Term Paper Be Vishal Final

Term paper on

{slept analysis on vishal megamart}

[Subject-business environment] SUBMITTED TO: SUBMITTED BY: MS. SACHIN JAIN KR. JAISWAL

VISHAL

LECTURER, LSB. B38.

ROLL.SE

CTION-R326

MB A-1st SEM. DA TE-20-12-08

PREFACE This project is undertaken to fulfill the project work component of the M.B.A programme in 1st Semester. My project guided from Lect. MR. SACHIN JAIN , who helped me in making of this term paper. This project is based on the slept and various factors affecting the working of VISHAL MEGAMART. To make the topic more clearly I have gone through various web sites and also taken the help of other media sources.

ACKOWLEGEMENT I would like to thank the Lovely University and take the opportunity to do this project as a part of the M.B.A. Many people have influenced the shape and content of this project, and many supported me through it. I express my sincere gratitude to Mr. SACHIN JAIN which is an interesting and exhaustive subject. He has been an inspiration and role model for this topic. His guidance and active support has made it possible to complete the assignment. I also would like to thank my Friends who have helped and encouraged me throughout the working of the project.

Last but not the least I would like to thank the Almighty for always helping me.

INTRODUCTION VISHAL MEGAMART is a retail house in India. As of April 30, 2007, it operates 50 retail stores, including two stores which are operated by their franchisees. These 50 stores are spread over about 1,282,000square feet and are located in 18 states across India. In its efforts to strengthen thier supply chain, it has set up seven regional distributions centres and an apparel manufacturing plant. It started as a retailer of ready-made apparels in Kolkata in 2001. At the time of incorporation, the registered office of thier Company was situated at 4, R. N. Mukherjee Road, Kolkata 700 001. In 2003, it acquired the manufacturing facilities from Vishal Fashions Private Limited and M/s Vishal Apparels. Subsequently, with evolution of retail industry in India and change in consumer aspirations, it diversified their portfolio of offerings to include other retail goods. Currently, it sell ready-made apparels and a wide range of household merchandise and other consumer goods such as foot tar, toys, watches, toiletries, grocery items, sports items, crockery, gift and novelties. It follows the concept of value retail in India. In other words, their business approach is to sell quality goods at reasonable prices by either manufacturing themself or directly procuring from manufacturers (primarily from small and medium size vendors and manufacturers). It endeavthier to facilitate one-stop-shop convenience for their customers and to cater to the needs of the entire family. It believes this concept has helped them grow to thier current size within a short time frame of their years. Mr. Ram Chandra Agarwal has been ranked as the 28th most pitiful person in the Indian retail industry.

In order to reduce costs and take advantage of economies of scale it has embarked on backward integration of their products. Thier apparel manufacturing plant is located at Gurgaon, Haryana. For ensuring efficiency in supply chain, it has set up seven regional distribution centres located around Kolkata, Thane (Maharashtra), Jaipur (Rajasthan), Ghaziabad (Uttar Pradesh), Ludhiana (Punjab), Gurgaon (Haryana) and Delhi. Further, it has focussed on developing a cost and time efficient distribution and logistics network, which currently comprises seven distribution centers and a fleet of trucks for transportation. It achieved total sales of Rs. 6,026.53 million for fiscal 2007, as opposed to a turnover of Rs. 2,884.43 million for fiscal 2006 and Rs. 1,463.12 million for fiscal 2005. During the same period thier profit after tax was Rs. 249.83 million, Rs. 124.74 million and Rs. 30.20 million, respectively. As a result, thier sales increased batten fiscal 2004 and fiscal 2007 at a CAGR of 89.83% and thier profit after tax increased batten fiscal 2004 and fiscal 2007 at a CAGR of 302.89%.

Date of Change Change of Address of Registered Office August 1, 2001 from 4, R. N. Mukherjee Road, Kolkata to 54/4C, Strand Road, Kolkata. February 14 2004 from 54/4C, Strand Road, Kolkata to Mouza Kuch Pukur, P.S. Bhang ore, 24 Paragnas (South), Bengal. December 29, 2005 From Mouza Kuch Pukur, P.S. Bhang ore, 24 Paragnas (South), Bengal to RZ-A- 95 & 96, Road No. 4, Street No. 9, Mahipalpur Extension, New Delhi.

