An analysis of the Indian Retail sector

Tarannum M Sarwar

October 11, 2006

1. An Overview of the Retail sector:

The Indian retail sector is highly fragmented with 97% of its business being run by the unorganized retailers like the traditional family run stores and corner stores. The organized retail however is at a very nascent stage though attempts are being made to increase its proportion to 9-10% by the year 2010 bringing in a huge opportunity for prospective new players ¹. The sector is the largest source of employment after agriculture, and has deep penetration into rural India generating more than 10% of India's GDP ².

Source: Ernst &Young, The Great Indian Retail Story, 2006.

A look at the statistics shows that the retail sector in India is worth USD 394 billion and is growing at the rate of 30% annually. An ICRIER study has found that retailing ($180 billion) contributes to 10 per cent of GDP and employs 7 per cent (21 million) of the workforce ³. According to AT Kearney, India is given the top ranking as the next foreign investment destination, as markets like China become increasingly saturated ⁴. India is the 4^th largest economy as regards GDP (in PPP terms) and is expected to rank 3^rd by 2010 just behind US and China¹. Over the past few years, the retail sales in India are hovering around 33-35% of GDP as compared to around 20% in the US. The table gives the picture of India's retail trade as compared to the US and China.

Source: Economist, Let gradualism guide FDI in retail, 2006.

The last few years witnessed immense growth by this sector, the key drivers being changing consumer profile and demographics, increase in the number of international brands available in the Indian market, economic implications of the government increasing urbanization, credit availability, improvement in the infrastructure, increasing investments in technology and real estate building a world class shopping environment for the consumers ⁴. In order to keep pace with the increasing demand, there has been a hectic activity in terms of entry of international labels, expansion plans, and focus on technology, operations and processes. This has lead to more complex relationships involving suppliers, third party distributors and retailers, which can be dealt with the help of an efficient supply chain. A proper supply chain will help meet the competition head-on, manage stock availability; supplier relations, new value-added services, cost cutting and most importantly reduce the wastage levels in fresh produce ⁵.

Large Indian players like Reliance, Ambanis, K Rahejas, Bharti AirTel, ITC and many others are making significant investments in this sector leading to emergence of big retailers who can bargain with suppliers to reap economies of scale. Hence, discounting is becoming an accepted practice. Proper infrastructure is a pre-requisite in retailing, which would help to modernize India and facilitate rapid economic growth. This would help in efficient delivery of goods and value-added services to the consumer making a higher contribution to the GDP.

International retailers see India as the last retailing frontier left as the China's retail sector is becoming saturated. However, the Indian Government restrictions on the FDI are creating ripples among the international players like Walmart, Tesco and many other retail giants struggling to enter Indian markets. As of now the government has allowed only 51% FDI in the sector to `one-brand' shops like Nike, Reebok etc. However, other international players are taking alternative routes to enter the Indian retail market indirectly via strategic licensing agreement, franchisee agreement and cash and carry wholesale trading (since 100% FDI is allowed in wholesale trading).

2. How has the Indian consumer changed over the years?

In the past few years the whole concept of shopping has been altered in terms of format and consumer buying behavior. With the increasing urbanization, the Indian consumer is emerging as more trend-conscious. There has also been a shift from price considerations to designs and quality as there is a greater focus on looking and feeling good (apparel as well as fitness). At the same time, the Indian consumer is not beguiled by retail products which are high on price but commensurately low on value or functionality. However, it can be said that the Indian consumer is a paradox, where the discount shopper loyalty takes a backseat over price discounts ⁶.

Indians have grown richer and thus spending more on vehicles, phones and eating out in restaurants. The spending is focused more outside the homes, unlike in other Asian countries where consumers have tended to spend more on personal items as they grow richer⁷. Spending on luxury goods have increased twice as fast with 2/3 of India's population is under 35, consumer demand is clearly growing. The mall mania has bought in a whole new breed of modern retail formats across the country catering to every need of the value-seeking Indian consumer. An average Indian would see a mall as a perfect weekend getaway with family offering them entertainment, leisure, food, shopping all under one roof.

Source: Ernst & Young, The Great Indian Retail Story, 2006.

