Letter from the Managing Director
I am pleased to share with you the Annual Report of Future Market Networks Limited forthe Financial Year 20112012. Future Market Networks is inspired by the thought of creatinga network of new markets for the Indian consumption sector by integrating and organizingmodern retail, wholesale and logistics retail infrastructure. Retail Infrastructure,Wholesale Trade Infrastructure and Logistics Infrastructure form the three key businessverticals of your company. We are happy to state your company has made visible progress ineach of its business verticals and has aligned with "best in class" partners ineach of them.
It goes without saying that the potential and growth of India's domestic consumptionsector has few parallels anywhere in the world. We are in the midst of a social andeconomic change, the pace of which has never been seen at any point in our history.Increase in life expectancy, a younger demographic profile and economic growth are fuelingdomestic consumption. A Boston Consulting Group report states that the lifetimeconsumption of an average Indian born in 2009 will be $ 184,556, which is 13 times that ofsomeone born in 1960. The report suggests that the average household income is set to risenearly three times between now and the end of the decade. India's private domesticconsumption economy is now at around $400 billion and during this decade will cross $1trillion.
For a developing economy, India has a uniquely higher share of domestic consumptiondriving the economy. While domestic consumption is only 39% of China's GDP, in India itsshare is over 60%, comparable to the 70% share in the United States and other developedeconomies. This characteristic feature of the Indian economy therefore acts as a strongfoundation for sustainable growth of the economy. However, the infrastructure thatsupports this consumption economy in India is woefully inadequate, disorganized andfragmented. Modern retail has more than 40% share in China and over 90% share in theUnited States. In India, the share of modern retail is variously estimated to be between6% and 8%. Even in the large metros, the share of modern retail rarely crosses 20%. TheIndian logistics space is extremely fragmented - only 6% of the industry is organized, asopposed to 57% in USA and 80% in Japan.
Economic liberalization in the Nineties led to growth. Growth generated demand.However, supply in India is perennially playing catch up with demand. Most of theinfrastructure that supports consumption in India continues to be outdated and unable tobenefit from or catalyze the further growth of consumption. It is only obvious that wehave to build capacity to reach more consumers across more consumption centers, with moreproducts and services, more effectively and cost effectively.
Your company is designed to build capacity in the three most important components ofthe value chain the connect the manufacturers to consumers in India. These are thewarehouse and logistics infrastructure, wholesale trade infrastructure and modern retailinfrastructure.
In order to develop these businesses, your company has forged partnerships with leadingorganizations in India and abroad. Hong Kong based, Fung Properties is part of a USD 15billion organization that specializes in supply chain management in sourcing anddistribution of consumer goods. It partners with some of the largest retailers across theworld and invests in fast growing companies that can benefit from both capital andstrategic assistance from the group. Your company has formed a 70:30 joint venture withFung Properties to develop the Wholesale Markets in India.
Infrastructure Leasing & Financial Services Limited (IL&FS) is one of India'sleading infrastructure development and finance companies. Your company has partnered withIL&FS for the development of the logistics infrastructure parks in the country and hascommitted to invest Rs 100 crore in the business.
Delhi-based Star Centers specializes in the planning, and management of high-qualityshopping malls and has domain expertise, credibility, occupier relationships and anestablished track record of success with experience spread across 50 shopping centersacross Asia, including the much acclaimed Select City Walk in Saket, Delhi. Your companyhas a 60% stake in this entity.
Drawing on the requisite expertise from these partnerships, your company has alreadymade progress on each of these businesses. A modern wholesale market - similar to thoseseen in China and the Middle East - is being set up in Bangalore. The first phase of thisproject will be operational from December 2012. Branded as 'World Market' this 11 acrefacility located on the Old Madras Road in the outskirts of Bangalore will have over 400wholesale traders operating from this complex. In Mumbai, an existing mall close to MumbaiCentral railway terminus has also been converted into a World Market and will have 400traders operating from the complex by the first quarter of the FY 2012-13.
In April 2012, the company also opened its retail infrastructure project, 1MG Road. 1MGROAD is an iconic, downtown high street shopping centre, located in the heart ofBangalore, on Trinity Circle, MG Road. Located inside walking distance from some of thecity's best 5-star hotels such as Taj Residency, The Oberoi, Park Hotel & Hotel Ista,the mall is positioned as a premium, high energy, urban retail centre for the affluentBangalorean and visitors to the city. It sports foreign and domestic labels like Marks& Spencer, Apple iStore, Hagen Daaz, The Body Shop, Hidesign and Food Hall. Anothermarquee mall, DCN, will be operational in the second quarter of the FY 2012-13 in Kolkata
In the logistic infrastructure space, the company has already begun the process ofacquiring land in Jhajjar in Haryana to set up a logistics infrastructure facility toaddress consumption in Gurgaon and the balance of the south and south east region of theDelhi NCR. It has also identified land at Dankuni to the north west of Kolkata and appliedto the Government of West Bengal for the necessary permission to acquire it. The companyhas chalked out a plan to develop 10 million square feet of space for logisticsinfrastructure parks in eight top cities and is in various stages of identifying andacquiring the land.
We believe that we are fortunate enough to have a board of directors with rich andcross-functional expertise in infrastructure development, project management, real estateand finance and are backed by a committed team of professionals with experience in workingwith leading organizations in the country. Future Group's inherent knowledge andexperience in the consumption economy and its presence in retail and supply chain and itsrelationships with partners across various consumption categories in India provides astrong foundation for our growth.
The slowdown in real estate development has come at a most opportune time for us as wego out into the market to acquire site for our business verticals. We are finally findingsanity in the pricing and transaction terms that are being offered to us. Within a shortperiod of time, we have been able to achieve more than what we planned for. Yet, thisachievement is quite small compared to the aspiration and ambition that is harbored withinthis organization. I would like to thank everyone for your continued support, faith andencouragement in our vision, ambition and execution.
Sumit Dabriwala Managing Director