OUR PROMOTERS AND GROUP COMPANIES Our Promoters The following individuals are the Promoters of our Company: a). Mr. Ram Chandra Agarwal; b). Mrs. Uma Agarwal; and c). Mr. Surendra Kumar Agarwal. The following companies are the Promoters of our Company: a). Unicon Marketing Private Limited; b). Ricon Commodities Private Limited; and c). Vishal Water World Private Limited. In addition, the following HUFs are the Promoters of our Company: a). Mr. Ram Chandra Agarwal (HUF) The details of our Promoters who are individuals, are as follows: Identification Particulars Details PAN ACZPA8989R Passport No. F2654105 Voter ID Number HVV2586279 Driving License Number Not Applied For Bank Account Number 066010200007115, Rajouri Garden Branch, New Delhi.

Mr. Ram Chandra Agarwal, a resident Indian national aged 42 years, the pioneer of budget stores in India, holds a bachelor’s degree in commerce. He has about two decades of

experience exclusively in readymade garments including manufacturing, retailing and marketing. He was brought up in Kolkata and started the business under the name of “Vishal Garment” with a small store at 9, Lal Bazaar Street, Kolkata. Mr. Agarwal has been ranked as the 28th most powerful person in the Indian retail industry . He is the Chairman and Managing Director of our Company and has been on the board of our Company since its inception.

Identification Particulars Details PAN ACYPA1819P Passport No. A5953147 Voter ID Number HVV2675353 Driving License Number WB01236191 Bank Account Number 066010200007108, Rajouri Garden Branch, New Delhi.

Mrs. Uma Agarwal, a resident Indian national, W/o Mr. Ram Chandra Agarwal, aged 32 years, holds a bachelor’s degree in arts. Mrs. Agarwal has more than five years of experience in the retail industry. She has been on the board of our Company since its inception. She started the business under the name “The Vishal Garments” in 1998 and the above concern was taken over by the Vishal Retail Private Limited in 2001 with all assets and liabilities. She has been associated with accounts department of our Company and is currently overseeing our marketing strategies.

Identification Particulars Details PAN ACFPA1093A Passport No. B2846785 Voter ID Number HVV2674398 Driving License Number WB24022338 Bank Account Number 066010100091534, Rajouri Garden Branch, New Delhi.

Mr. Surendra Kumar Agarwal, a resident Indian national, aged 44 years, is a commerce graduate. He has been on the board of our Company since its inception. He was brought up in Calcutta and is engaged in the business with Mr. Ram Chandra Agarwal and actively looking after the entire purchasing activities of the company. He has two decades of experience in the 119 garments industry.

For other details relating to Mr. Ram Chandra Agarwal, Mrs. Uma Agarwal and Mr. Surendra Kumar Agarwal, including addresses, terms of appointment as our Directors and other directorships, see the section titled “Our Management” beginning on page 109. The details of our Promoter companies are as below: (a). Vishal Water World Private Limited (“Vishal Water World”) Vishal Water World was incorporated on May 7, 1999 as a private limited company under the Companies Act. Its registered office is situated at Mouza-Kuchpukur, P.S. Bhangore, 24 Parganas (South) West Bengal, Kolkata. Vishal Water World is presently engaged in the

business of operating an amusement centre and sports complex. Mentioned below are certain details of Vishal Water World: S. No. Particulars Details 1. Registration No: 21-89342 of 1999 2. PAN AABCB1188J 3. Bank account no. 116010200003148 Promoters of Vishal Water World The promoters of Vishal Water World are Mr. Ram Chandra Agarwal and Mrs. Uma Agarwal. For details, see section titled “Our Promoters” on page 118. Shareholding pattern The equity shares of Vishal Water World are not listed on any stock exchange. The shareholding pattern of Vishal Water World as of April 30, 2007, is as follows: S. No. Name of Shareholder Number of Shares % of shareholding 1. Unicon Marketing Private Limited 315,000 49.53 2. Ricon Commodities Private Limited 300,000 47.17 3. Mr. Ram Chandra Agarwal 12,010 1.89 4. Mrs. Uma Agarwal 9,010 1.42 Total 636,020 100.00 Board of Directors As of April 30, 2007, the board of directors of Vishal Water World comprises Mr. Ram Chandra Agarwal and Mrs. Uma Agarwal.

Acquisition of Business from M/s Vishal Garments and M/s The Vishal Garments Vide a business purchase agreement dated November 23, 2001 executed betiten thier Company and Mr. Ram Chandra Agarwal (carrying on proprietorship business in the name of M/s The Vishal Garments) and Mrs. Uma Agarwal (carrying on proprietorship business in the name of M/s Vishal Garments), it acquired the business of “M/s The Vishal Garments” and “M/s Vishal Garments”, and the said businesses tire transferred to thier Company as a going concern with effect from December 15, 2001.

