- Supermarket chains are looking for funding in a tough business environment, with foreign partners closed off for

now after last year's indefinite suspension of a move to open the $450 billion retail market to giants such as Wal-Mart Stores Inc(WMT.N).
The government had hoped the major reform would boost investment in Asia's third biggest economy, but it quickly backtracked when it came up against fierce opposition from across the political spectrum and from traders' unions. Following are some facts on India's retail sector: * The retail sector in the nation of 1.2 billion people is estimated to have annual sales of $450 billion, with nearly 90 percent of the market controlled by tiny family-run shops. * Organised retail, or large chains, makes up about 10 percent of the market, but is expanding at 20 percent a year. This is driven by the emergence of shopping centres and malls, and a middle class of close to 300 million people that is growing at nearly 2 percent a year. * India also allows 100 percent FDI in cash-and-carry, or wholesale, ventures. Restrictions on foreign investment in front-end retail exist because of opposition from millions of small shopkeepers who are valuable vote banks during elections. * India has recently allowed 100 percent FDI in single-brand retail subject to certain sourcing restrictions but no ownership in multi-brand retail. LOCAL COMPANIES * Pantaloon Retail, India's largest listed retailer and part of the Future Group, runs apparel and electronics stores under its lifestyle brands Central, E-Zone, Hometown. Future also operates the Big Bazaar hypermarket chain and supermarket brand Food Bazaar. The group has over 1,300 stores across formats, and occupies a total retail space of 16.5 million square feet in India. Future has for long been linked to France's Carrefour(CARR.PA) for a partnership in hypermarkets. It is recently sold controlling stake in its flagship clothing brand Pantaloon to bring down its high debt. * Second-ranked Reliance Retail is part of Reliance Industries(RELI.NS), India's largest listed group headed by Mukesh Ambani, India's richest man. Reliance Retail operates 1,300 stores across neighbourhood stores, supermarkets, hypermarkets and lifestyle stores. It has said it doesn't plan to partner with any global retailer. * Shoppers Stop (SHOP.NS), part of the K Raheja Group which operates in real estate, has about 265 stores across brands and formats including 12 Hypercity hypermarkets. It operates 4.58 million square feet of retail space and its loss-making Hypercity is open to partnerships with foreign groups. * Trent, part of the sprawling Tata Group, operates 106 stores across formats and runs the Westside range of apparel stores, and hypermarkets under Star Bazaar. It signed a franchisee agreement with Tesco Plc under which Star Bazaar shops use the British firm's supply chains and infrastructure. * Aditya Birla Retail is the unlisted retail arm of India's telecoms-to-cement conglomerate Aditya Birla Group, headed by Kumar Mangalam Birla, ra nked the seventh-richest Indian by Forbes in March 2012. The company operates around 500 supermarket and hypermarket stores under the More brand. It has said it will evaluate partnerships with global firms.

MAJOR FOREIGN COMPANIES * Wal-Mart Stores Inc (WMT.N) has a cash-and-carry operation with Indian partner Bharti Enterprises, the parent of leading mobile provider Bharti Airtel, and will add 12-15 new cash-andcarry stores this year to its 17 existing stores. * Tesco, Britain's largest retailer, has a tie-up with Trent's Star Bazaar hypermarket chain. Tesco is also looking to enter the wholesale market through the tie-up. * Germany's Metro AG operates 11 wholesale stores in India. The company plans to open 5 cash-and-carry stores every year. * Carrefour has 2 cash-and-carry stores in India. The world's No. 2 retailer has been seeking a local partner to enter the hyper or supermarket sectors. (Reporting by Nandita Bose in MUMBAI; Editing by John Mair)

Ratings agency Fitch has assigned a stable outlook to the retail sector for 2012 as factors such as expected sales growth-driven expansion and efficient working capital management are likely to benefit retail companies. Despite the economic downturn, Fitch expects the food and value segments to provide a defensive play. "There are likely to be economic headwinds which would impact Indian retailers. However, sales growth driven by space additions and inflation, stable margins, efficient working capital management and flexibility to defer or tone down expansion plans are expected to result in a stable credit profile for Fitch-rated retail companies," Fitch said. According to the '2012 Outlook:India Retail' report, consumer discretionary income is likely to be lower due to higher inflation and interest rates. "However, inflation provides a direct fillip to same-store sales growth. Growth will also be helped by capital expenditure undertaken by retailers," it said. During the year, margins for most retailers are likely to remain stable. "Fitch expects margin pressures created by extended discounting periods to push volumes growth, to be mitigated by measures such as recent price hikes and softening in raw material prices [mainly cotton]," it said. Improvements in operating cost structure (rentals) and increasing the proportion of private labels would also contribute to margins. Fitch expects most retailers to generate negative cash flow from their operations in 2012. However, the deficit is expected to be lower compared to previous years, backed by stable margins and slightly improved working capital management. "In 2011, most companies tied up additional space requirements for the next two to three years, citing lower availability of space in strategic locations, resulting in a higher outflow on account of lease deposits," it said. The outlook could be revised to negative if economic conditions worsen, affecting revenue growth, leading to margin contraction and adversely impacting retailers' cash flow, Fitch added. The agency also does not expect any positive triggers in the immediate term for the sector. Commenting on allowing more FDI into the sector, Fitch said: "If and when foreign direct investment [FDI] is allowed, it would benefit Indian retailers over the next two to three years." The size of India's retail sector is currently estimated at around $450 billion and organised retail accounts for around 5% of the total market

Retail sector in India growing at phenomenal pace

TNN Jun 25, 2012, 05.12AM IST

Tags: retail sector| Reliance India Private Ltd| Marks and Spencer| Global Retail Development Index 2012

