Aditya Birla Retail Ltd (ABRL) expects foreign direct investment in retail to be a reality by the end this year. Even as the share of organised retail business grows in India, the company said the domestic market is still starving for quality hypermarkets, and FDI in retail will bring more competition to the retailing business.
As a part of its retail consolidation, the cement-to-telecom conglomerate is investing Rs 300 crore towards its retail expansion which includes setting up hypermarkets, supermarkets and neighbourhood stores under the More brand name.
“At least 25 per cent of our products are always in deep discounts at our hypermarkets. Since, hypermarkets offer scale and visibility, we are able to pass on the benefit to our consumers. Unfortunately, lack of good quality retail space is posing a hindrance to hypermarkets' expansion,” said Mr Thomas Varghese, CEO, ABRL.
The company currently operates 560 super markets (size ranging from 2,500-4,000 sq ft) and 10 hypermarkets (60,000 sq ft). ABRL said that its retail expansions will be funded partly through debt and equity. At present, it has a 1:1 debt equity ratio.
It will add another 12 hypermarkets to its portfolio by the end this fiscal. The hypermarkets segment in the country is dominated by players such as the Future Group's Big Bazaar and the Raheja-promoted Hypercity.
Revenues
Speaking on its revenues, Mr Varghese said the new formats will add about 16 per cent to its topline. Last fiscal, the company closed the year at Rs 1,650 crore. “We are looking at Rs 2,400 crore revenues by the end of this fiscal by consolidating our retail presence.”
Mr Varghese said it is also scaling up its private label business. “Our private label business is growing at a good pace. At present, 19-20 per cent of sales come from private labels.” Its private labels cover 54 categories and has over 300 products.
The company expects private labels to contribute at least 30 per cent in the next two-three years. It is also looking for collaborations with vendors to create products for its More outlets.
Margins
Asked if the company is facing a tussle with FMGC players over margins like many of its competitors, Mr Varghese, who is also the chairman of the CII committee on retail, said, “We are working closely with FMCG companies to develop joint business plans. This means that both of us grow our businesses.”