With the decision to allow foreign direct investment (FDI) in multi-brand retail round the corner, the Aditya Birla Retail CEO is not in a hurry to rope in a foreign partner.
Supporting the move to allow FDI in retail, Mr Thomas Varghese, CEO Aditya Birla Retail, says, “No we are not looking at roping in a foreign partner immediately. However, capital is the need of the hour for expansion and domestic funds are not readily available. Funding is going to be crucial for the business.''
In the past, Mr Varghese had hinted at offloading not more than 15 per cent stake in his retail venture to private equity investors.
The company has already planned to add 150 supermarkets and 12-14 hypermarkets every year under the More brand. “The next few years will make it difficult for retailers to cope up with the huge demand that is going to be generated in the country. Retailers have to be prepared for this,'' he added at the IRF on Wednesday.
At the same time, most of the retail networks are not profitable today. The EBIDTA levels are the lowest for food while fashion and apparel command the higher levels of EBIDTA in India.
Mr Varghese expects the Government to allow FDI in the next 3-6 months. He further said, “There should be no delay as the consensus note has already been prepared by the Cabinet committee. However, the State Government will have the final say on the FDI.''
But capital is going the mainstay for retailers to expand their operations. The largest retailer in the country, Mr Kishore Biyani, Chairman of the Future Group, intends adding nine 9 million square feet of retail space in the next 3-4 years. There are plans of setting up between 25-30 Big Bazaars every year.
According to Mr Biyani, “FDI will be a gamechanger for Indian retail, but an even bigger boost will be the GST which I see getting implemented in the next 12-18 months.” However, in spite of the riders which are expected to come about as a result of the policy changes, retailers are not too concerned about their implications.
“The riders will not be a cause of concern for domestic Indian retailers unlike their foreign counterparts, '' said Mr Varghese.
“We hold talks with every foreign retailer who wants to come into the country since they know we are the largest retail chain in the country,'' said Mr Rajan Malhotra, President, Retail Strategy, Future Group, which is currently in talks with Japanese convenience store chain, Lawson Inc.