Pantaloon's Biyani: Learning from the slums

One of the things that pantaloon retail's Kishore Biyani has done over the recent past is to spend time in Mumbai's slums, especially Dharavi. In the claustrophobic homes of Dharavi, which boasts of being Asia's biggest slum settlement, Biyani is trying to find the retail model of tomorrow. Many of the low-priced items that you see in his hypermarket Big Bazaar stores are inspired by the needs of urban poor. He decided to sell cricket bats at Rs 75 and stumps at "crazy prices" because he found the game to be a passion among those who couldn't afford too much. His trade-in scheme (bring your old clothes, kitchen equipment, footwear, or whatever, sell them to Big Bazaar in return for shopping vouchers) was also inspired by the fact that the typical Indian household hated to throw anything away. Last year, the scheme fetched Rs 1 crore in sales that otherwise would have gone to some kirana, or neighbourhood, stores. "If we have to grow, the slums have to come to us," says Biyani, who claims to have pictorially documented consumption habits of the urban poor.

Meanwhile, the garment-manufacturer-turned-retailer is going after middle class consumers with an out-of-the-box retail model. To be headed by former (RPG) FoodWorld CEO, Raghu Pillai (he starts August 1), Home Solutions Retail India boasts an all-new business model. Meant to be home-centric, Home Solutions will come in seven or eight "silos" (Biyani is still fine-tuning it) comprising: home furnishing and textiles, home furniture, consumer electronics, home building, home electricals, home services and home improvement.

Of these, the first three would operate like stand-alone chains, and the rest may be operated as either stores-in-store in Big Bazaars or small independent stores. In addition to that, there could half-a-dozen mother stores (called Home Town) comprising all the seven silos. However, Biyani clarifies that there's nothing rigid about the model and that his plans will keep evolving.

It's easy to see why Biyani is focussed on the home. A staggering 70 per cent of what an average consumer spends relates to her home, and this segment is expected to grow further. Over the next three years, Biyani expects to open six or seven flagship Home Towns, each occupying over 90,000 to 1.5 lakh square feet , and between 40 and 50 of the three stand-alone stores (home furnishing and textiles, home furniture, and consumer electronics) of 3,000 to 15,000 sq. ft each. The first home furnishing and textile store is slated to open in Andheri in Mumbai on August 15.

Real estate developer Unitech is one investor in Home Solutions, which will require investments of Rs 150 crore to Rs 200 crore. Why Unitech? Biyani says that the company understand homes, of which it builds 6,000 to 7,000 a year. But Biyani's calculations could be vastly bigger than that. He may actually be looking at getting Unitech interested in building furnished, or at least semi-furnished, homes. If he succeeds in doing that, he will enjoy tremendous clout with suppliers and, needless to say, an early lead in virgin retail territory. He has already said that he wants his Pantaloon empire to be $2-billion (Rs 8,800-crore) big by 2010. Home Solutions, then, is a step that should take him closer to that goal.

-R. Sridharan

Easy Gulls
Will the real VW please stand up?

That state governments eager to attract foreign investors to their shores are living dangerously is something that is highlighted by the recent Volkswagen AG (VW) episode. Towards late May, it became clear that Andhra Pradesh (AP) had managed, after considerable lobbying, to convince VW to set up a manufacturing facility in Vizag. Then, Der Spiegel, a German newsmagazine, broke a story alleging graft at the highest levels in Volkswagen, naming senior executive Helmuth Schuster as the main accused. Schuster was in charge of the India project.

Around the time this magazine goes to press it emerges that Schuster and an individual named Ashok Jain floated a company called Vashishta Wahan (also VW) in January, approached the Andhra Pradesh government with claims that Volkswagen held a 51 per cent stake in it, and convinced it to invest a portion of the equity in return for an undisclosed stake and a plant in Vizag. The state government agreed to invest 5 million euros (Rs 27.5 crore), Vashishta Wahan gave it details of the account into which the money has to be paid, and, depending on which version you believe, the state government issued a letter indicating its willingness to pay 2 million euros or actually did pay that much (around Rs 11 crore). Not too long after, a delegation from the state visited Germany and met with Volkswagen CEO Bernd Pischetsrieder without anyone becoming wiser. Then comes the expose and allegations that Schuster was behind a missing shipment of cars headed for Angola. Now, opposition leaders in AP are insisting that Major Industries Minister Botcha Satyanarayana, who met Pischetsrieder come up with some answers. Meanwhile Volkswagen has put its India plans on hold.

