Retail handloom and handicrafts major FabIndia looks at entering tier-III cities with plans to increase its footprints from 42 stores to 150-200 standalone stores in the country over the next four years. The company has earmarked an investment of Rs 275 crore (Rs 2.75 billion) towards this initiative.
The company plans to raise the funds for the expansion through a combination of private equity, debt and internal accruals. However, the company executives ruled out the possibility of an IPO (talks of the company going in for a listing have been doing the rounds in recent times).
The retail chain, which was launched in 1960 by an American, John Bissell, will now open showrooms in cities like Nasik, Belgaum and Hubli.
"In the past couple of years, we entered tier-II cities on the back of rising disposable incomes. If this trend continues, we will take it to the next level and beyond," said William Nanda Bissell, MD of FabIndia Overseas Pvt Ltd.
FabIndia is currently opening new outlets in Amritsar, Shimla, Lucknow, Jamshedpur, Bhubaneshwar and Jalandhar. At present, 30 of the retailer's 42 stores are located in tier-I cities, which account for 75 per cent of its sales.
"The balance could probably tilt to smaller cities and we know there is some potential there. But everything depends on GDP growth and how disposable
incomes increase there in the next few years," Bissell said.
The company's fastest-growing market is the South, where FabIndia grew by 75 per cent in the last financial year.
In comparison, the West grew by 50 per cent, while the North and the East grew by 40 per cent each.
Commenting on growth drivers in the future, Bissell said that while garments would continue to remain the bread and butter of the company, its organic foods range FabIndia Organics -- and its body-care products range -- FabIndia Sana are expected to grow at a compounded annual growth rate of 100 per cent, although on a lower base. Organics and Sana account for a combined 2.5 per cent of the company's turnover.
Bissell said the retail chain is also in preliminary talks with large format retail players, like Reliance, who are expected to hit the market, but added that standalone stores would continue to be its focus.
FabIndia currently has four stores outside India -- two in Guangzhou, China, and one each in Rome and Dubai. It will add another store in Guangzhou, but the international market is low on priority, as it is experiencing a low single-digit growth.
Do you want to discuss stock tips? Do you know a hot one? Join the Stock Market Investments Discussion Group
