top player in retail sector.
Showing posts with label Retail. Show all posts
Showing posts with label Retail. Show all posts
Sunday, May 23, 2010
Sunday, November 29, 2009
Retail investors make Rs 1.9-lakh cr in market rally
Promoters walk away with Rs 13 lakh crore.
BL Research Bureau Stock price gains have generated crores of rupees in notional wealth for investors holding on to equities so far this year. However, only a small slice of this may have accrued to retail investors.
Stocks in the BSE 500 added over Rs 24-lakh crore in market capitalisation in 2009, mainly through price gains. Of this notional wealth, retail investors saw an accretion of Rs 1.9 lakh crore, while promoters of India Inc walked away with over Rs 13 lakh crore.
These numbers are based on the shareholding patterns of the BSE 500 companies, which account for nearly 94 per cent of the total market capitalisation on the exchanges.
Lion’s share for promoters
Across-the-board gains in stock prices have expanded the market value of the BSE 500 stocks from about Rs 29-lakh crore at the start of this year to about Rs 53-lakh crore now. It is the promoters, holding 56.7 per cent of the market cap of these companies, who raked in the lion’s share of this wealth. That’s probably one reason why the Forbes Rich List released last week showed a doubling of the number of Indian billionaires!
Next in the line of beneficiaries were Foreign Institutional Investors (FIIs) that saw the value of stocks held shoot up by Rs 3.6-lakh crore. Domestic institutions — mutual funds and insurance companies — saw a Rs 2.2-lakh crore addition to their assets from the rally. Individual investors can probably take heart from this, as it is retail savings that domestic institutions redirect into the stock markets.
The accretion to market capitalisation, or notional wealth mentioned above, is a function of both the increase in the number of shares held by investors and the price gains on their stocks, though the latter accounted for the bulk of the gains. Adjusting for changes in the shareholdings, the FIIs pipped all other classes of investors in generating stock price returns. The FIIs saw an 80 per cent stock price appreciation on their holdings between January 1 and now, while retail investors saw a 75 per cent appreciation.
Retail investors cash in
The numbers show that company promoters continue to hold a sizeable, 56.7 per cent, stake in the market capitalisation of the BSE 500 companies (based on end-September 2009 data), even after selling into the rally this year. The FIIs own 13.9 per cent of the market cap, having hiked their stakes from 12.8 per cent at the start of 2009. Domestic institutions too have added to their holdings, and now own 9.1 per cent.
Retail investors, who now hold about 8 per cent of the outstanding market value, have marginally reduced their equity stakes since January. Consistent selling by retail investors over the past few months suggests that they may have used rising stock prices to convert a portion of their equity holdings into cash.
Friday, September 18, 2009
Is Organised Retail a Great Business or a Mediocre Business?
Organised retail business is a comparatively new phenomenon in India, and is still in the process of finding its feet in terms of location, size, format, product ranges, and segment targetting.
Before figuring out whether organised retail is a great business or a mediocre one, let me digress a bit and relate an interesting bit of news that appeared in the local newspapers.
South City Mall is one of the flashy new edifices in Calcutta's retail industry, with flagship large-format stores like Pantaloon and Shopper's Stop. With the city's four-day annual celebration of Durga Puja round the corner, the Mall has been teeming with shoppers of all ages.
Many shopper's were confounded recently by a closed Pantaloon store. Several smaller stores were also closed. Even the food court had most shutters down. This, at a time of peak shopping in the city.
The next day's papers were all agog with the inside scoop. Reportedly, the mall authorities had turned off the power supply to the Pantaloon store for non-payment of a large electric bill. The smaller stores and the food court - which apparently were part-owned by Pantaloon - had shut down in 'sympathy'.
Turns out that the mall authorities had agreed to lower the 'astronomical' store rents for a few months because of the economic down turn, after representation by a group of retailers allegedly led by Pantaloon. Raising of the rents back to the earlier levels caused the non-payment of bills. Wonder what they were thinking, when they agreed to the high rents before moving in!
That Pantaloon is badly in need of money, and they are not finding anyone who will give them a loan, is not news any more. (All their 'profits' are accounting fiction - negative cash flows from operations on each of the last 4 years paint the true picture.)
Neither is the story of losses incurred by the likes of Shopper's Stop, Subhiksha, Spencer's, Vishal Retail. Even a big company like ITC is incurring losses on its retail garment stores.
What went wrong? Organised retail was supposed to be the ideal service industry for the future of India, with a huge potential of employment of an unskilled but literate work force.
Several things. The most basic being the business fundamentals. You need to spend several Rupees to earn one. Real estate has to be purchased or leased at exhorbitant rates in large cities - where small format stores are not viable. In smaller towns with cheaper real estate, large format stores may not draw adequate footfalls.
Stores need to be air-conditioned, well lit, frequently remodelled. New products and fashions have to be constantly introduced and the older models and shop-soiled garments sold off at highly discounted prices.
Margins are wafer thin. The constant requirement of cash sooner or later overwhelms the business because of the large interest burden. Add to that, the competition from mom-and-pop outfits that have lower infrastructure costs and have long established customer relationships.
Highly streamlined bulk procurement processes, tight inventory control, live assessment of customer preferences are some of the ways by which some actual profits can be generated. Such activities require expensive computer hardware and software, further adding to the cost.
The banning of overseas retail businesses - except in single product stores - has ensured that Indian retail companies will not benefit from established processes at Walmart, Krogers, Asda, Costco, Target.
Subscribe to:
Posts (Atom)