Indian consumer is also witnessing some changes in its demographics with a large working population being under the age group of 24-35, there has been an increasing number of nuclear families, increase in working women population and emerging opportunities in the service sector during the past few years which has been the key growth driver of the organized retail sector in India. The emergence of a larger middle and upper middle classes and the substantial increase in their disposable income has changed the nature of shopping in India from need based to lifestyle dictated. The self-employed segment has replaced the employed salaried segment as the mainstream market, thus resulting in an increasing consumption of productivity goods, especially mobile phones and 2 - 4 wheeler vehicles. There is also an easier acceptance of luxury and an increased willingness to experiment with the mainstream fashion, reuslting in an increased willingness towards disposability and casting out from apparels to cars to mobile phones to consumer durables. Indians spend over USD 30,000 a year (in PPP terms) on conspicuous consumption that represents 2.8% of the entire population (which is approx 30 million people) making it the 4^th largest economy in PPP terms next only to USA, Japan and China ¹.

With reference to the map of India's income class, it can be noticed that the real driver of the Indian retail sector is the bottom 80% of the first layer and the upper half of the second layer of the income map. This segment of about 40 million households earns USD 4,000-10,000 per household and comprises salaried employees and self-employed professionals and is expected to grow to 65 million households by 2010 ¹. In addition to this, facilities like credit friendliness, availability of cheap finance and a drop in interest rates have changed consumer markets. Capital expenditure (jewelry, homes, and cars) has shifted to becoming redefined as consumer revenue expenditure, in addition to consumer durables and loan credit purchases.

3. FDI in retail:

Global retailers have already been sourcing from India; the opening up of the retail sector to the FDI has been fraught with political challenges. With politicians arguing that the global retailers will put thousands of small local players and fledging domestic chains out of business.

The only opening in the retail sector so far has been to allow 51% foreign stakes in single brand consumer stores, private labels, high tech items/ items requiring specialized after sales service, medical and diagnostic items and items sourced from Indian small sector (manufactured with technology provided by the foreign collaborations). Parties supporting the FDI suggest that the FDI in retail should be opened in a gradual/ phased manner, such that it can promote competition and contribute to the growth of the Indian economy. The impact of the FDI would benefit the end user of the consumer to a great extent and will help to generate a decent amount of employment as more and more entrepreneurs would be coming forward to invest and taste the new generation in retail marketing. The opening of FDI should be designed in such a way that many sectors - including agriculture, food processing, manufacturing, packaging and logistics would reap benefits. The table below lists the pros and cons of allowing FDI into retail.

Benefits of FDI in retail

Drawbacks of FDI in retail

Inflow of investment and funds. Improvement in the quality of employment. Generating more employment. Increased local sourcing. Provide better value to end consumers. Investments and improvement in the supply chains and warehousing. Franchising opportunities for local entrepreneurs. Growth of infrastructure. Increased efficiency. Cost reduction. Implementation of IT in retail. Stimulate infant industries and other supporting industries.

Would give rise to cut-throat competition rather than promoting incremental business. Promoting cartels and creating monopoly. Increase in the real estate prices. Marginalize domestic entrepreneurs. The financial strength of foreign players would displace the unorganized players. Absence of proper regulatory guidelines would induce unfair trade practices like Predatory pricing.

Thus it can be said that this investment boom could change the face of Indian retail by offering quality goods at lower prices to the consumers. In addition to this, the presence of global retailers will further enhance exports from India as they would also source Indian goods for their international outlets in a big way leading to a remarkable increase in Indian exports.

4. Segment analysis:

The structure of Indian retail is developing rapidly with shopping malls becoming increasingly common in the large cities and development plans being projected at 150 new shopping malls by 2008. However, the traditional formats like hawkers, grocers and tobacconist shops continue to co-exist with the modern formats of retailing. Modern retailing has helped the companies to increase the consumption of their products for example: Indian consumers would normally consume the rice sold at the nearby kiranas viz. Kolam for daily use. With the introduction of organized retail, it has been noticed that the sale of Basmati rice has gone up by four times than it was a few years back; as a superior quality rice (Basmati) is now available at almost the same price as the normal rice at a local kirana. Thus, the way a product is displayed and promoted influences its sales. If the consumption continues to grow this way it can be said that the local market would go through a metamorphoses of a change and the local stores would soon become the things of the past or restricted to last minute unplanned buying.