-Kushan Mitra and E. Kumar Sharma

Blow Hot/Cold
Provogue's stock debuts smartly despite...

Provogue face Khan: Once bitten

The Indian stock market, that fickle thing whose moods are unpredictable has actually turned out to be a closet liberal. What else can explain the premium at which the stock of Provogue listed on July 7? The stock listed at Rs 249 on the NSE (and Rs 250 on the BSE), a good Rs 100 over the issue price. Then, the issue itself was subscribed 70 times over.

That's significant for a company that was dragged into a messy cocaine-investigation around the time of the issue. For the record, a former employee of Provogue was arrested while couriering cocaine to an associate in Chennai and, during questioning, sang like a canary naming the two promoters of the company, Salil and Nikhil Chaturvedi (the first has been called in for questioning), brand ambassador Fardeen Khan (who had previously been arrested on charges of cocaine-purchase in 2001), a media baron and an ad film maker among others.

So, why wasn't the market spooked? "Well, investors must have felt the brand stands for something irrespective of the management," says Pashupati Advani, Director, Advani Share Brokers.

Maybe, or maybe the market is more liberal than we thought.

-Priya Srinivasan

Bus, Yes, But Truck?
In time, says Swedish auto major Volvo.

Volvo's Jufors: Give it time, and India will look good

Even today, in India, Xerox is a generic term used as a common noun, even a verb. Volvo, the Swedish auto major that entered the country in 1998, can stake claim to similar greatness. Volvo is, at once, a common noun for luxury buses and an adjective signifying comfort and class. Today, long-haul bus operators run Volvos on preferred routes, Chennai-Bangalore, Bangalore-Goa, Delhi-Shima, Delhi-Jaipur, even Delhi-Vaishno Devi (a temple-town near Jammu), and countless others, and passengers are quite happy to pay a premium for a faster, safer, more comfortable option.

Buses is one thing; trucks, another. Last year, the Indian truck market was on fire; of the 57,000 trucks sold, however, Volvo did a mere 264. One reason for that is cost (or upfront cost, as Stefan Jufors, the worldwide President and CEO of Volvo Trucks Corporation would like it put). A typical twin-axle truck costs around Rs 10 lakh; Volvo's multi-axle vehicles do anything between Rs 35 lakh and Rs 40 lakh. Indeed, in its seven years in India, Volvo has managed to sell a mere 2,000 trucks. That doesn't faze Jurors. "We are in the top end," he says. "And as the concept of total cost of ownership rather than just upfront investment becomes understood, Volvo will become a bigger player even in terms of volumes." Jufors is confident that Volvo India will end 2005 with revenues of Rs 1,200 crore, up from Rs 600 crore in 2004. Much of that, however, will come from the sale of buses (like it did last year).

If there is one thing going for Volvo, it is that the current infrastructure boom, and emerging concerns over safety and environmental issues will give it an edge over Indian rivals. Then, the same can be said for global truck majors such as gm and Mercedes that are already eyeing the Indian market. "We cross swords with them in the international market," says Jufors with a bring-them-on air. "We compete, we win, and we are not afraid of them."

-Venkatesha Babu

STEALTH DRIVE
Toyota's Next

Small Car, Big Battle: Up Next, Toyota vs Maruti

Toyota may have had a dream run in India thus far through its subsidiary Toyota Kirloskar Motor Corporation (TKMC) but the company has consciously stayed out of the highly competitive small car segment of the market-seven out of every 10 cars sold in India right now are small cars-concentrating instead on the middle- and higher-ends of the sedan market (with Corolla and Camry) and the mini-van/ multi utility vehicle one (with the hugely successful Qualis and now, Innova). Now, the buzz in auto circles goes, the company will invest around Rs 400 crore in its plant outside Bangalore (it has the capacity to produce 60,000 vehicles a year) in a 100,000-units-a-year small car line. In Japan, and in other markets, Daihatsu, a Toyota subsidiary that makes small cars, competes with Suzuki; the latter's subsidiary Maruti is the market leader and the champion of the small car segment in India. Toyota is said to be examining three Daihatsu models, Mira(above), Passo and Sirion for an India launch. However, a spokesperson for Atsushi Toyoshima,

Managing Director, TKMC, ruled out an immediate entry into the small car segment. Still, it is a question of when, not if.

-Venkatesha Babu