Pantaloon shares surge on high hopes

Shares of Kishore Biyani-controlled Pantaloon Retail have been on fire on bourses on expectations the Cabinet may soon consider a proposal to allow 51 per cent foreign direct investment (FDI) in multi-brand retail, helping the retailer to pare its debt through stake sales amid slowing consumer demand.

On Friday, Pantaloon shares rose 8.42 per cent, or Rs 15.40, to close at Rs 198.25 on the Bombay Stock Exchange (BSE) in an overall weak market, taking its gains to nearly 30 per cent in the past three sessions. The Bombay Stock Exchange (BSE) benchmark, the Sensex, has fallen three per cent in the past three sessions. Shares of other Indian retailers — Shoppers Stop and Trent — have also gained over three per cent in the past three trading sessions.

“The move (allowing FDI in multi-brand retail) will benefit Pantaloon Retail and Trent as these companies currently have or are in the final stages of tie-ups with global retailers eagerly waiting to enter India,” said Abneesh Roy and Harsh Mehta, analysts at Edelweiss Securities, in a note to clients. “Shoppers Stop too welcomes FDI although it is currently not looking for a partner,” they added.

India’s total retail sector is estimated at $590 billion with the unorganised sector accounting for $496 billion. An approval of FDI in multi-brand retail, a politically sensitive issue, would allow global chains like Wal-Mart, Carrefour and Tesco to enter the Indian market.

It and is expected to stimulate investments in logistics and cold chain development.

“Many retailers are thinking about raising capital and FDI is one of the ways to make it happen. From that perspective, it will help retailers,” said Hemant Kalbag, partner and vice-president at retail consultancy AT Kearney. “FDI in multi-brand retail will help Indian retailers to gain access to foreign retailers and their know-how. India still has a dearth of comprehensive retail talent. International retailers can bring best practices and know-how here.”

Biyani’s Future group, which runs the country’s largest listed retailer Pantaloon Retail, plans to divest stakes in non-core businesses in the next six to 12 months. The group has already undertaken valuation of its businesses such as insurance, financial services, logistics and media where it plans to sell stakes.

Such stake sales are a vital part of Pantaloon’s plans to reduce its debt of Rs 4,200 crore at a time when most of the retailers are expecting slowdown in consumer spending due to high inflation, rising interest rates and slowing economy.

For the quarter ended September 30, Pantaloon posted lowest same-store sales growth in the value segment in about two years.

“FDI in multi-brand retail will help only if somebody is looking at selling something or looking at partners. Otherwise, I do not think it will help existing retailers,” said BS Nagesh, vice-chairman at Shoppers Stop.