4.1 Food and grocery retail:

The food business in India is largely unorganized adding up to barely Rs. 40,000 crore, with other large players adding another 50% to that. The All India food consumption is close to Rs. 900,000 crore, with the total urban consumption being around Rs.330,000 crore. This means that aggregate revenues of large food players is currently only 5% of the total Indian market, and around 15-20% of total urban food consumption. Most food is sold in the local `wet' market, vendors, roadside push cart sellers or tiny kirana stores. According to McKinsey report, the share of an Indian household's spending on food is one of the highest in the world, with 48% of income being spent on food and beverages.

4.2 Apparel retail:

The ready-mades and western outfits are growing at 40-45% annually, as the market teems up with international brands and new entrants entering this segment creating an Rs.500 crore market for the premium grooming segment. The past few years has seen the sector aligning itself with global trends with retailing companies like Shoppers' stop and Crossroads entering the fray to entice the middle class. However, it is estimated that this segment would grow to Rs. 300 crore in the next three years.

4.3 Gems and Jewellery retail:

The gems and jewellery market is the key emerging area, accounting for a high proportion of retail spends. India is the largest consumer of gold in the world with an estimated annual consumption of 1000 tonnes, considering actual imports and recycled gold. The market for jewellery is estimated as upwards of Rs. 65,000 crores ⁹.

4.4 Pharma retail:

The pharma retailing is estimated at about Rs. 30,000 crore, with 15% of the 51 lakh retail stores in India being chemists. According to Vikas Bali, Principal, A.T. Kearney (India) Ltd, "Pharma retailing will follow the trend of becoming more organised and corporatised as is seen in other retailing formats (food, apparel etc)". A few corporates who have already forayed into this segment include Dr Morepen (with Lifespring and soon to be launched Tango), Medicine Shoppe, Apollo pharmacies, 98.4 from Global Healthline Pvt Ltd, and the recently launched CRS Health from SAK Industries. In the south, RPG group's Health & Glow is already in this category, though it is not a pure play pharma retailer but more in the health and beauty care business ¹⁰.

4.5 Music Retail:

The size of the Indian music industry, as per this Images-KSA Study, is estimated at Rs.1100 crore of which about 36 percent is consumed by the pirated market and organized music retailing constitutes about 14 percent, equivalent to Rs.150 crore ¹¹.

4.6 Book retail:

The book industry is estimated at over Rs. 3,000 crore out of which organized retail accounts for only 7% (at Rs.210 crore). This segment is seen to be emerging with text and curriculum books accounting to about 50% of the total sales. The gifting habit in India is catching on fast with books enjoying a significant share, thus expecting this sector to grow by 15% annually ¹¹.

4.7 Consumer durables retail:

The consumer durables market can be stratified into consumer electronics comprising of TV sets, audio systems, VCD players and others; and appliances like washing machines, microwave ovens, air conditioners (A/Cs). The existing size of this sector stands at an estimated USD 4.5 Billion with organized retailing being at 5% ¹².

Source: E&Y, The Great Indian Retail Story, 2006.

As noticed in the figure above, the organized retail penetration (ORP) is the highest in footwear with 22% followed by clothing. Though food and grocery account for largest share of retail spend by the consumer at about 76%, only 1% of this market is in the organized sector. However, it has been estimated that this segment would multiply five times taking the share of the organized market to 30 percent in the coming years ¹.

5. Industry analysis of the Indian retail sector:

Modern retailing has entered India in form of sprawling malls and huge complexes offering shopping, entertainment, leisure to the consumer as the retailers experiment with a variety of formats, from discount stores to supermarkets to hypermarkets to specialty chains. However, kiranas still continue to score over modern formats primarily due to the convenience factor.

Source: IT Retailing: Are You In The Loop?, July 16, 2006.

