The Hindu Business Line : Shopper's Stop IPO boosts retailers

Stock prices of retailing companies Pantaloon Retail and Trent are on the rise in the last one month just ahead of Shopper's Stop initial public offering (IPO). Brokers and analysts attribute the rise to huge expectation from the company's IPO, which may augur well for listed retail companies.

There has been increased interest especially in Pantaloon stock due the hike in foreign institutional investors' (FIIs) limit to 40 per cent from the existing 24 per cent by its board recently. "Pantaloon is among the most sought retail stock by FIIs and with their limit already at the peak no fresh buying was coming. Once the limit increases to 40 per cent, active buying from FIIs is expected," said a dealer with a foreign broking firm.

Stock price of Pantaloon Retail is up 22.5 per cent in the last one month and Trent 24.48 per cent. In today's trading, Pantaloon Retail stock was up 4.99 per cent at Rs 403.35 on the BSE and the Trent gained 4.91 per cent at Rs 359.75.

Other than the IPO of Shoppers' Stop, the huge growth in the organised retail business has attracted interest in the sector. These stocks are commanding price-earning ratio of over 30 due to the huge growth expectation in the next few years

According to ILFS InvestmartIndia, a financial services firm, the industry has entered into growth stage. It said consumers were exposed to all kinds of retailing formats such as supermarkets (Nilgiris), departmental stores (Shopper's Stop, Pantaloon), hypermarkets (Big Bazaar), specialty stores (Vijay Sales, Tanishq), and grocery stores (Food Bazaar).

"Initial success and customer acceptance of these formats have led to their rapid proliferation in more parts of the country. About 300 malls are under construction, to add another 50 million square feet over next 3-4 years with penetration now increasing in tier I & tier II cities.

"Stage is set for acceleration in growth with the total retail market in India expected to grow at a CAGR of 6 per cent to Rs 14,00,000 crore by 2010. The organised retailing segment is expected to grow at a much higher rate of 30 per cent to reach a total size of Rs 1,40,000 - Rs 1, 50,000 crore and increase its share from current two per cent to 10 per cent by 2010," said ILFS InvestmartIndia.