The Hindu Business Line : Zuari Investments pumps in Rs 12 cr

Mr Arun Mahajan (right), Managing Director, Style Spa Furniture Ltd, and Mr K.A. Parameswaran, General Manager, Marketing, at a press conference in Chennai on Wednesday. — Shaju John

Chennai , July 14

ZUARI Investments Ltd of the KK Birla Group has infused additional equity into Style Spa Furniture Ltd to fund the furniture chain's expansion plans and pay off debts.

It has pumped in Rs 12 crore as equity through a rights issue, taking the total equity of the company to Rs 22 crore, according to Mr Arun Mahajan, Managing Director, Style Spa.

Consequently, Style Spa is effectively a subsidiary of Zuari Investments Ltd, which holds 73 per cent of the equity. About 13 per cent is with other companies in the Zuari Chambal group and 14 per cent with Mr S.K Poddar and his associates.

Style Spa has paid off its debts of about Rs 6 crore to become a zero-debt company and Rs 4.5 crore has been earmarked to expand its retail chain, Mr Mahajan said.

The company plans to open 15 stores in the current year, of which 12 will be company owned and the other three company franchisee operated. It has identified 10 locations where the stores will open for business by October.

Style Spa, one of the largest furniture chains in India, will go international.

It is looking at the markets in the SAARC countries, and plans to open two outlets in Colombo next year. In 2003-04, the company made cash profit of Rs 20 lakh. Its turnover was Rs 56 crore and with a loss of Rs 3.91 crore.

The loss was due to a one-time expense of Rs 3 crore spent to change the brand name from the original Gautier to Style Spa, and an additional Rs 74 lakh due to amortisation of brand establishment costs for Gautier (as Style Spa was originally known), he said. In 2002-03, it reported a turnover of Rs 47 crore.

In the current year, the company's turnover is expected to be Rs 75 crore with a profit of Rs 2.5 crore.

In 2005 - 06, business is expected to grow to Rs 100 crore and the net profit around 5 per cent of the turnover, in line with the trend in this competitive business, he said.

Style Spa has 55 stores of which 33 are company operated and 22 exclusive franchises. This year the company is expanding in the smaller cities and towns such as Lucknow, Udaipur, Aurangabad, Nashik, Ahmedabad, Hubli and Rajkot.

Next year its strategy would be to open large format stores in the metros. A large format store will range around 7,000 sq ft against the average 2,500 sq ft of its other stores.

The large format store also demands an increase in its product range, and Style Spa is considering introducing furniture with wood veneer finish.

Mr Mahajan was optimistic about the company's growth, with the organised sector in furniture sales growing at 20 per cent against the more sedate 4 - 5 per cent growth by the market, which is estimated at Rs 30,000 crore.

Of this a third is attributed to institutional sales, and the balance Rs 20,000 crore is to the households.

The unorganised sector dominates with this segment with an 80 per cent share while the organised sector caters to 20 per cent.

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