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Future Goup's Biyani: Food, glorious
food! |
» JV
with Blue Foods for food-retail outlets
» Presence
in Pantaloon stores and other outlets
» Reach
to Tier I and Tier II cities
» Explore
options for liquor retailing |
The
next frontier for pantaloon Retail, part of Kishore Biyani's Future
Group, would appear to be food and drink. The company has forged
a 50:50 joint venture with Blue Foods, which runs fine dining
restaurants Copper Chimney, Bombay Blues, and Noodle Bar, all
in Mumbai. The company, named Pan India Food Solutions, will run
food courts, specialty restaurants, coffee shops, bakeries, and
the now-in-vogue gelato bars in Pantaloon stores across the thirty
cities where the chain is present, and in other locations within
these cities and beyond.
At the time this magazine goes to press,
less than three weeks after the announcement, Pan India Food has
put down 18 outlets across Mumbai, Bangalore, Ahmedabad, Hyderabad,
Lucknow, and Indore. The space? Some 50,000 sq. ft. By the end
of the year, Pan India hopes to have 40 more outlets. "Our
main aim is to capture the eating-out market," says Sunil
Kapur, CEO, Pan India Food. The company's plans include setting
up the country's largest food court, over 16,000 sq. ft. in Delhi's
Rohini area (it will, however, remain so for just a short duration
as the company plans to follow up with a 40,000 sq. ft. food court
in Noida). Kapur refuses to talk about the numbers, but it is
likely that Pan India will benefit from not having to directly
invest in real estate, the single largest component of any retail
business model, for at least some outlets (the ones in Pantaloon
stores).
Biyani would seem to be on to a good thing.
A recent study by market research firm acNielsen says Indians
are increasingly "outsourcing" their dining needs to
restaurants and convenience stores. "We strive to maximise
our share from the customer's wallet be it in spending or saving,"
says Biyani. "To this end we evaluate new categories and
try to be present there; eating-out is one such area." The
man also has plans for liquor-retailing and is talking to Diageo,
the company that owns brands such as Smirnoff, Guinness, J&B,
Johnnie Walker, Baileys and Captain Morgan to create a shop-in-a-shop
concept. "Pantaloon's retail model is just the thing we need
and we will be quite pleased if the talks end in a positive manner,"
says Diageo India managing Director Asif Adil. By 2010, a study
by the Federation of Indian Chambers of Commerce and Industry
says, the organised food retail sector in India will be worth
$30 billion (Rs 1,41,000 crore). Biyani clearly wants a piece
of that.
-Pallavi Srivastava
Chasing
Fees
Hardening interest rates have banks eyeing
other revenue.
As long as the
retail financing boom was on, banks had it easy. Now, with interest
rates hardening and consumers becoming conservative banks are
looking at fee-based offerings. "Consumer demand is still
there," says V. Vaidyanathan, Country Head, Retail Banking,
ICICI Bank, "but speculators have dropped off." "People
are postponing their purchases," adds Huzaifa Suratwala,
Research Analyst, Emkay Shares and Stock Brokers. To compensate,
banks are marketing insurance, distributing mutual funds, and
offering corporate advisory services. "The focus is on increasing
fee revenues," says G.V. Nageswara Rao, CEO, Commercial Banking
SBU, IDBI Bank. Nitin Rao, HDFC Bank's Senior Vice President,
Private Banking, is betting on the mutual funds distribution business
to grow at 30 per cent a year and Arvind Jain, Senior Vice President,
IndusInd Bank, sees insurance as the thing. Suratwala expects
the contribution of the fee-based revenues segment to grow at
over 40 per cent for most private sector banks this year. The
adventitious benefit: it helps banks offer complete wealth-management
solutions.
-Ahona Ghosh
The Cairn
IPO
So, why is Cairn really making an IPO in India?
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Caim Energy's Dhir: D-street on his
mind |
In
2006's fortune global 500 listing (which ranks companies by revenues),
five of the top ten spots are occupied by the oil majors, exploration
and production firms Exxon Mobil (#1), Shell (#3), BP (#4), Chevron
(#6), and ConocoPhillips (#10). Oil companies dominate any listing
on the basis of market capitalisation also: three of the top 10
companies by market value in 2006's Forbes 2000 are oil firms
(Exxon Mobil at #1, BP at #5 and Shell at #6). Even in India,
an exploration and production company, ONGC, is #1 in terms of
both revenues and market capitalisation. Thus, even when a small
oil firm, already listed on LSE (market value: $6.33 billion or
Rs 29,751 crore; revenues in 2005: $262.6 million or Rs 1,234.22
crore), announces that it is going to make an IPO in India, it
is big news.