The organized segment typically comprises of a large number of retailers, greater enforcement of taxation mechanisms and better labour law monitoring system. It's no longer about just stocking and selling but about efficient supply chain management, developing vendor relationship quality customer service, efficient merchandising and timely promotional campaigns. The modern retail formats are encouraging development of well-established and efficient supply chains in each segment ensuring efficient movement of goods from farms to kitchens, which will result in huge savings for the farmers as well as for the nation. The government also stands to gain through more efficient collection of tax revenues. Along with the modern retail formats, the non-store retailing channels are also witnessing action with HLL initiating Sangam Direct, a direct to home service. Network marketing has been growing quite fast and has a few large players today. Gas stations are seeing action in the form of convenience stores, ATMs, food courts and pharmacies appearing in many outlets.

In the coming years it can be said that the hypermarket route will emerge as the most preferred format for international retailers stepping into the country. At present, there are 50 hypermarkets operated by four to five large retailers spread across 67 cities catering to a population of half-a-million or more. Estimates indicate that this sector will have the potential to absorb many more hypermarkets in the next four to five years ¹.

List of retailers that have come with new formats:

Traditionally, the small store (kirana) retailing has been one of the easiest ways to generate self-employment, as it requires minimum investments in terms of land, labour and capital. These stores are not affected by the modern retailing as it is still considered very convenient to shop. In order to keep pace with the modern formats, kiranas have now started providing more value-added services like stocking ready to cook vegetables and other fresh produce. They also provide services like credit, phone service, home delivery etc.

The organized retailing has helped in promoting several niche categories such as packaged fruit juices, hair creams, fabric bleaches, shower gels, depilatory products and convenience and health foods, which are generally not found in the local kirana stores. Looking at the vast opportunity in this sector, big players like Reliance and K Rahejas has announced its plans to become the country's largest modern retainers by establishing a chain of stores across all major cities.

Apart from metro cities, several small towns like Nagpur, Nasik, Ahmedabad, Aurangabad, Sholapur, Kolhapur and Amravati as witnessing the expansion of modern retails. Small towns in Maharashtra are emerging as retail hubs for large chain stores like Pantaloon Retail because many small cities like Nagpur have a student population, lower real estate costs, fewer power cuts and lower levels of attrition. However, retailers need to adjust their product mix for smaller cities, as they tend to be more conservative than the metros.

In order for the market to grow in modern retail, it is necessary that steps are taken for rewriting laws, restructuring the tax regime, accessing and developing new skills and investing significantly in India.

6. Business analysis of the Indian retail sector:

The size of modern retail is about US$ 8 Billion and has grown by 35% CAGR in last five years. ¹⁴ (KSA Technopak, June 2006). In modern retailing, a key strategic choice is the format; retailers are coming up with various innovative formats to provide an edge to retailers.

Most attractive developing markets for retail by region according to AT Kearney Study:

Percentage of markets that are `on the radar' and `to consider':

Source: AT Kearney, GRDI 2006.

A look at the graph above shows that the Asian markets are considered attractive for retail as per the AT Kearney's report; India is being placed on the radar by the USA and UK. Global giants like Tesco and Walmart are experimenting with various options to enter India. One possibility for Walmart would be to open Sam's club wholesale business through a joint venture and sell strictly to other retailers. This strategy skirts the issue of not being able to sell directly to customers and establish a strong presence in the local market. On the other hand, Tesco is planning to get into a partnership with Home Care Retail Mart Pvt. Ltd expecting to open 50 stores by 2010 ⁴. The government is taking gradual steps in allowing the FDI into Indian retail, when it takes the final steps the peak time will quickly pass giving the existing players a distinct edge.

6.1 Merger and acquisition activity:

India witnessed a record number of M&A deals in the first half of 2006, which were collectively worth USD 25.6 billion. A significant number of deals have being carried out in the Indian retail sector in the past few months in order to acquire a larger share in the growing domestic market and to compete against the prospective global and domestic players.¹³ The table below shows some recent deals that have taken place in the Indian retail sector:

Source: PricewaterhouseCoppers, Asia-Pacific M&A bulletin, Mid year 2006.

6.2 Business models for entry in Indian markets:

Due to the FDI restrictions the international players are looking for alternative avenues to enter the Indian markets. The chart below shows the current formats permitted by the Government of India for the international players.

