Restructuring Pantaloon Retail: The ‘Future Group’ Initiative

Presented by:-Dolly GirohtraAtul SinghSreeshma ThayyilAmit ThakranAridhi Jain

A New Identity

“We never created a group identity in the past….we can not be known as pantaloon. It was originally a trouser brand”-

Kishore Biyani

Introduction

• Mid 1980’s – PRIL begin as a trouser manufacturer

• March 2006 – Pantaloon Group renamed as Future Group

Contd…

• Future Group Divided into six verticals

Contd...

• 23rd May 2006- PRIL announced an agreement to form joint venture with Italy based Generali Group with 26% stake.

• Future Group planned to operate its insurance and other financial services such as banking, personal finance through its financial arm

–

Contd…

• Restructuring of Pantaloon group to consolidate the group leadership position and diversify into new growth areas in Indian Retail.

• Drivers of growth in Indian Retail Sector:-

– Rising income– Increased exposure to global products– Indian attitude towards saving and consumption– Better infrastructure facilities– Greater employment generation

Competitors

Background

• The history of PRIL can be traced to the mid 1980s when Biyani quit his family business to start manufacturing apparels.

• In 1987 PRIL was incorporated as Manz Wear Pvt. Ltd and manufactured readymade trousers under ‘Pantaloons’ brand.

• In 1992 Manz Wear went public, and the name was changed to Pantaloon Fashions (India) Ltd.

• In 1992 the company inaugurated its first exclusive men’s store called Pantaloons Shoppe.

• By 1995 the no. of stores had grown to 70.

• In August 1997, the first departmental store called Pantaloons was opened in Kolkata with an investment of 0.7 million.

• It was the first retail store in India that marketed apparel for the entire family.

Contd…

Contd…• The store was a success and recorded revenues of Rs. 100

million within first year of operation.

• In 1999 the company’s name was again changed to Pantaloon Retail (India) Limited (PRIL).

• To reduce the dependency on third parties PRIL opened a manufacturing facility at Tarapur, near Mumbai in May 2001.

• The facility contained manufacturing plant with a production capacity of 70,000 pieces per month and a denim plant with a capacity of 20,000 pieces pm

• After success of Pantaloon departmental stores encouraged it to come up with retailing formats such as ‘Big Bazaar’, ‘Food Bazaar’ to retail food products.

• In 2001 PRIL opened its first ‘Big Bazaar’, which had an area of 30,000 sq feet, in Kolkata.

• The major USP of the Big Bazaar was low prices and the best price proposition being offered to consumers.

• As a part of its low pricing strategy the stores mainly focused on unbranded products.

Contd…

Contd…• Big Bazaar sold around 200,000 items at discounts ranging from

6% to 60%.

• In 2001, the first Food Bazaar store was set up in the Lower Parel region of Mumbai.

• These stores were designed based on PRIL’s understanding of the domestic needs of Indian housewives.

• The caption used for promotion was- “Ab Ghar Chalaana Kitna Aasaan”.

• Food Bazaar was performing well when compared to competitors like FoodWorld, Subhiksha and Margin Free.

Contd…• It was reported Food Bazaar generated Rs. 2 billion in

gross revenues.

• It was reported that Food Bazaar stores achieved a cash break even in the very first year of its launch, on the other hand it took 6 years to Food World.

• As of 2005, the Pantaloon Knowledge Group had 3.5 million sq.ft of retail space and over 100 stores across 25 cities in India.

• It employed more than 12,000 people and had a customer base of more than 120 million with a revenue of Rs. 10.73 billion (US$ 242 million).

THE ‘FUTURE GROUP’

THE ‘FUTURE GROUP’• In March 2006: Pantaloons renamed itself as ‘Future Group’ The new group was set up to drive growth through

consumer insights and scenario planning

Future retail

Future space

Future brands

Future media

Future capital

Future logistics

Six business verticals

Future group

Verticals Description

Future Retail Food & fashion

Future Space Management of shopping malls & real estate

Future Brands Management of owned & licensed brands

Future Capital Financial products & services

Future Media Focus on development & management of retail media space

Future Logistics Deriving efficiencies through better supply chain management distribution

Verticals Description

Future Retail Food & fashion

Future Space Management of shopping malls & real estate

Future Brands Management of owned & licensed brands

Future Capital Financial products & services

Future Media Focus on development & management of retail media space

Future Logistics Deriving efficiencies through better supply chain management distribution

• Developed a B2b model

To strengthen its back-end supply chain sourcing capabilities.

To reduce costs and to increase business volumes.

• Increased no. of departments from 16 to 28 with an average area of 20,000 square feet.

• Launched 2 fashion stations, 4 Big Bazaar hypermarkets and 6 new food bazaar stores.

• Able to generate a new market share in retail industry.

• Able to cater in different consumer segments.

• Report released in 2006:

Ranked India First.

Considered as one of the most attractive markets.

Retail Industry in India worth US$ 350 billion.

Vision Statement-

“We will provide Everything, Everywhere, Every time to Every Indian consumer in the most profitable manner.”

New Business Ventures

January 2005

– PRIL acquired 68% stake in apparel company Indus League Clothing Limited (ILCL). The acquisition cost the company around 240.9 million.

– ILCL owned popular clothing brands like Scullers and Indigo nation.

Contd…

February 2005

– PRIL acquired 15.73% stake in Galaxy Entertainment Corporation at a investment of Rs. 88 million.

Biyani said “Leisure and entertainment account for over 6% of the aspirational consumer spent and is growing rapidly. Galaxy will fill that need for the aspirational customer”

Contd…February 2005

– PRIL plans to acquire 49% stake in Planet Sports Pvt. Limited, a sports goods and apparel retailing company, for Rs. 142million.

