Portfolio Focus: Aditya Birla PE Investee V Mart Retail

Aditya Birla PE through its unit Naman Finance and Investment invested around R50 Cr in medium size hypermarket operator V Mart Retail Limited in 2008.

The funds were raised to increase the store count and strengthen the presence in the existing cities.

With this investment MD and CEO Bharat Banka of Aditya Birla PE joined the board of V Mart Retail.

Since then, V mart has been a beneficiary of other group companies of Aditya Birla Group like Madura Garments, Birla Sun Life, etc.

The PE contributed by re-strategizing the expansion plan; sourcing products via Aditya Birla Group firms; helping negotiate rent and reduce inventory to cut costs.

Banka suggested a clustered approach of increasing store presence within existing states instead of spreading wings across all regions and states curtailing the over aggressiveness.

Today, the company manages 59 stores across 10 states as against 22 stores across 8 states

Performance

V Mart is also planning to go public by raising R120 Cr and had filed DRHP in July this year. The funds will be used for expansion strategy, under which it will almost double its showrooms to 120 outlets by 2015.

Currently, the promoters hold 77% stake in the company and the rest is with Naman Finance. Post IPO, promoters will have around 58% holding, while Naman will be having 10%.

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If the company successfully raises the funds than Aditya Birla PE will able to sell their shares at more than R200 per share realizing a profit of R40 on each share.

The Company

Incorporated in 2002, Delhi based V-Mart operates a chain of medium-sized hypermarket-format retail stores ranging from 6000 to 10,000 sq ft across North and West India, with a focus on Tier II and Tier III cities. At present, the company operates 59 stores across 51 cities, covering approximately 5,00,000 sq ft.

V mart provides a complete range of products ranging from Clothes, Accessories & Footwear for men, women and kids besides Cosmetics, Luggage, and Toys & Games. The company also provides a wide range of food, non- food and staple items through its Kirana Bazaar section. Among its portfolio apparel section accounts 70% of the revenues and FMCG accounts for 20% and rest from non-apparel items, such as gifts, and toys.

The company also launched V Galz stores, a fashion studio for ladies garments and accessories. V Galz aims to cater to fashion conscious new generation by offering them western wear at affordable prices.
The concept has met with huge initial success.

All stores have lease agreements, with two stores having revenue sharing clause. VMRL operates all its stores on its own and has not issued any franchisees.

VMRL’s operations are mainly spread in tier 2 and tier 3 cities of Northern, Eastern and Western part of the country. Some of the major states in which company operates are New Delhi, Gujarat, Madhya Pradesh, Uttar Pradesh, Bihar, Punjab and Rajasthan.

Rising PFCE – to fuel Indian Retailing growth story

CARE Research expects the country’s Private Final Consumption Expenditure (PFCE) to continue driving the growth of Indian retailing. However, considering the expected slackness in the growth of country’s GDP during FY13, the PFCE is expected to record marginally lower year-on-year growth of 14.5% during FY13 as against 14.9% recorded during FY12. Correspondingly, during FY13, the PFCE is estimated at 59,275.79 Bn; of which approximately 55% of the expenditure can be earmarked to retailing.

The Indian Retail industry has been growing in tandem with the economy, thereby registering a healthy growth. The Indian Retail industry has grown from 14,574 Bn in FY07 to 25,001 Bn in FY11 at a CAGR of 14.4%.

Of the same, the organized retail has grown from R598 Bn in FY07 to R1,575 Bn in FY11 at a CAGR of 27.4%. Correspondingly, organized retailing as percentage of GDP has increased from 1.4% in FY07 to 2.1% in FY11.

During FY12, the organized retail revenues are estimated at R1,932.37 Bn with year-on-year growth of 22.6%. The organized retailing as % of GDP is expected to increase to 2.2% in FY12.

FDI in Multi Brand Retail

Recently, the Indian Governement allowed 51% FDI. At least 50% of total FDI shall be invested in
‘back-end infrastructure’ within 3 years. Outlets can only be set up in cities with population of over 10 lakh.

The government won the approval of Parliament allowing FDI in multi-brand retail with a motion against it being defeated convincingly in Rajya Sabha.

FDI in multi-brand would bring much needed investment in the already existing organized sector in India and would spur the further growth of the sector. This would be particularly important for sustenance of some of the domestic retailers that don’t have the resources to come out of the financial crunch during an economic slump such as the case with Vishal, Subhiksha and Koutons, which couldn’t arrange for funds to sustain their growth.

The investments will also bring technical know-how, global best practices, quality standards and cost competitiveness and which would augur well for the domestic players to garner the necessary support to sustain their growth.

Fund Profile

Aditya Birla PE offers investment management and advisory services as Aditya Birla PE to domestic and global investors.

The current funds under management are - Aditya Birla PE - Fund I and Aditya Birla PE – Sunrise Fund. The first one has a sector agnostic investment style and later is a domestic Fund, focused on providing growth capital to proven businesses/ concepts within sectors that are in early stage of exponential growth.

Current portfolio of Aditya Biral PE – Fund I includes Anupam Industries, BSE, CARE, GEI Industries, Alphion and Trimax.

Recently, the Sunrise fund invested in Olive Bar and Kitchen and also has investment in SMS Paryavarn Limited.

Recent Transactions In The Space

• Retail giant Future Venture acquired 100% stake of Express Retail Services for R61.35 Cr.
  
• Future Group sold majority stake in Future Capital Holdings Limited to Warburg Pincus.
  
• Tristar Retail Limited filed DRHP with SEBI to raise R25Cr through an IPO for expansion. Tristar Retail is engaged in into retailing and distribution of national and international lifestyle, sports and fashion merchandise through our chain of exclusive retail outlets.
  

Japanese Aeon - retailing and financial services provider was planning to invest in Indian retail business and is in talks with two Indian grocery retail chains.

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1	February 14, 2013 08:34 AM	very nice - Posted by k.premnadhan babu
2	February 14, 2013 08:34 AM	its very informative - Posted by k.premnadhan babu

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