Source: Ernst & Young, The great Indian Retail Story, 2006.

7. Employment opportunities in this sector:

The Indian retail sector offers an economic opportunity on a massive scale both as a global base and a domestic market. This sector yields many positive results like generating more jobs and bringing numerous goods to the consumers at reasonable prices. According to Ernst &Young's report `The Great Indian Retail Story' this sector is expected to create 2 million jobs by 2010.

About 4 crore people are employed in retail trade, assuming each person supports a family of 5, this, implies that about 20 crore people are dependent on this sector. For a vast majority of the households, retailing is a euphemism for a marginal existence. Modern retail formats have generated huge employment for the young and even senior citizens and women wanting to work part-time (even in small towns). People have greater exposure to the technical aspects, training and also earn higher salaries along with bonuses and incentives. With foreign companies opening expanding in India, employees are being re-trained according to international standards and practices that are being bought in. There is also an increase in the number of retail management programmes and institutes. This will bridge the gap in availability of talented professionals at the middle and lower levels. Successful Indian retailers are creating a robust second and third level of management by hiring aggressively for these key roles. Talented professionals will put increased pressure on wage costs. Therefore operating margins, especially for mid-sized retailers, are becoming a poaching ground for international retailers once they enter India.

With private companies getting into retail, there are people employed from diverse cultures (no room for reservations unlike government owned stores) where there is a sense of unity in diversity. The companies are also employing people who are physically handicapped. The next few years are expected will see the sector offering new jobs to 50,000 young graduates and diploma holders.

8. What makes foreign firms come to India?

A host of traditional `brick and mortar' companies such a Tatas have entered the retail business. With demographic changes like rising disposable incomes and rapidly expanding middle class, the Indian retail sector is at an inflexion point where the growth in consumption and growth of organized retailing are taking it towards higher growth. Market liberalization and an increasingly assertive consumer population have attracted bigger Indian and multinational operations to make investments, but are yet to achieve success or reach break even.

The Indian consumption pattern and preference have undergone vast changes over the years allowing the foreign retailers to play with the psyche of the brand conscious modern Indian, who has no qualms spending a fortune on overhauling his wardrobe. This led to the entry of up-market brands like Nautica and New Balance into the country to cash in on this opportunity.

India has the youngest population in the world, with large population between 20-34 age groups in the urban regions boosting the demand. All these factors have tempted the foreign firms such as Walmart, Tesco and Carrefour to enter India. India is now firmly placed on the US and UK radars as US retailers are gradually realizing the potential of the retail and consumer goods sector. The timing is the most important source of competitive advantage for global and regional retailers in the globalization race. Knowing when to enter emerging retail markets is the key to success.

AT Kearney's study on global retailing trends found that India is the least competitive as well as least saturated of all major global markets. This implies that there are significantly low entry barriers for players trying to setup base here, in terms of the competitive landscape. The report further stated that global retailers such as Walmart, Carrefour, Tesco and Casino would take advantage of the more favourable FDI rules that are likely in India and enter the country through partnerships with local retailers. Other retailers such as Marks & Spencer and the Benetton Group, who operate through a franchisee model, would most likely switch to a hybrid ownership structure.

However, in order to achieve breakthrough growth the global retailers might have to face some glitches in India. High taxes, poor infrastructure, bureaucratic hurdles and high cost of real estate are some of the challenges that overseas retailers may have to tackle in the country.

9. IT and latest development:

Technology has played a key role in retailers' efforts to compete in this volatile market. With e-tailing channels making its presence felt in India companies are using either their own web portal or are tying up with horizontal players like Rediff.com and Indiatimes.com to offer their products on the web ¹⁵ (www.alexa.com). IT has been used by retailers ranging from Amazon.com to eBay, in order to radically change the buying behavior across the globe ¹⁶.

