Mumbai: Indiabulls Retail Services Ltd, known as Piramyd Retail before it was acquired eight months ago by the financial services group, is drastically downsizing operations in the face of mounting losses.
The firm, which is the retail arm of Indiabulls Financial Services Ltd, has shut four of its nine Indiabulls Mega Stores, each with a floor space of about 50,000 sq. ft, and fired several employees, including senior executives, working at these stores. Each mega store employs about 75-100 employees.
“We are restructuring our retail business. These issues have kept coming up ever since we acquired Piramyd, which was a loss-making company even at the time of the acquisition,” said Gagan Banga, chief executive (CEO) and director of Indiabulls Financial Services, who doubles up as the chief spokesman for the group. “We have shut down the loss-making stores, but we have plans to come up with new stores at better locations.”
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Sameer Gehlaut, one of the three founders of the Indiabulls Group, had resigned as a director in the retail venture in late August.
The enterprise value of Pyramid Retail was pegged at Rs208 crore when it was acquired by Indiabulls in January. Back then, the business had losses of about Rs55 crore.
And, since the acquisition, India’s nascent branded retail industry has taken a beating from high real estate prices, rising interest rates and slowing store traffic.
Of the four mega stores that have been closed, two were in Delhi and two in Ahmedabad.
The five mega stores still functioning are holding on to old merchandise, according to an ex-employee, who had been fired. Mint could not independently ascertain this.
The mega stores that are still open are in Jaipur, Nagpur and Ludhiana, and two in Pune.
In addition to the mega stores, Indiabulls Retail owns smaller stores called Trumarts and two warehouses in Wagholi, Maharashtra and Badarpur, near Delhi.
According to former employees familiar with the situation, who didn’t want to be identified, the company plans to shut both warehouses and could also close some of its small-format stores.
Indiabulls officials did not say if they are closing the warehouses, but Banga said the company plans to launch more small-format stores in Maharashtra and Ludhiana.
“After the acquisition, Indiabulls has added eight Trumart stores,” he pointed out.
Indiabulls Retail’s CEO Ikroop Singh Kehal recently resigned, adding to the chain’s woes, and was replaced by the wholesale unit’s chief operating officer Udesh Jha.
At the annual meeting with shareholders on Friday, however, both Kehal and Jha were appointed directors of Indiabulls Retail.
Some of the company’s vendors say they have also become wary after the retail company delayed payments.
“The company is having issues with some of the vendors, but not with us,” said one of Indiabulls Retail’s larger vendors, on condition of anonymity. “It is closing down its loss-making units, but at the same time it has conveyed plans to expand its operations.”
Most Indian branded retail chains are losing money, especially those that have been on a huge store-opening spree, in an industry known for razor-thin profit margins.