The retail sector in India is growing at a phenomenal pace leading to job opportunities in different areas. Aaditi Isaac reports The retail sector in India is growing at a phenomenal pace. According to the Global Retail Development Index 2012, India ranks fifth among the top 30 emerging markets for retail. The recent announcement by the Indian government with Foreign Direct Investment (FDI) in retail , especially allowing 100% FDI in single brands and multibrand FDI has created positive sentiments in the retail sector. "There are many factors contributing to the boom in this sector. To name a few, increased consumerism with a capacity to spend on luxury items and increased spending power in the hands of Indians. More Indians are travelling abroad and are exposed to different cultures and way of life and thereby more brands. India's internal consumption is also high and the consumption pattern owning to diversity in culture, religion and the family values that encourage spending on specific occasions keep the retail business well oiled. Marriages add a big dimension to the retail spends. Our culture expects a lot of give-and-take for marriages, festivals and other important events of life. Hence, it's imperative for people right from rural to the urban , irrespective of their caste and creed or economic status, to spend on gifts as a part and parcel of life. And that's the reason worldwide retailers eye the Indian market," says Swati Salunkhe, managing director, Growth Centre (I) Pvt Ltd. The size of India's retail sector is currently estimated at around $450 billion and organised retail accounts for around 5% of the total market share. Ratings agency Fitch has assigned a stable outlook to the retail sector for 2012 as factors like expected sales, growth-driven expansion and efficient working capital management are likely to benefit retail companies . It is estimated that the retail sector would continue to grow at 10-12 % per annum, which is extremely encouraging when the country's economy is only projected to grow at 6%. EMERGING AREAS Within retail, the emerging sectors would be food and grocery, apparel, electronics, ecommerce , fashion and lifestyle. "The upcoming areas within retail are luxury, super specialty stores/ malls, and renewed emphasis on high streets. Unfortunately, malls have become expensive affairs for most of the retailers. Therefore, a huge investment and emphasis has been laid down on e-tailing or online stores that has wider reach and are economically viable," says Darlie Koshy, DG and CEO, Institute of Apparel Management.

Any professional who has an experience in the retail industry or a relevant qualification in the field of retail industry like visual merchandising, marketing or has pursued a retail course can get into this field. SKILL-SETS REQUIRED The training and the skills would be a little different for people working in Indian retail stores and international retail stores. "Conceptual understanding, analytical skills and details, understanding customers and observation skills project management and operating skills are required to work in any retail industry whether Indian or international. Specific aspects required to work in the international retail world would be understanding of global consumer behaviour, international standards and retailing strategies, for example, retail expansion strategies. One is required to develop a strategic bent of mind to be able to work in this environment," says Salunkhe. It is also important to understand local culture , know the local language/s, spending patterns on festivals, special seasons, etc, and so on.

The Indian Retail Industry 2012

Credit Analysis & Research Limited, May 2012

The Indian Retail industry has grown at a CAGR of 14.6% for the period FY07-12(p). The said growth can be attributed to the growing Indian economy, increase in Private Final Consumption Expenditure (PFCE) and the change in consumption pattern of the Indian populace. The changing consumption pattern, in turn, primarily remains driven by higher standard of living, growing middle-class population, greater proportion of working women, increase in penetration levels of organised retail etc. Of all the retailing segments, the contribution of food & grocery' is estimated to have remained the highest at 58% of the total retail sales during FY12 (p) with the clothing & footwear' segment remaining the second-largest contributor occupying 10.5% of the total retail pie during the same period. However in terms of growth figures, the entertainment, books & sports goods equipment' segment is estimated to have outperformed the other retail segments, registering a CAGR of 21.3% during the period FY07-12 (p). Despite the said growth, the Indian retail industry remains highly fragmented, with the organized retailing still at a nascent stage accounting for a miniscule percentage of the total Indian retail market. During FY07- 12 (p), the organised retailing in India has grown at a CAGR of 26.4%; higher to the growth of total retailing in India during the same period under consideration. Of the organised retail sales during FY12, the contribution of Clothing & Footwear' segment remained the

highest at 37% with the Food & Grocery' segment being the second-highest contributor accounting for 24.2% of the total organised retail sales. Notably, the penetration of Food & Grocery' segment remained low at 2.8% owing to greater sale of fresh produce and groceries from the unorganised retail outlets. With the global as well as Indian economy reviving post recession, the organised retail industry witnessed gradual increase in footfalls and correspondingly an increase in the Same store sales (SSS) during FY11. Despite of increase in sales volume across product categories, the operating margins of the retailers failed to improve on the backdrop of rising input costs and discounted product offerings. To aggravate the situation, escalating interest burden adversely affected the retailers' net profit margins. During the latter half of FY12, the retailers however witnessed slowdown in consumer spending as reflected through their SSS performance. This in turn resulted in higher inventory days for the retailers, on an average, ultimately affecting their working capital cycle. Also, with the interest rates at its peak during FY12 and lack of fund-raising avenues from the capital markets, the availability of capital remained a major constraint to the Indian retailers. In addition, the Indian retailers continued to be faced with challenges such as higher store rentals andunavailability of desired store location especially in - I cities, taxation & other policy regulations, inefficiencies in supply chain management and higher rate of shrinkages. Despite the said challenges, CARE Research expects the growth in country's PFCE to propel the growth of retailing in India. Correspondingly, CARE Research expects the Indian retail industry to grow at a CAGR of 14.8% during FY12-15. Importantly, CARE Research expects the penetration of organised retail in the total retail pie to increase to 8.8% by FY15 owing to the expanding reach of the retailers in tier- II & III cities accompanied by higher consumer spend on discretionary items. Also, in an attempt to increase margins, CARE Research expects the retailers would resort to measures such as increasing the share of private labels in the total store sales, reducing storelevel operating expenses etc.