– Planet Sports was the sole franchise in India for Marks and Spencers (UK based Retailer)

– It had distribution licensing rights for brands like Puma, Wilson, Speedo and Converse.

PRIL entered the restaurant business

– Established PAN India Restaurant Limited with an investment of 90 million. Its focus was on quick service restaurant, food court and hotels

Contd…

April 13, 2005

– Pantaloons food product( India)Ltd. Was incorporated as a subsidiary of PRIL with a 100% stake at an investment of Rs. 50 million.

– It was the main supplier of food products to its food bazaar stores.

September 2005

– PRIL stepped into retailing of footwear by forming a JV called foot mart India Ltd. With Liberty shoes Ltd.

– PRIL holding 51% stake. it invested Rs. 127.5 million in the JV.

Contd…

January 2006– PRIL announced to set up a NBFC with an

investment of 65 million to target credit and insurance business.

– PRIL formed a JV with Gini and Jony Pvt. Ltd. For the purpose of setting up a retail chain for kids wear .

– PRIL had 50% stake.

Contd…

March 2006

– PRIL’s subsidiary ILCL formed a JV with UK based Lee Cooper to distribute and sell Lee Cooper Brands at its retail outlets in India.

– ILCL had 50% stake.

– PRIL begin to retail Lee Coopers brand from January 2007 after the approvals has been obtained.

Contd…April 2006

– PRIL ventured into telecom retailing by establishing its wholly owned subsidiary, Convergem Retail India Ltd. With an investment of 1 billion.

– It was operated through telecom retail formats such as Mport, M bazaar, Gen M.

– It offered wide range of lifestyle electronic products such as car phone accessories, cellular handsets , mobile accessories, cameras etc.

Neeran Chibber “Convergem retail plans to follow a three –pronged strategy : shop in shop with their Big bazaar stores, independent brand stores, and Kiosks in malls and multiplexes catering to impulse buying”

Contd…

April 2006

– Pantaloon Group owned Kshitij real Estate Fund (KVC fund) entered into a property acquisition deal with crossroads.

– The deal included crossroads mall space of around 0.12 million sq. ft. which was estimated to be around Rs. 350-400 million

May 2006

– PRIL form a JV with Italy based Generali to form a JV called ‘Future Generali ‘ with 74% stake and an investment of Rs. 250 million

Contd…

May 2006

– PRIL ventured into online retailing by launching its e-retail portal, futurebazaar.com

– New venture was part of Biyani’s strategy to counter competition from leading e-commerce portals in India like eBay, Rediff, Fabmail, and Indiatimes.

Contd…

June 2006

– 50:50 JV with Talwalkars Better value Fitness Pvt Ltd.

– For retailing health and fitness products and services.

July 2006

– PRIL entered into an alliance with Ruchi Soya Industries Ltd (RSIL) for expanding its refined edible oil business through Food Bazaar.

Contd…

August 2006

– PRIL entered consumer durables retailing business by entering into a JV with Videocon Industries LTD.

– Future Bazaar owned brands ‘Koryo’ and ‘Sensei’

RECRUITING NEW TALENT

Contd…

• At the senior management level , the group hired high profile executives from reputed organizations like Goldman Sachs, Coca Cola India.

• In addition to bringing in new talent at the senior management level, PRIL also tied up with a few management schools to create a management talent pool for the lower levels of the organization.

Contd…

• In April 2006,PRIL had tied up with four B schools in India Welingkar Institute of Management ,K.J . Somaiya Institute, Institute for Integrated Learning in Management Delhi, Chennai Business School to expand its talent sourcing pool by establishing a course in retail management.

• PRIL also said that it had a lower attrition rate 8.3 % when compared to the retail industry as a whole around 40 % to 50% per annum

FUTURE OUTLOOK

Contd…

• According to report by KPMG the size of the Indian retail industry was estimated at US $ 200 billion in 2006.

• For the year ended June 30 2006,PRIL reported a total Income of Rs 18.72 billion as compared to Rs 10.88 billion in 04-05.

• The company also reported a 66.4 % rise in net profit in the previous fiscal year.

Contd…

• The company’s growth momentum continued as PRIL recorded a net profit of Rs 386.4 million for the quarter ended September 30,2006.

• This was an increase of around 186 % over the corresponding period of the previous year.

• In Feb 06, the Indian government allowed single brand retailing in India upto 51 %.

Contd…

• In July 06,it was reported that WAL-MART received permission from Indian government to set up two liaison offices in India.

• Though these offices could not undertake business operations in India, analysts saw this as part of retail giant’s long term plans for establishing operations in India.

Contd…

• Biyani was against allowing FDI in Indian retailing sector .

• He said “since Indian retail is growing at over 40 %, FDI in retail is not urgently required as Indian entities are growing this sector at a rapid rate. The valuations of Indian retailers would be better in a few years time”.

Contd…

• In order to compete with Reliance and international retailers Biyani entered into wholesale trading and opened KBs Wholesale market similar to WAL-MART’s Sam’s Club.

• Commenting on the new venture Biyani said “We think there is a big opportunity in changing the face of wholesale trading in the country just like we have done for retail.”

Contd…

• Biyani had plans to launch 18 formats and over 3340 stores thereby turning PRIL into a US $7 billion company with over US$1 billion in profits by the year 2010.

• In September 06 Biyani planned to raise around Rs 10 billion over the next 18 months.

• Biyani also planned to split his businesses so that he could raise money separately from each business entity.

Contd…

• A few industry observers were of the opinion that despite Biyani’s anti FDI stance he would have few options in future and so he may have to form a venture with an international retailer.

• Biyani was of the view that his aggressive expansion plans were proof that he planned to be in business for a long time.