Uncertainty over duty-free operator as Nuance exit nears

Uncertainty over duty-free operator as Nuance exit nears
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First Published: Thu, May 06 2010. 10 52 PM IST

Waiting game: The Hyderabad international airport. The management had been expected to announce a replacement for Nuance by 7 May, but the process was delayed after potential bidders raised several is
Waiting game: The Hyderabad international airport. The management had been expected to announce a replacement for Nuance by 7 May, but the process was delayed after potential bidders raised several is
Updated: Thu, May 06 2010. 10 52 PM IST
New Delhi: GMR Hyderabad International Airport Ltd (Ghial) is finding it difficult to meet the early June deadline to replace its duty-free operator, Nuance Group AG, which exits its contract at the end of this month.
Poor business in the last two years prompted Nuance Group India Pvt. Ltd, the joint venture between the Switzerland-based company and its local partner Shoppers Stop Ltd, to walk out of airport retailing five years before the seven-year contract actually runs out.
Ghial, which will now award the contract for 15 years instead of seven years, had been expected to announce a replacement for Nuance by 7 May, but the process was delayed after potential bidders for the contract raised several issues at a meeting late last month.
Waiting game: The Hyderabad international airport. The management had been expected to announce a replacement for Nuance by 7 May, but the process was delayed after potential bidders raised several issues. Bharath Sai/Mint
Potential bidders raised concerns about the steep Rs30 crore one-time fee that the airport developer expects the winner to deposit. An executive at one of the potential bidders said the timeline was complex and the June deadline for a new operator to open duty-free stores was not possible to meet.
“It would be sensible for them to give Nuance an extension, otherwise the airport will be without duty-free stores,” added the executive, who did not want to be named.
The head of a foreign duty-free operator, who attended the pre-bid meeting in Hyderabad, said Ghial had sent an email that it would revert to the potential bidders on their concerns. “But when will they get back, we don’t know,” said the person, who also declined to be named.
Responding to Mint’s queries on the timeline for the bids, a GHIAL spokesperson said: “The bidding process is currently under way and we cannot give out more details... As communicated earlier, we are working towards a long-term contract and this is bound to take some time to finalize.”
“We are looking at alternate scenarios after the Nuance contract ends on 31 May,” the spokesperson said. “We are confident that when the new operator comes on board there will be visible improvement in sales and customer experience.”
Spain’s Aldeasa SA, Dubai’s Flemingo International Ltd, Switzerland’s Dufry AG, Hong Kong-based DFS Group Ltd, state-owned India Tourism Development Corp., and a joint venture between Gurgaon-based IDFS Trading Pvt. Ltd and Ireland’s Aer Rianta International are potential bidders, according to the two executives quoted above.
Ghial had high hopes of its retail business spread over more than 100,000 sq. ft.
Nuance Group India does not reveal sales figures, but it had been expecting revenue of up to $240 million (around Rs1,089.6 crore) over seven years.
However, sales were below expectations, partly because most of the international passengers flying to and from Hyderabad airport are Indian workers employed in West Asia who don’t match the free-spending profile of customers who shop at duty-free outlets.
rasul.b@livemint.com
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First Published: Thu, May 06 2010. 10 52 PM IST