The Pantaloons stores are sold, but Kishore Biyani is still focused on fashion.
After clinching a Rs 1,600-crore (Rs 16-billion) deal with the Aditya Birla Group to sell its Pantaloons format, Pantaloon Retail plans to focus on expanding its remaining fashion formats, such as the 'Central' mall concept, discount chain Brand Factory and private labels, which have been kept out of the ambit of the deal.
Even smaller fashion formats like Ethnicity and popular segments like Fashion at Big Bazaar will be under Future Group operations.
The country's largest retailer, Pantaloon plans to add 10 central malls, with an average size of 90,000 sq ft, by June 2013.
It has 21 malls at present.
It had also plans to add 35 to 40 Brand Factory stores during the same period, said a senior Future Group executive involved with the expansion plans.
Brand Factory has 20 outlets. The two formats have three million sq ft of retail space.
Central and Brand Factory, whose financials are integrated, are actually bigger than the Rs 1,700-crore (Rs 17-billion) Pantaloons format, and are expected to clock a turnover of Rs 2,100 crore (Rs 21 billion) in 2011-12.
The two were looking at 35 per cent growth in 2012-13 to achieve a turnover of Rs 3,000 crore (Rs 30-billion), the executive said.
Unlike Pantaloons, the company is not looking at getting strategic investors in these fashion formats in the near future.
"Out of the Rs 5,000 crore (Rs 50-billion) businesses we have in fashion through manufacturing of brands, distribution and retailing, only Rs 1,700 crore is going out to the demerged entity.
"We will continue to focus on others," said another senior executive from the Future Group, the parent of Pantaloon Retail. "The turnover from one Central store is equivalent to revenues from four Pantaloons stores," the executive said.
The Pantaloons format, which runs 65 stores and 21 factory outlets, has retail space of two million sq ft. The business is expected to post a turnover of Rs 1,700 crore for 2011-12.
Abhishek Ranganathan, an analyst at MF Global Sify Securities, said: "I think they will look at raising money from non-core assets such as financial services than selling stake in other fashion ventures.
"In the value segment, they are still looking at getting partners, but foreign direct investment is banned and domestic players are already building their own food and ventures."
Analysts say independent units are expected to do better once the demerger happens.
"Once the main entity lowers leverage, its units will find it easier to get more debt and credit facilities for growth," said D K Aggarwal, chairman of SMC Investments.
Harminder Sahni, managing director of Wazir Advisors, a management consultancy, thinks the Future Group would continue to look at getting investors in all its ventures, given the huge debt on its books.
"It will continue to sell buyers if it finds investors for these ventures. Scaling up is challenging, given that the money coming in is going for debt payments," Sahni said.
Another Future Group executive said except for smaller brands, all other major private labels would stay with its companies.
Most are owned by non-Pantaloon group entities like Future Ventures or Future Brands, with the former even separately listed.
So, Indus League, a company originally floated by the ex-Madura management before Biyani bought it out and which sells brands such as Indigo Nation, Scullers, John Miller and Urban Yoga through multi-brand outlets, will continue to remain under Future Ventures, the venture arm of the group.
"We have seven brands in the Indus League and two licensing agreements.
"We are seeing steady growth in these and believe in maintaining that position. We are not looking at any alliance with other companies," said a top Future Ventures executive.
Margins
Some analysts say Pantaloon Retail's deal with the Birlas may see Biyani lose on the high-margin fashion play.
But many argue it was inevitable, as the company was finding it difficult to rope in foreign investors, given that foreign direct investment in the sector has been kept on hold.
"Fashion, which carries a margin of over 30 per cent versus a 10-15 gross margin in food, was one of the strong points for Pantaloon and giving up on that could have been a bit painful.
"But in the current circumstances, it could not have got many avenues to raise funds," said a Mumbai-based consulting firm's head.
But company executives say the company will continue to have a strong play in fashion and the deal with the Birla group will help arrest erosion in margins and profitability due to servicing of debt.
"Now, Madura Garments will get a bigger platform for its in-house brands like Van Heusen, Allen Solly and Peter England.
"The Pantaloon Stores have a 70 per cent slot for its private labels and will continue to do so," said a Future Group official.
The company paid 61 per cent of its earnings before interest, tax, depreciation and amortisation as interest cost in the December quarter.
Image: Kishore Biyani
