Provogue planning foray into food & grocery retailing sector

Company likely to tie-up with an established player for stores across India.

Apparel retailer and mall developer Provogue India is exploring an entry into the crowded food and grocery retailing sector in the country, according to a top company executive. The foray may be done in a tie-up with an established retail chain, said the executive.

The retail stores may come up along with Provogue’s discount chain, Promart, which is opening stores across the country. The partner will run the stores, while Provogue will either own or lease the space. The tie-up is expected to happen in mid-2009.

“We are exploring this opportunity and a tie-up with established chains if we come across an attractive option,’’ said Nikhil Chaturvedi, managing director, Provogue India.

The organised retailing sector, which accounts for around 5 per cent of the estimated $350-billion Indian retail market, is expected to expand its share to 14-18 per cent of the total market by 2015, says a McKinsey report. The Tatas, Birlas, Reliance Industries and Videocon have entered organised retailing seeing enormous opportunities in the sector. The sector was mainly dominated by Kishore Biyani’s Future Group and RPG’s Spencers, among others. International retailers, such as Wal-Mart, Tesco and Carrefour, have also announced their plans to get into back-end retail operations.

Chaturvedi said Provogue is also aggressively looking at acquiring international brands in apparel and accessory retailing and tie-up with international retailers. “We have a very open mind on this. Many global retailers approached us for a tie-up. But high realty prices made us rethink. As realty prices have come down, we can again look at that,’’ he said.

He declined to name the leading foreign retailers that the company was in talks with, saying the discussions were in preliminary stages.

Provogue has already tied up with UK-based Liberty International to form a joint venture, Prozone Liberty, to set up malls in the country. Recently, Triangle India Real Estate Fund, invested Rs 457 crore in the special purpose vehicles of Prozone.

Provogue is also beefing up its discount retail operations in coming years. In the first phase, the company is opening 10 Promart stores in the next one year and eyeing revenues of Rs 180 crore. These stores give a discount of 35 per cent to 60 per cent to the last season’s apparel and related goods.

In total, the company will roll out nearly 30 Promart stores in the next 3 years, he said. The company will have a mix of company-owned and franchisee stores. “Depending on the facilities offered by our partner and locality, we will share our revenues,’’ he said.

“So far, we had only two Promart stores in Ahmedabad and Indore. All this time, we have got our model right and perfected our supply chain, but high real estate prices held us back. As realty prices have crashed 30 per cent in the last two months, we can expand fast now,’’ he said. The stores will have nearly 125 brands, a mixture of Provogue’s store brands and international brands.

Provogue has 121 stores now and plans to add 40 stores in the next one year. The company has made a turnover of Rs 330 crore in FY08 and expects a 30 per cent increase in turnover over the last financial year, he said.