India’s largest lisited retailer, Pantaloon Retail India Ltd, announced that it would set up separate subsidiaries for its hypermarket chain and food business, speciality retail and property and mall management divisions. It also announced its second quarter results, which were in line with market expectations.
Pantaloon’s revenues grew 62.98% to Rs1,226.75 crore for the quarter to December, from Rs752.68 crore a year ago. Profits before tax were up 71% to Rs48.74 crore for the quarter, from Rs28.5 crore for the year-ago period, after excluding a Rs37.32 crore profit on sale on investments for the December 2006 quarter.
Net profit in the quarter rose to Rs31.65 crore, five times the previous year’s Rs6.65 crore, after excluding the profit on sale of investments.
$4 bn ambition: Pantaloon MD Kishore Biyani. Big Bazaar is Pantaloon’s largest retail format with more than 80 hypermarkets in India. (Photo: Madhu Kapparath/ Mint)
Pantaloon’s interest costs more than doubled to Rs41.78 crore in the quarter from Rs20.55 crore in the previous year. But analysts said that is because it is in a growth phase and adding stores quickly.
Analysts had expected Pantaloon to be shielded from the trend of retailers’ margins being hit by rising salary, rental and interest costs. “When all the results come in, I expect Pantaloon’s to be the best,” said a retail analyst at a brokerage who did not want to be named, citing company policy.
Pantaloon’s hiving off of some of its business units into separate subsidiaries could pave the way for strategic investors to invest in the stock, apart from helping to run the units better. “We could well see some (private equity) placements coming in to these businesses,” said Hemant Patel, retail analyst at Enam Securities Pvt. Ltd.
Big Bazaar is Pantaloon’s largest retail format and has more than 80 hypermarkets nationwide. That, along with Food Bazaar, the company’s food retail chain that often fits within Big Bazaar stores, will form one business unit.
Big Bazaar and Food Bazaar could clock a revenue of about $1 billion (Rs3,940 crore) by the end of the firm’s fiscal year ending June 2008, and could go up to $1.5 billion in the next year and almost $4 billion in the next three to four years, according to Pantaloon managing director Kishore Biyani.
“It will be a challenge to run a $4 billion business,” Biyani had said earlier this month. “It’s already not easy to run the business.” Biyani said the unit is doing business if Rs350-400 crore a month and new stores and growth from existing ones will push monthly revenues to around Rs500 crore in the next fiscal year. “We are looking at managing our big businesses separately to give some independence to those businesses,” Biyani had said.
Rasul Bailay contributed to this story.