Retailers worldwide are looking forward to increase their IT spending by almost 15% in 2006, allocating almost half of this increase to application software with a particular focus on tools that facilitate multi-channel customer relationships, point of sale systems, strategic merchandising and supply chain management ¹⁷. The last 2-3 years have seen several retailers ranging from F&B operations to discount clothing implementing supply chain management (SCM) solutions to improve core business processes such as global sourcing, distribution, logistics, innovations, transparency and visibility in financials and inventory, compliance and management of point of sale (POS) data. However, organized retailers have not taken well to the concept of 3PL (third party logistics) due to their apprehensions of losing control over the supply chain. Currently, the transportation is carried out partly by organized service providers and partly by truckers and local transporters.

In conclusion, it can be said that in order to deliver the levels of quality and service that consumers are demanding; the organized retailers are in a pressing need for a single enterprise wide IT platform to manage operations, which will become increasingly complex once the market expands.

10. A look at the rural retailing:

More than half of retail market in India is in the rural areas (55%); although share of urban market is increasing by almost 5% every 8-10 years ¹⁴. Accommodating almost two-third of the country's consumers and generating almost half of the national income, the rural India offers tremendous opportunities for organized retailers which many companies have failed to access. According to the study conducted by NCEAR, the number of `lower middle income' group in rural areas is almost double as compared to the urban areas, having a large consuming class with 41% of the Indian middle class and 58% of the total disposable income.

Source: Census; National Council of Applied Economic Research (NCAER).

A look at the demographics reveals that the highest income levels households in the rural areas are 1.6 million as compared to 2.3 million in urban areas. It has also been forecasted that the middle and the higher income households are expected to grow to 111 million by 2007 from the current levels of 80 million. Thus, it can be said that with 128 million households, the rural population is nearly three times the urban. This vast demand base and size offers a huge opportunity that MNCs cannot afford to ignore.

In order to meet with this rapid growth in demand the government has shown its concern by providing an induction of Rs.140 billion and Rs. 300 billion in the rural sector through its development schemes in the Seventh and the Eight plan respectively. The large players like ITC, HLL, BPCL are realizing the potential of this sector and are seen experimenting with new ways to tap this segment.

ITC spent 3 years and Rs. 80 crore on r&d to come up with the concept of E-choupal and Choupal Sagar-rural hypermarkets ¹⁸. Through this, the farmers can access latest local and global information on weather and market prices, scientific farming techniques at the village itself through a web-portal - all in Hindi. E-Choupal also facilitates supply of high quality inputs as well as purchase of commodities at their doorstep. The hypermarket (Choupal Sagar) provides them with another platform to sell their produce and purchase necessary farm and household goods under one roof.

Next in line, HLL came up with Project Shakti in late 2000 to sell its products through women self-help groups who operate like a direct-to-home team of sales women in inaccessible areas where HLL's conventional sales system does not reach. Another step to tap the rural market was `Operation Bharat' wherein low-priced sample packets of toothpastes, fairness creams, Clinic Plus shampoos and Ponds face creams to 20mn households.

As a part of their rural strategy, BPCL introduced Rural Marketing Vehicles (RMVs) that move from village and village and filling cylinders on the spot for rural consumers keeping in mind the low-income of the rural population. The Company also introduced a smaller size cylinder to reduce both the initial deposit cost as well as the recurring refill cost.

Future outlook:

Investments in the range of US$ 20+ Billion are expected in the next 5 years in Retail & its Supply Chain alone.

Size of modern retail likely to touch US$ 60+ Billion by 2011:

At least 2.5 Million additional direct jobs likely to be created in the next 5 years.

Hyper-competition is expected to set in by 2008-9 as the footprint of the top-5 players starts significant overlapping in top 20 - 30 towns.

Significant impact on other retailers and branded good players - creating new opportunities and threats:

According to Assocham, the overall retail market would grow by 36 per cent with the organised sector expected to register three-fold growth to Rs 15,000 crore by 2008. The total size of the market is also expected to increase to Rs 14,79,000 crore from the current level of Rs 5,88,000 crore.

Challenges faced by this sector:

The industry is facing a severe shortage of talented professionals, especially at the middle-management level.

Most Indian retail players are under serious pressure to make their supply chains more efficient in order to deliver the levels of quality and service that consumers are demanding. Long intermediation chains would increase the costs by 15%.

