Market Research Report : Retail market in india 2014 - Sample

Retail Market – India

October 2014

2

Executive Summary

Market

Drivers & Challenges

Government

Competitive Landscape

Indian services sector contributes to ‘p1’% of the country’s GDP

Retail, a segment of services sector, is growing at a CAGR of ‘p2’% and is expected to touch INR ‘m1’ by 2018

It has seen the entry of several high profile international players and phenomenal rise of domestic retailers

Food products constitutes ‘p3’% of the total retail market and is expected to dominate over the next ‘n1’ years

FDI in Retail

Goods and Services Tax (GST)

Drivers Rise in organized retail

Increase in disposable income

Boom in real estate sector

Growth in rural segment

Increase in awareness

Growing consciousness on health and beauty

Changing lifestyle of consumers

Increasing availability of credit

Major Players

Company 1 Company 2 Company 3


Trends

Higher discounts and extended seasonal sales

Online retailing

Integration of various business strategies

Rise of private labels

RETAIL MARKET IN INDIA 2014.PPT

Challenges Tough competition from unorganized

players

Inefficiencies in supply chain

Depreciation of Rupee and rise in energy costs

High chemical content

3 RETAIL MARKET IN INDIA 2014.PPT

•Macro-Economic Indicators

•Introduction

•Market Overview

•Market Entry Strategies

•Organized Formats

•Drivers & Challenges

•Government Initiatives

FDI in Retail


•Trends

•Competitive Landscape

•Strategic Recommendations

•Appendix

4

Economic Indicators (1/3)

11

12

13

14

15

b2

a2

Q1

d1 c1

b1

a1

Q4

c4

b4

a4

Q3

c3

b3

a3

Q2

d2 c2

INR tn

2013-14 2012-13 2011-12 2010-11

GDP at Factor Cost: Quarterly

Inflation Rate: Monthly

-2

-1

0

1

2

q

Jul 2013 - Aug 2013

p

%

Nov 2013 - Dec 2013

t

Oct 2013 - Nov 2013

s

Sep 2013 - Oct 2013

r

Aug 2013 - Sep 2013


5

Indian economy is showing significant shift from agriculture and manufacturing to services

• Services sector is also known as the tertiary sector of

an economy

• It consists of sub-sectors such as retail trade,

telecommunication and information technology,

tourism and hospitality, healthcare, mass media,

banking and financial services and education

• Traditionally, as country’s economy progresses from

developing to developed, the contribution of services

sector to the GDP overwhelmingly outpaces the

contributions from the primary sector of agriculture

and the secondary sector of manufacturing

• Currently, services sector contributes about ‘p1’% to

the GDP of India, compared to ‘p2’% in the US, ‘p3’%

in the UK, ‘p4’% in Singapore, ‘p5’% in Japan and

‘p6’% in France

• Indian services sector is dominated by banking and

financial services, healthcare, information

technology, and retail trade

Services Sector – Overview GDP of India – Sectoral Contribution (2013)

Retail contributes to ‘p10’% of the

total services sector, or ‘p12’%

of the GDP of India


p10%

p11%

Retail Others

p8%

p9%

p7% Services

Agriculture

Manufacturing


Retail market in India is among the fastest growing components of the Indian services sector

Retail Market – Overview Market Size and Growth

• Indian retail market is among the largest and fastest growing components of the economy, contributing ~’p1’% to the country’s GDP

• Over the last decade, retailing has shifted towards modern formats such as supermarkets and hypermarkets

• Retail market in India is poised for strong growth in the coming years owing to rising income of consumers, demand for quality products and investor-friendly policies by the government

fed

cb

a

0

10

20

30

40

50

INR tn p2%

2018e 2017e 2016e 2015e 2014e 2013

p8%

p7%

Retail Market – Structure (2013)

Unorganized Retail

Organized Retail

Note: Figures are for the respective calendar years

p6%

p4%

p5%

p3%

Segment 4

Segment 2

Segment 1

Segment 3

Retail Market – Segmentation (2013)


Various entry routes are available for foreign retailers...

Retail Market – Entry Strategies (1/2)

Entry Routes Description Companies

• Government has been undertaking reforms to liberalize the retail sector and attract significant foreign investments

• FDI regulations are undergoing gradual reforms and are expected to fall in place over the next ‘n1’-’n2’ years

• Various entry routes are available for foreign retailers to invest and enter the Indian retail market


Retail Market – Organized Formats (1/3)

Retail Formats Companies

Traditional retail formats such as kirana stores...

