Mumbai: Even as Reliance Industries Ltd’s Reliance Retail venture said it would have a tough time meeting ambitious targets for expansion, Pantaloon Retail India Ltd, India’s largest listed retailer, said it will spend Rs800 crore to have 10-11 million sq. ft space for the year ending June from the current 6 million sq. ft retail space.
The expansion will help Pantaloon compete with large domestic and international companies entering the retail space, chief executive Kishore Biyani had said at the company’s 20th annual shareholders meeting on Thursday.
A Big Bazaar store in Bangalore.
Those competitors include Reliance Retail, which has faced mounting protests in several states over its expanding retail presence.
The company said on Thursday that meeting its target of 100 million sq. ft of retail space by 2010/11 would be difficult after protests forced the closure of some stores.
“It’s a tough challenge at this point of time but we certainly think we would make a good go at it,” said Bijou Kurien, president and chief executive of the lifestyle segment, referring to a target set last November. The company currently operates more than 390 stores in 16 cities, spanning 1.5 million sq. ft.
But in October, Reliance ended the services of about 400 franchisees for planned operations in West Bengal state and has shelved a roll-out in neighbouring Orissa because of protests from small traders, who fear major job losses.
Reliance Retail in September laid off 1,000 staff in northern Uttar Pradesh after the state shut 10 Reliance Fresh supermarkets following similar protests. By spending more than $5.5 billion (Rs21,615 crore) on its retail venture, the firm had planned to open about 500 Reliance Fresh supermarkets in the Communist-ruled West Bengal and about 150 in Orissa. “2008, 2009 and 2010 would be the three critical years in terms of property addition so far as we are concerned,” said Kurien at the launch of the company’s first jewellery store in Bangalore.
Modern retail faces political obstacles in India because of fears millions of small shopkeepers could lose their jobs in the fragmented but fast-growing industry that is forecast to double in size by 2015 from an estimated $350 billion.
India limits foreign multiple-brand retailers to wholesale or franchise and licence operations. Talk of easing foreign investment rules have cooled in recent months, prompting Tesco Plc. and Carrefour SA to cool India plans.
Large Indian firms, including the Tata Group, the Aditya Birla group and RPG Group have been stepping up investments to tap growing consumer spending in Asia’s third-largest economy. Kurien said Reliance Retail plans to open 300 jewellery stores across India in the next three years.
Meanwhile, asked by several investors how Pantaloon would deal with competition posed by large companies such as Reliance, Pantaloon’s Biyani said: “We should not worry about competition because the market is expanding. We are looking to create a dominant position in the eight big cities.”
He said the company would seek to set up more stores of the existing chains and its other brands to the metro cities to get a head start on competition. “Our first-mover advantage will be big,” Biyani said. “Retail is a business where you learn doing and others will go through a learning curve.”
The company’s current 75- store discount hypermarket chain, Big Bazaar, will get to 100 stores by February and 120 by June, he said. It will also add four stores to its six Brand Factory stores—its discounted brand store—and 20 E-Zone stores—its consumer durables and electronics store chain— to its current seven stores.
Reuters contributed to this story.