Cairn Energy Plc is the company in question,
and the simple fact that 90 per cent of its current market value
can be traced back to its Indian operations could be one reason
for the company's decision to list in India. Another could be
the company's decision to invest $1.5 billion or Rs 7,050 crore
(on behalf of the whole project), over the next 30 months in Rajasthan
where its discoveries add up to a significant 1 billion barrels
(recoverable oil); at its peak production, the company's Rajasthan
fields should produce a little over 54 million barrels a year.
Neither of these reasons, however, seem to be relevant. International
investors seem to understand the oil business better and value
firms in the sector higher (ONGC's forward price-earnings multiple,
for 2006-07, is a mere 9.49 by some estimates); and Cairn recently
tied up some $1 billion (Rs 4,700 crore) in debt to fund its plans
for Rajasthan.
The real reason, claim analysts who point
out that Cairn is "an M&A amenable company", is
that the IPO could serve as a valuation exercise in the run-up
to a sell-off. Rahul Dhir, CEO, Cairn Energy India, pooh-poohs
such suggestions and proffers the fact that Founder-CEO Bill Gammel
is yet to sell out two decades after founding the company. "The
decision to hive off the Indian business as a separate one preceded
the idea of listing in India." Yet, at various times, the
buzz in D-street has had everyone from Shell to ONGC looking at
the Indian operations of Cairn for a possible acquisition. At
least initially, the India-listed entity will merely be a holding
firm for the company's India assets that are on the books of other
companies listed in several 'tax-efficient' countries.
Despite concerns over the quality of oil
in the Cairn finds-it is waxy and will probably sell at a discount
of $10 (Rs 470) per barrel, say some analysts-it is likely that
the IPO itself will do well. The $40-45 million (Rs 188-211.5
crore) increase in capital expenditure projected by analysts towards
pumping inferior oil will be more than offset, explains Dhir,
by the fact that this is "shallow oil that is onshore and
close to markets." Then, in oil-hungry India which imports
70 per cent of its requirements at prices close to $70 (Rs 3,290)
a barrel, any oil is good oil. Dhir skirts the issue of the size
of the offering, saying it could be anything between 25 per cent
and 80 per cent (it will likely be less than 50 per cent), and
analysts expect the issue to mop up anything between $2 billion
(Rs 9,400 crore and this looks the likely number) and $3.5 billion
(Rs 16,450 crore) depending on its size. Still, rumours of a last
minute offer from an integrated oil company, which will pre-empt
the late-2006, early-2007 IPO persist.
-Shalini S. Dagar
A Finance
Play
That's what Tata Sons' investment in the Nagarjuna
refinery is.
WHO GETS WHAT |
TATA SONS: There aren't any significant
upstream or downstream linkages; however, refining is a good
business purely from the returns point of view
NAGARJUNA OIL: The participation by the Tata Group
could speed up the financial closure of the project
The company could also benefit in terms of learnings on
the governance and management fronts
|
Barely two months
after it divested the majority stake in its 1,015 mw power project
in Mangalore in favour of Hyderabad-based infrastructure firm
Lanco, the Nagarjuna Group has now roped in Tata Sons as an equity
partner for its much-delayed refinery in Cuddalore. Tata Sons
is to pick up a 26 per cent stake in Nagarjuna Oil Corporation
for a consideration of Rs 350 crore. The entry of Tata Sons is
expected to turn things around for the beleaguered refinery project.
"We hope to achieve financial closure in the next couple
of months," says K.S. Raju, Chairman, Nagarjuna Group, which,
through Nagarjuna Fertilizers and Chemicals, its flagship company,
will have a 51 per cent stake in the project (total cost: Rs 4,700
crore) after the Tata Sons investment. With this deal (and the
Lanco one that preceded it), the Nagarjuna Group appears to have
got its act together in its energy business. The Rs 4,300 crore
power project where Lanco holds 74 per cent and the Nagarjuna
Group 26 per cent should achieve financial closure by the end
of this year.
-E. Kumar Sharma
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