Description


Drivers & Challenges – Summary

Drivers

Rise in organized retail

Increase in disposable income

Boom in real estate sector

Growth in rural segment

Increase in awareness

Growing consciousness on health and beauty

Changing lifestyle of consumers

Increasing availability of credit

Challenges

Tough competition from unorganized players

Inefficiencies in supply chain

Depreciation of Rupee and rise in energy costs

High chemical content


Retail market in India has been slowly opened up to FDI due to government initiatives over a period of time

Evolution of retail FDI policy

• Government of India has gradually opened up the retail sector to FDI amidst reservations concerning fear of job losses, procurement from international market, competition and loss of entrepreneurial opportunities

• Discussions are still being carried out by the government to open up and allow ‘p1’% FDI in multi brand retailing

‘y6’: Government allows ‘p6’% FDI in single brand retailing

‘y4’: Government mulled over the idea of allowing ‘p4’% FDI in single-brand retail and ‘p5’% in multibrand retail

‘y5’: Government proposed to allow FDI in multibrand retailing

‘y3’: FDI up to ‘p3’% allowed in single brand retail with prior government approval

1991: Indian economy opened FDI up to 51% allowed under the automatic route in select priority sectors

‘y2’: FDI up to ‘p2’% allowed under the automatic route in cash & carry wholesale

‘y1’: Indian economy opened FDI up to ‘p1’% allowed under the automatic route in select priority sectors


India is expected to implement Goods and Services Tax (GST) in the year 2015


• Goods and Services Tax (GST) is a comprehensive tax imposed on the supply of goods or services

• India is in the process of implementing a dual GST system, namely a ‘t1’ and a ‘t2’

• GST will replace a variety of taxes such as ‘t3’, ‘t4’, ‘t5’, ‘t6’, ‘t7’, ‘t8’, ‘t9’ and ‘t10’

• The combined tax rate (‘t1’+’t2’) on an item is expected to be between ‘p1’% and ‘p2’%, although

the rates for the component taxes are yet to be decided

• With the implementation of GST, prices of goods are expected to fall, provided the benefit of

reduced taxation is passed on to consumers

• In case there are revenue losses to a state government due to implementation of GST, the

Government of India would provide compensation to the state government for the same

• Overall, GST would bring about a number of benefits for all stakeholders involved

Reduction in the total number of taxes paid to just two, namely ‘t1’ and ‘t2’

Net decrease in the tax rate on goods, thereby reducing unit cost of goods and lowering prices of final products

Elimination of cascading tax, thereby making the taxation process more efficient

Net decrease in transaction costs of taxpayers through a simple tax structure

Overall increase in government revenues, as lower prices would boost consumption of goods


Trends – Summary

Higher discounts and extended seasonal sales Online retailing

Rise of private labels Integration of various business

strategies

Key Trends

13

Competitive Rivalry

• x

Bargaining Power of Suppliers

• x

Bargaining Power of Buyers • x

Threat of Substitutes • x

Threat of New Entrants

• x

Impact i4

Impact i2

Impact i1

Impact i3

Impact i5

Porter’s Five Forces Analysis


14

Competition – Summary

Players Food Products Soft Goods or Consumables

Hard Goods or Durables

Retail Services Arts and

Entertainment

Public Players

Company 1

Company 2

Company 3

Company 4

Company 5

Company 6

Private Players

Company 7

Company 8

Company 9

Company 10

Company 11


15

Competitive Benchmarking (1/5)

Public Trading Comparables

Company 1 Company 2 Company 3 Company 4

Market Capitalization (INR bn)

Share Price (INR)

EV/EBITDA (x)

EV/Revenue (x)

PE Ratio

Note: Top 3 Public companies based on the Market Capitalization; Market Capitalization, Share Price and PE ratio is as of 22/07/2014


16

Key Ratios of Top 3 Companies – Operational Basis (FY 2014) (1/3)

Competitive Benchmarking (2/5)

a3a2a1

b3

b2

b1

c3

c2

c1

-5

0

5

10

%


• Company 1 recorded gross margin of ‘a1’%, higher than both Company 2 and Company 3 which recorded gross margin of ‘a2’% and ‘a3’% respectively

• Company 2 recorded operating margin of ‘b2’%, higher than both Company 1 and Company 3 which recorded operating margin of ‘b1’% and ‘b3’% respectively

• Company 1 recorded net margin of ‘c1’%, higher than that of Company 3 which recorded net margin of ‘c3’% but lower than that of Company 2 which recorded net margin of ‘c2’%


Operating Margin Net Margin Gross Margin


Key People

Products and Services

Company Information Offices and Centres – India

Corporate Address

Tel No.

Fax No.

Website

Year of Incorporation

Ticker Symbol

Stock Exchange

Brands Products/Services

Name Designation

Chairman and MD

Director

CFO

COO

Head Office

H1

Public: Company 1 (1/4)


Financial Snapshot Key Ratios

Financial Summary

• The company incurred a net loss of INR ‘m1’ in FY 2013, as compared to net profit of INR ‘m2’ in FY 2012

• The company reported total income of INR ‘m3’ in FY 2013, registering an increase of ‘p1’% over FY 2012

• The company earned an operating margin of ‘p2’% in FY 2013, a decrease of ‘p3’ percentage points over FY 2012

• The company reported debt to equity ratio of ‘r1’ in FY 2013, an increase of ‘p4’% over FY 2012

Particulars y-o-y change

(2013-12) 2013 2012 2011 2010

Profitability Ratios Operating Margin

Net Margin

Profit Before Tax Margin

Return on Equity

Return on Capital Employed

Return on Working Capital

Return on Assets

Return on Fixed Assets

Cost Ratios Operating costs (% of Sales)

