New Delhi: City-based realty firm Parsvnath Developers Ltd will open retail stores this fiscal year to March 2009 by partnering overseas firms to diversify beyond building homes and offices, said its top official on Friday, even as India’s real estate market cools.
The developer is likely to sign deals with foreign retailers in the next two months, chairman Pradeep Jain told reporters at a press conference. He declined to name the companies. Jain said Parsvnath, which owns 5.5 million sq. ft of retail space, is likely to establish an independent division for its retail venture to easily source additional retail space from other developers. However, the company will not venture into back-end operations, which will be handled entirely by its foreign partners, he said.
India’s recent economic growth has seen large corporates such as Reliance Industries Ltd, Bharti Enterprises Ltd and the Aditya Birla Group enter the organized retail market, hoping to cash in on the higher disposable incomes of the country’s middle class. Multinational retailers such as Wal-mart Stores Inc., Tesco Plc. and Carrefour SA are also keen to tap this space.
The government currently allows 100% foreign investment in retail that sells only to wholesalers, and 51% in case of single-brand stores. It is yet to allow overseas investments in multi-brand retail ventures. Jain said the firm will open 5-10 retail stores in four formats that include hypermarkets, food joints and convenience stores.
It also announced its March quarter results. Net profit fell 18%, owing to a drop in operating margins and higher tax liability. The net profit was Rs109 crore on a revenue of Rs540 crore in the three months to March, against Rs132 crore on a revenue of Rs412 crore in the same period last year.
In the current fiscal that began on 1 April, Parsvnath hopes to maintain its past growth rate despite higher construction costs and tighter financing norms, because it plans to pass on the higher costs to customers, Jain said.