FY-03 FY-04 FY-05 FY-06 FY-07

Years

Per

cen

tag

e o

f sa

les

PAT %

EBIT %

Rent

Personnel cost

Comparative Analysis

 ParticularsVishal

RetailPantaloon

RetailShoppers’

Stop Trent

Raw-material cost (% of Sales) 57.46 68.26 63.48 56.37

Cost of goods sold (% of Sales) 62.07 69.01 65.02 58.81

Employee Cost (% of Sales) 4.81 6.37 7.32 6.24

Rental Cost (% of Sales) 5.44 6.4 7.96 2.21

Power Cost (% of Sales) 2.87 1.9 2.29 2.81

Other Expenditure (% of Sales) 13.69 9.66 8.98 22.54

OPM (% of Sales) 11.12 6.66 8.43 7.39

Interest Cost (% of Sales) 2.45 2.77 0.55 0.31

Depreciation Cost (% of Sales) 2.52 1.14 3.2 1.74

PAT (% of Sales) 4.16 3.71 3.28 7.11

Trend AnalysisLiabilities Trend( balance sheet)

0.001000.002000.003000.004000.005000.006000.007000.008000.009000.00

2003 2004 2005 2006 2007Years

Shareholder's Fund

Unsecured loans

Total long term liabilities

Assets Trend

0.00

1000.00

2000.00

3000.00

4000.00

5000.00

6000.00

2003 2004 2005 2006 2007Years

Capital WIP

Investment

Fixed Assets

Huge increase in Unsecured loans Additions in investments

and Capital WIP

Cash Flow Analysis

-800

-600

-400

-200

0

200

400

600

800

1000

1200

Jun 2002 Jun 2003 Jun 2004 Jun 2005 Jun 2006 Jun 2007

Years

Rs

(Cro

re)

Operating Activities

Investing Activities

Financial Activities

Similar ComplementaryEffects on the cashIn flows/outflows

Similar ComplementaryEffects on the cashIn flows/outflows

Similar ComplementaryEffects on the cashIn flows/outflows

Similar ComplementaryEffects on the cashIn flows/outflows

Similar ComplementaryEffects on the cashIn flows/outflows

Ratio AnalysisProfitability Ratios FY05 FY06 FY07Operating Profit Margin (%) 8.00 7.80 6.60EBIDT Margin (%) 8.40 8.00 9.50PAT Margin (%) 3.60 3.40 3.70RONW (%) 17.40 12.20 11.00ROCE (%) 15.47 11.14 11.06Turnover Ratios FY05 FY06 FY07Inventory Turnover 3.9 3.7 3.7Inventory Turnover Days 92.9 99 99.9Debtors Turnover 72.50 127.40 78.80Debtors Turnover Days 5.00 2.90 4.60Fixed Asset Turnover 5.10 6.00 4.80Working Cap turnover 4.06 3.12 2.33Creditors turnover 19.72 14.87 15.21Creditors Turnover days 18.26 24.22 23.67Per Share Ratios FY05 FY06 FY07EPS (Rs.) 3.5 4.8 8.2CEPS (Rs.) 4.7 6.3 10.7Dividend paid (Rs) 0.5 0.5 0.5BV Per Share (Rs.) 20.1 39.2 74.4Capital Structure FY05 FY06 FY07Debt/Equity 1.3 1.1 1.2Current Ratio 2.8 3.4 4.9

Ratio Analysis (Competitors)

Company should improve its operational practicesIncrease the debtors turnover ratioReduce the inventory days

Maintains a fair amount of Debt/equity ratio as others Company has relative low returns

Particulars for FY07 Vishal Retail Pantaloon Shoppers’ Stop TrentInventory Days 99.1 99.9 36.72 50.41Creditors Velocity (Days) 6 23 44 58Debtors Velocity (Days) 0 4 3 2

Vishal Pantaloon Shoppers’ TrentParticulars Retail Retail StopTotal asset turnover ratio 1.62 1.32 1.94 0.98Debt Equity 1.92 1.19 0.27 0.14ROCE (%) 18.67 11.06 14.42 10.25

Conclusion

Sl. Metrics ObservationsCompetetive

pictureRating

1 Growth Parameters 70% CAGR Largest Revenue generator Excellent

2 Margins Decreasing operating margins, but stable PAT

Least operating margins Average

3 TrendsMassive increases in assets & liabilities, Stable PAT

Largest & still expanding Good

4 Ratio Analysis

ProfitabilityHighest revenues still low margins, decreasing returns

Average returns as others Average

TurnoverHigh inventory and creditors turnover ratio

Poor compared to other players and cash blockage

Poor

Per ShareGood earnings but not so good dividend policy

Good performer Good

Capital Stable Ratios In sync with other players Good

5 Altman Z Score Score of 3.005, under safe area

----- Good

FUTURE PLANS

Source: SSKl Research

Thank You