Retail fires on all cylinders, up 57%
WHILE AMERICAN BIGGIES AMAZON AND WALMART FIGHT FOR THEIR POUND OF FLESH IN INDIA, INDIAN RETAILERS HAVE QUIETLY STOLEN THE SHOW.
YEAR 2018 HAS BEEN quite momentous for the Indian modern retail story. While homegrown retailer DMart surprised the market with its high valuations, Kishore Biyani-owned Future Group invested in building scale, and Reliance Retail strove hard to build its omni-channel presence. It was also during this time that American retail giant Walmart Inc. announced that it was going to buy Indian ecommerce company Flipkart for an astronomical $16 billion (about ` 1.17 lakh crore at ` 73.19 to a dollar). The action at once triggered, what many call, battle of the Americans in India. There was scepticism galore whether the presence of
the two global biggies – Walmart and Amazon.com – could actually wipe out Indian retailers. Apart from Reliance Retail none of the other Indian retail companies had the money power to fight them out. The biggest fear of Indian retailers was that the American biggies would deep discount and take away their customers, while they didn’t have the wherewithal to burn cash on similar strategies.
It’s been close to six months since Walmart announced it was going to buy out Flipkart, and the surprising bit is that the market cap of the Indian retail companies has soared by 57 per cent. The biggest gainer has been V-Mart Retail, whose average market cap grew by 127.8 per cent (`1,601 crore to ` 3,648 crore for the October 2017-September 2018 period), Future Retail saw a 96.81 per cent jump (from ` 13,826 crore to ` 27,211 crore), while Shoppers Stop’s average market cap grew by 68.20 per cent (from ` 2,840 crore to ` 4,778 crore). Value retailer Dmart
“DEMONETISATION LED TO CONSUMERS SAMPLING MODERN RETAIL FOR THE FIRST TIME; GST BROUGHT IN A CLEANER SYSTEM.” ABNEESH ROY
Senior Vice-President, Edelweiss Securities
(owned by Avenue Supermarts), whose market cap growth was the talk of the market all through 2017, also saw a 59.15 per cent growth in market cap.
The industry’s fear that the cash-strapped homegrown retailers would be wiped out has been laid to rest. The American retailers have also realised the importance of an omni-channel presence, and that it made much more sense to partner with Indian physical retailers who already have the logistics and supply chain infrastructure in place. So what if the Indian government doesn’t allow foreign direct investment (FDI) in multibrand retail? Global retailers have found a way to invest in Indian companies through their investment arms. For instance, through its investment arm, Amazon had picked up a 5 per cent stake in Shoppers Stop for about ` 179 crore. More recently, it bought out Aditya Birla’s grocery retail chain, More, in partnership with Samara Capital for ` 4,200 crore. Amazon is also in the final stages of picking up stake in Future Retail.
“Access to capital is not a challenge today. Even private equity companies are enthused to put money into retail and this is a major reason for retail companies’ valuation going up,” says Arvind Singhal, Chairman of retail consultancy, Technopak Advisors.
“Every retail scrip will benefit from strategic investors. Formal retail is coming out of its shell as fund raising has become easier. Global funds are looking at Indian retail companies,” adds Kumar Rajagopalan, CEO of Mumbai-based industry body Retailers Association of India (RAI).
FUTURE RETAIL Big Bazaar’s parent saw a 96.81% jump in its average market cap for October 2017-September 2018 period