Mumbai: The Wadia group plans to invest between Rs8,000 and Rs12,000 crore in the retail business over the next several years.
In doing so, the textiles-to-food group, which has been an icon of Indian enterprise for 116 years, will join India’s four other big industrial houses—Reliance, the Tatas, the Aditya Birla Group and Bharti Enterprises—in outlining ambitious plans for this booming sector.
The Wadia group plans to acquire partner or license over two dozen domestic and international brands in various categories—from consumer durables to apparel to retail—under its different retail formats, Wadia family members told Mint. “We are very keen on the retail sector and are exploring all segments of the market—discount, mid-segment or premium,” saidNess Wadia, joint managing director of Bombay Dyeing & Manufacturing Co., the flagship of the group, and son of chairman Nusli Wadia. “We will work with like-minded partners in each area to leverage our understanding of the retail space as we have always been in (the business-to-consumer) segment and have no issues dealing with customers.”
The group is developing 4.3-million-sq.ft land in central Mumbai, some of which will be part of its big retail foray, and is “prepared to commit adequate resources from the group’s side once the studies are over,” says Wadia, a youthful 36-year-old who appears equally at ease in the world of construction and hard hats as he is in Bollywood circles.
This is the first time that Wadia, who is spearheading the transformation of the group, has talked specific details about the ambitious retail ventures that are being planned.
The group is in the process of finalizing an umbrella retail identity as well as a foreign partner for the retail venture. It plans to set up hypermarkets, super markets and stand-alone stores, and has appointed S. Raghunandan, former CEO of Rainbow Retail, a project management company of K Raheja Corp., as one of its advisors.
Wadia, however, wouldn’t comment on the specific amounts being invested, saying that funding patterns will be finalized for each business separately.
Bombay Dyeing, known for its uninterrupted record of paying dividends for over a hundred years as well as for its textiles, will be one of the brands to be retailed through its various outlets.
Organized retailers generally rely on a bouquet of well-known brands to pull customers into stores even though they make larger margins from their own branded goods that are sold at prices comparable with well-known brands such as Hindustan Lever, Colgate, Videocon and LG.
Analysts cite the example of Pantaloon Retail, which has successfully managed to introduce its own private label brands—such as Fresh and Pure in edible oils and dairy fats and Koryo in consumer durables—allowing Pantaloon to generate larger profits.
Through its private-equity arm, Pantaloon has also acquired stakes in other companies such as Capital Foods that sells ketchup under the Smith & Jones brand, among others.
The Wadias may go for acquisitions of popular brands at the initial stage itself. Says another Wadia family member, who did not want to be quoted: “We will look at everything—from acquiring franchising rights of some global brands to buying domestic brands and even partnering with some brands at our retail stores.”
Hemant Kalbag, principal, consumer industries & retail practice, AT Kearney Ltd, a management consultancy firm, notes that many of the major retail ventures that have been announced recently are from groups with little or no previous retail experience. “The Wadia group has some experience,” he says. “Real estate will be the critical differentiator in the success of a retail venture and (the) Wadias’ land bank will be an advantage, although only in Mumbai.”
The Wadia group, whose pedigree goes back to a long line of master shipbuilders, has had a long history of real-estate developments as well. Between 1908 and 1956, it helped build five baugs, or housing colonies, in Mumbai for lower and middle-class Parsis—the Nowroz Baug, Rustom Baug, Bai Jerbai Baug, Cusrow Baug and Ness Baug.
Its current publicly-traded companies, in addition to Bombay Dyeing, also include National Peroxide, Britannia Industries and Citurgia Biochemicals. The shares of Bombay Dyeing, in particular, have soared in recent times as investors started to take note of its valuable real estate. While it is well off their 52-week high of Rs988.90, the shares are trading at Rs462.20, well above the 52-week low of Rs382.50, despite the recent turmoil in the stock market.
The Wadia group, which employs about 35,000, is in the process of unlocking value by selling real estate and developing the textiles business of Bombay Dyeing. It is relocating its textile operations to Rajangaon, Pune, from Mumbai and has plans to commercially develop close to 4.3m sq. ft of commercial and residential areas over the next two-three years. These would include residential buildings, commercial offices, malls, hotels and convention centres.
Bombay Dyeing, which pioneered the franchisee concept for its textile stores, has already refurbished most of its around 400 stores across the country. Says Wadia: “We have a really strong brand equity for our customers.”