Administration costs (% of Sales)

Interest costs (% of Sales)

Liquidity Ratios Current Ratio

Cash Ratio

Leverage Ratios Debt to Equity Ratio

Debt to Capital Ratio

Interest Coverage Ratio

Efficiency Ratios Fixed Asset Turnover

Asset Turnover

Current Asset Turnover

Working Capital Turnover

Capital Employed Turnover

Improved Decline

Key Financial Performance Indicators

Indicators Value (22/07/2014) Market Capitalization (INR mn)

Total Enterprise Value (INR mn)

EPS (INR)

PE Ratio (Absolute)

Profit / Loss Total Income

srqp

d

0

10,000

-1,000

-500

0

500

Profit INR mn

Total Income INR mn

2013 2012

c

2011

b

2010

a



Key Business Segments Key Geographic Segments

Business Highlights

Description News

Overview

• Company 1 is a subsidiary of ‘c1’, a leading textiles and apparel company

• Through its parent company, Company 1 holds exclusive retail rights in India for notable international brands ‘b1’, ‘b2’, ‘b3’ and ‘b4’

• The company also retails its home brand ‘b5’, a range of suits and fabrics

Business Operations • It operates in high streets, malls, luxury shopping arcades, 5 star hotel properties with store sizes ranging

approximately from ‘a1’ sq ft to ‘a2’ sq ft

Business Network • It’s retail network is spread across all major metros, mini-metros, state capitals with presence across Tier

II and Tier III cities, making it the only retail company in India to cater to all socio-economic segments

• Has a network of ‘n1’ company-operated and franchise stores across ‘n2’ cities covering over ‘a3’ sq ft

India is the only geographic segment in which the company has been operating for the last

four years

Company 1 has been operating solely in the retail segment

over the last four years

Note: Business Segments and Geographic Segments are based on total revenues

100%

0%

50%

2013

100%

Retail

100%

0%

50%

2013

100%

India


20

T O

W S


Public: Company 1 – SWOT Analysis (4/4)


Key People

Products and Services

Company Information Offices and Centres – India

Category Retail Formats

Name Designation

Chairman, MD

Director

Director

Director

Corporate Address

Tel No.

Fax No.

Website

Year of Incorporation

Head Office

H1

Private: Company 2 (1/5)

22

Shareholders of the Company Ownership Structure

Name No. of Shares held

p1%

p2%

p3% p4%

Segment 1

Segment 2

Segment 3

Segment 4

Note: AGM as of 8th Aug 2013




Financial Snapshot Key Ratios

Financial Summary

Particulars y-o-y

change (2012-11)

2012 2011 2010 2009

Profitability Ratios Operating Margin

Net Margin Profit Before Tax Margin

Return on Equity

Return on Capital Employed Return on Working Capital Return on Assets Return on Fixed Assets

Cost Ratios Operating costs (% of Sales) Administration costs (% of

Sales) Interest costs (% of Sales)

Liquidity Ratios Current Ratio Cash Ratio

Leverage Ratios Debt to Equity Ratio Debt to Capital Ratio Interest Coverage Ratio

Efficiency Ratios Fixed Asset Turnover Asset Turnover Current Asset Turnover Working Capital Turnover Capital Employed Turnover

Improved Decline

Net Profit/Loss Total Income

a

qp

a0

5000

10000

15000

-100

-50

0

50

100

150

INR mn INR mn

2013

c

2012

r

2011

d

2010

b

• The company incurred a net loss of INR ‘m1’ mn in FY 2013, as

compared to net loss of INR ‘m2’ in FY 2012

• The company reported total income of INR ‘m3’ in FY 2013,

registering an increase of ‘p1’% over FY 2012

• The company earned an operating margin of ‘p2’% in FY 2013,

an increase of ‘p3’ percentage points over FY 2012

• The company reported debt to equity ratio of ‘r1’ in FY 2013, a

decrease of ‘p4’% over FY 2012



Business Highlights

Description News

Overview

• Company 2 is Asia’s second largest company in terms of coffee estate ownership

• Besides its own coffee estates, it also sources coffee from ‘n1’ private coffee growers

• It was the first company to bring the concept of ‘café’ to India

• The most visible arm of the company is the hugely popular coffee chain ‘b1’

The first outlet opened in ‘y1’ in ‘p1’

Today, it has spawned other formats such as ‘b2’, ‘b3’ and ‘b4’

Retail Network

• ‘b1’ operates more than ‘n2’ cafes across ‘n3’ cities and towns in India and serves more

than ‘n4’ customers everyday

It also runs international outlets in ‘p2’ and ‘p3’

• ‘b2’ operates ‘n5’ outlets across major metros in India

• ‘b3’, a premium coffee chain, operates ‘n6’ outlets in India, namely ‘n7’ in ‘p4’ and ‘n8’

each in ‘p5’ and ‘p6’

• ‘b4’, a small format coffee kiosk, operates over ‘n9’ outlets all across India


25

T O

W S


Private: Company 2 – SWOT Analysis (5/5)

26

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Market Research Report : Retail market in india 2014 - Sample

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