Shoppers Stop MD says FDI will be limited to HyperCity stores

Shoppers Stop Ltd (SSL) will decide about accessing FDI after studying the policy announcement made by the Government but this would be limited to its high end HyperCity stores format, according to Govind Shrikhande, Managing Director, SSL, Mumbai.

He said the company, which has 160 stores at present under different formats, would ramp up their number to 190 stores in the next three years at an investment of about Rs 350 crore.

Speaking to Business Line here on Wednesday on the sidelines of the opening of SSL’s store in Coimbatore, he said hypermarket and supermarket formats offered scope for FDI. SSL had at present 12 hyper market (HyperCity) stores and was adding 1-2 HyperCity stores every year. He expected them to `start making money’ for SSL in the next three years. He said `if FDI has to be brought in’, this was the `only area where FDI can be looked at’ by his company.

The SSL MD said the company was looking at the present policy as to how was it structured and would decide whether it was to have a serious look at it. This might take three months. The HyperCity stores account for about 30 per cent of the sales of SSL and FDI would help ramp up the hyper market network faster. While no decision has been taken on the FDI issue by his company, he felt that `we should seriously look at it as an opportunity for expansion’. He said if the company decided to opt for FDI, this would be restricted to the hypermarket segment activities.

Shrikhande said the departmental stores were driving the growth of the company and they were present in 24 cities with 54 stores which would go up to 74 stores in the next three years in about 30 cities. It was a profitable format that was doing very well. It was the HyperCity stores that were `losing a lot of money’. The company has identified the reasons for the losses in this segment and would ensure in three years’ time this started making money.

He said in three years’ time, his group would take up the number of stores under different formats from 160 stores to 190 stores. These included departmental stores, hyper markets, Crossword (book store), HomeStop, Mothercare, Estee Lauder etc. This would involve an investment of Rs 350 crore for the 30 additional stores over a three year period.

Shrikhande, referring to the concerns voiced over allowing FDI in multi brand retail, said because of preference of Indians to cook and eat fresh food every day, they tend to shop in their neighbourhood stores. Large format stores that required huge space ( 80,000-1,00,000 sq.ft) could not come up in big cities like Mumbai where either space was not available or it was too costly to be economical to run such a store there. This will make it tough for big hyper markets to make inroads into India. This was borne out by his experience in the HyperCity format which is preferred by those looking for wider choice, better and customer friendly shopping experience etc.

But there have been several riders put by the Government for FDI in multi brand retail like the size of the city population where they could happen, the prior approval of the respective state governments, the minimum investment of $ 100 million, of which 50 per cent should go for backend operations etc. If the comments from foreign players like Wal-Mart were analysed, they showed that they want to tie up in manufacturing, processing, cold storage facilities etc and this would help the nation because the wastage of food could be minimised and supply could improve, leading to price drop.

He felt that it was a `decent policy, a good start up point’ for retailing becoming more modernised. But this was neither going to sell India as a country nor going to be a big thing for the global retailers in the short term. But it could bring benefits lover the long term -10 or 15 years from now.

Shrikhande said there were certain issues that should be addressed by the Government along with the FDI policy. What was hampering the Indian retail growth story was the non-availability of retail space at reasonable price as the government did not look at it as an engine to create jobs, imposition of 12. 5 per cent service tax on rent and power that together constitute about 12-13 per cent of the retailing cost that should be addressed along with GST. More importantly the APMC Act denies the retailers direct access to farmers to source their requirements, which added to cost, led to wastage and delay etc. Unless all these issues are sorted out, the retail growth story `is not going to happen’.

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