Lack of adequate infrastructure with respect to roads, electricity, cold chains and ports has further led to the impediment of a pan-India network of suppliers. Due to these constraints, retail chains have to resort to multiple vendors for their requirements, thereby, raising costs and prices.

The available talent pool does not back retail sector as the sector has only recently emerged from its nascent phase. Further, retailing is yet to become a preferred career option for most of India's educated class that has chosen sectors like IT, BPO and financial services.

Even though the government is attempting to implement a uniform value-added tax across states, the system is currently plagued with differential tax rates for various states leading to increased costs and complexities in establishing an effective distribution network.

Stringent labor laws govern the number of hours worked and minimum wages to be paid leading to limited flexibility of operations and employment of part-time employees. Further, multiple clearances are required by the same company for opening new outlets adding to the costs incurred and time taken to expand presence in the country.

The retail sector does not have 'industry' status yet making it difficult for retailers to raise finance from banks to fund their expansion plans.

Government restrictions on the FDI are leading to an absence of foreign players resulting into limited exposure to best practices.

Non- availability of government land and zonal restrictions has made it difficult to find a good real estate in terms of location and size. Also lack of clear ownership titles and high stamp duty has resulted in disorganized nature of transactions.

13. Performance of the players in the retail industry:

	Revenues	Growth%	Growth%	Net Profit	Growth%	Growth%	OPM%	OPM%	EPS	CMP	P/E
	(Rs mn)	QoQ (compared to corresponding quarter)	YoY	(Rs mn)	QoQ (compared to corresponding quarter)	YoY	Q1FY06	Q1FY05	Q1FY06
Trent	3464.41	15.94	47.75	243.78	(1.35)	27.91	6.25	7.07	4.55	875.00	53.88
Shoppers' Stop	6455.74	4.75	57.07	271.05	(4.94)	42.43	4.38	3.00	2.03	604.60	76.73
Pantaloon (Retail) India Limited	18677.71	26.28	72.30	641.58	(2.50)	66.42	7.00 (Q3FY06)	6.82 (Q3FY06)	5.89 (Q3FY06)	1844.85	120.42
Pyramid Retail Limited	991.99	(9.67)	0.00	(74.76)	3.20	0.00	(16.62)	0.00	(3.53)	114.85	0.00

Note: Market Price as at 11/10/2006.

Source: bseindia.com, economictimes.com, myiris.com,

List of resources:

1. Ernst & Young, The Great Indian Retail Story, 2006.

2. FICCI - ICICI Property Services Study.

3. Let gradualism guide FDI in retail, Economist, 2006.

4. AT Kearney, GRDI 2006.

5. Retail scenario most developed in Bangalore, DH News service, According to Bijou Kurien, 6. President & Chief Executive - Life Style, Reliance Retail.

7. CII, Logistics and Freight News, March 2006.

8. KPMG analysis, Consumer markets in India - the next big thing, September 2005.

9. India's changing household, Deutche Bank, November 2004.

10. CII, Manufacturing Bulletin, June 2006.

11. Pharma's retail push, Business Line, 2006.

12. Northbridge Journal, Industry Outlook - Retail, 2006.

13. Express Press release, Consumer durables sector sees pick-up sales in India, 2006.

14. Price Water Coppers, Asia-Pacific M&A bulletin, Mid year 2006.

15. KSA Technopak, June 2006.

www.alexa.com.

Hoilday shopping defined by outlet malls of Amazon, eBay, CNet News, 9^th December 2002.

According to Frost & Sullivan Research analysts.

www.itcportal.com.

CII, Retail scenario in India: Unlimited Opportunity.

Disclaimer:

This document has been based on the information obtained from secondary sources believed to be reliable and which are not independently verified. The author makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. The recipients of this report should be aware that the past performance is not necessarily a guide to future performance and value of investments can go down as well.

The document should not be reproduced, wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this publication), modified or in any manner communicated to any third party except with the written approval of the author.

This publication is for information purposes only. While due care has been taken during the compilation of this publication to ensure that the information is accurate to the best knowledge and belief, the content should not be taken as a substitute for professional advice. Expressions of opinion are those of the research department only and are subject to change without notice.

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