Parsvnath in talks with international retail chains for JV3 min read . Updated: 27 Nov 2007, 12:19 AM IST
Parsvnath in talks with international retail chains for JV
New Delhi: New Delhi-based real estate developer, Parsvnath Developers Ltd, India’s fourth largest, is in talks with international retail chains for a joint venture (JV) in an effort to deploy its funds and leverage its land bank profitably.
Parsvnath is looking for a retail partner to provide mostly back-end support as it has no expertise in this area. It wants a partner that will provide the supply chain logistics or science involved in transporting goods from the place of origin to the shop floor—often cited as the weakest link in organized retailing in India. Overseas retailers, facing a slowdown and intensifying competition in their home markets, have been looking to tap into Indian wallets as more people enter the middle-class bracket in an economy growing at more than 9% a year.
“We plan to get into retail business in the next one year or even sooner," Pradeep Jain, Chairman, Parsvnath Developers said. Jain declined to comment on the companies Parsvnath is talking to. The company has formed a subsidiary called Parsvnath Retail for this.
Parsvnath Developers is looking at holding a majority stake in the joint venture, Jain said. The world’s No. 2 retailer, Carrefour SA, last week said it plans a fully-owned cash and carry business in India even as the French retailer is in talks with three Indian firms to run Carrefour brand of franchisee stores. Both Parsvnath and Carrefour declined comment on whether they are in talks with each other.
Parsvnath is one of Indian developers with a sizeable chunk of retail real estate—an important attraction for foreign retail firms, especially since the unprecedented retail rush in the country has pushed rentals to an all time high, slicing margins in a business that already works on razor thin margins and large volumes.
Parsvnath currently has five million sq. ft of retail space and the company is planning to increase it to 30 million sq. ft by building dozens of malls.
Parsvnath is also joining the ranks of developers bidding for airport management and modernization projects and is in advanced stage of talks with an international airport operator to jointly bid for projects in India. Parsvnath is looking at forming a joint venture with the airport operator. The company would manage the real estate, with the airport operator bringing in its expertise in airport design and development. “We will tie up with a big player," Jain said, adding that he cannot name the player till the deal is finalized.
Parsvnath is the latest among several non-retail companies to announce their entry into India’s $300 billion (Rs11.88 trillion) annual retail market. Gurgaon-based retail consulting firm Technopack Advisors Pvt. Ltd said with business houses such as Reliance Industries Ltd, the Aditya Birla Group, Tata group and Bharti Enterprises riding the retail bandwagon, the size of the organized market is expected to jump from current level of about 3-25% of the overall retail market,which is estimated to touch $800 billion in revenues the next ten years.
The world’s largest retailer, Wal-Mart Stores Inc., has teamed up with Bharti for a 50:50 cash and carry venture that is expected to kick-start its wholesale hypermarkets early next year.
Separately, Wal-Mart will assist Bharti in its retail business that plans to sell to the burgeoning Indian consumers through a host of stores from grocery outlets to hypermarkets. Foreign firms such as Wal Mart are barred from selling multiple brands to individual consumers directly in India.
Parsvnath plans to build 30 malls in the country. This includes seven malls which Parsvnath will build on land near metro stations which will be leased to Parsvnath by the rail authorities on a build-operate-and-transfer basis. Parsvnath has 191.08 million sq. ft of area under development.
Leading real estate developers such as DLF Ltd and Unitech Ltd have already said that they plan to bid for airport modernization projects.
While DLF has tied up with Fraport AG Frankfurt Airport Services Worldwide, owner and manager of the Frankfurt Airport, to bid for projects, Unitech is in talks with Aéroports de Paris, the French airport operator which manages most of the important airports in France. The government is in the process of modernizing and redeveloping 35 airports to ease the traffic congestion in the existing airports.
Rasul Bailay contributed to this story.