New Delhi: Indian hottest retail stock is not its biggest. Nor is its best-known. It is just the oldest though.
Bombay Swadeshi Stores Ltd, which began in 1906 and listed on the Bombay Stock Exchange way back in 1964, has outperformed all of its listed peers as well as the benchmark Sensex in the past year.
Since January 2006, shareholders of Bombay Stores have seen their holdings soar 206% through the beginning of this month. The Sensex has jumped 50%, while India’s biggest listed retailer Pantaloon Retail’s shares rose a healthy 36% in the same period. The No.2 retail firm, Shoppers’ Stop, has also outperformed the Sensex with a gain of 56%.
Organized retail and its growth potential in India has swung into the limelight in recent months with major ventures announced by Reliance and Bharti Enterprises. It has also been controversial because of the likes of Wal-Mart Stores Inc. looking to expand here, causing some politicians to raise a hue and cry over potential threats to mom-and-pop stores.
“Is it listed?” asked a suprised Amnish Aggarwal, the analyst covering India’s retail sector for Mumbai-based Motilal Oswal Securities when asked about Bombay Stores. Aggarwal said he thought it was a so-called “penny stock,” but Bombay Stores closed at Rs539 a share. The company’s total market capitalization, however, is still tiny at around Rs33 crore, a fraction of the market value of Pantaloon Retail’s Rs6,163 crore.
“Over the years, they have refurbished their stores in order to catch up with the whole retailing experience that’s under way in India at present,” said Jigar Shah, head of research for Kisan Ratilal Choksey Shares & Securities, though he doesn’t have any rating on the stock. “They have a loyal set of customers who have maintained their patronage.”
Bombay Swadeshi Stores Ltd was born during India’s freedom struggle, when nationalist leader Bal Gangadhar Tilak and industrialist J.R.D Tata floated the idea of a chain of cooperative stores selling Swadeshi or “made in my country” products amid calls to boycott British goods in the early 1900s.
The company’s ownership changed several hands and the Dalal family, which boasted of some of Mumbai’s earliest stockbrokers and owned a few shares in Bombay Swadeshi, upped their stake over time from 35% to 68% in 1991. The store had just one outlet then.
“We were merely breaking even at that time,” says Asim Dalal, who left his job as a banker in London to run the newly-inherited family business and to pursue his “childhood passion to run a retail business”.
Dalal started refurbishing the store to give it a contemporary look, yet maintaining its basic values: to sell products ranging from clothing to furniture made by local artisans.
Then, in 1995, he changed the name of the outlets to Bombay Stores.
“Swadeshi doesn’t have relevance in present-day India,” Dalal said. “Tourists are not even able to pronounce it.”
The new-look Bombay Stores attracted newer clients and retained old customers. Revenues swelled to Rs24 crore for the year ended March 2006, from Rs1 crore at the time the family took over the lone store in Mumbai.
The family currently runs six stores in Mumbai, Pune, Bangalore and Hyderabad, and plans to open 30 more company-owned and franchisee stores in the next three years in different Indian cities.
The company plans to raise Rs30 crore through a dilution in the family stake to fund the expansion. Dalal is optimistic about his ability to raise money for expansion. “We would be on a different valuation, depending on our achievements in the next two years,” he says.
If Bharat Stores’ stock maintains even a fraction of its recent scorching pace, he is well on course.