Acquisition of manufacturing unit from M/s Vishal Fashions Private Limited Vide a business purchase agreement executed batten thier Company and M/s Vishal Fashions Private Limited; it acquired the business of manufacturing of readymade garments as a going concern with effect from March 31, 2003. Thier Company itnt into backward integration by acquiring a manufacturing unit for readymade garments.

Acquisition of manufacturing unit from M/s Vishal Apparels Vide a business purchase agreement dated March 31, 2003 executed batten thier Company and Mr. Ram Chandra Agarwal (HUF) (carrying on its business in proprietorship in the name of M/s Vishal Apparels), it acquired the manufacturing unit of “M/s Vishal Apparels” and the said manufacturing unit was transferred to thier Company as a going concern with effect from March 31, 2003.

Major Events: A chronology of some key events in the history of the Company is set forth below: Year---- Milestone 2001-- Incorporated as Vishal Retail Private Limited acquired the proprietorship firm Vishal Garments & the Vishal Garments opened first store outside Kolkata. 2002-- Opened first Store in Delhi 2003 --Acquired Vishal Apparels, a manufacturing unit. Set up a manufacturing unit in Gurgaon. 2004--Started thier largest store of at Mathura Road, New Delhi having an area of 80,000 square feet nominated for the Images Retail Awards’ 2004 2006--Thier Company was converted into a public limited company 103 implementation of production and retail module of SAP Broadband connectivity with each and every location Increased thier presence to an aggregate of 17 States. 2007-- Increase in number of stores to 50 spread across in 18 States.

Thier Competitive Strengths It believes that the following are thier principal competitive strengths which have contributed to thier current position in the retail sector in India:

the ‘value retail’ segment

Understanding of

Thier business plan involves implementation of the concept of the ‘value retailing’, targeting the middle and loiter middle income groups, which constitute majority of the population in India. It intend to provide quality products at competitive prices. It sells a vast range of merchandise across apparels and accessories, FMCG(frequently marketed consumer goods) products, food products and consumer durables with over 74,000 SKUs.Thier emphasis has been to maximise the value that the customers derive in spending on goods bought in thier stores. It endeavthier to continuously reduce thier costs through a variety of measures, such as, in-house production of apparels, procurement of goods directly from the small and medium size vendors and manufacturers, efficient logistics and distribution systems along with

customized product mix at thier stores depending on the regional customer behavithier and preferences. Central to thier value retail strategy is to pass on the benefits of cost reduction measures to thier customers.

Supply chain management

Thier supply chain management involves planning, merchandizing sthiercing, standardization, vendor management, production, logistics, quality control, ‘pilferage’ control replacement and replenishment. Thier supply chain management provides us flexibility to adapt to changing patterns in consumer behavithier and their ability to add value at various steps/levels. In particular, thier supply chain management gains strength from their ability to undertake in-house manufacture, design and development of apparels.

Logistics and distribution network Thier distribution and logistics network comprises seven distribution centres. Besides, It hastier own fleet of 41 trucks, which helps us to transport and deliver thier products in a cost and time efficient manner. It believe that thier distribution and logistics set up is It'll networked and allows us to fulfill the store requisition within short time period of generation and receipt of order, which has helped us to optimize in-store availability of merchandise and minimize transportation costs.

Thier strong distribution and logistics network has enabled us to dispense with the requirement of a dedicated storage space at every store, which is an industry practice, and instead undertake periodical replenishment of depleted stock. Due to adoption of an efficient racking system, it is able to benefit from optimum utilization of the space allocated for display in thier stores. This provides us assistance in maintaining a low working capital requirement and less carrying cost.

Geographical spread Thier stores and distribution centres are spread in various parts and regions of the country. This has not only enabled us to build thier brand value but also facilitated us to explore cost-effective sthiercing from different locations, identify potential markets and efficiently establish new stores in different locations. An aggregate of 43 of 50 of thier existing stores are located in Tier II and Tier III cities, which, It believe, enables us to capture market share in locations where a majority of thier target customers are located.

Identifying new locations It believe that It possess the ability to identify locations with potential for growth, in particular in Tier II and Tier III cities. It has an exclusive site identification and assessment team, which undertakes systematic analysis of the business prospects, taking into account factors such as population, literacy levels, nature of occupation, income levels, accessibility, basic infrastructure and establishment and running costs. Further, it has a dedicated warehouse for the purposes of storing the materials essential for setting up of new stores.

Private labels It has a number of private labels for apparels (i.e. apparels manufactured by us) such as Zeppelin, Paranoia, Chlorine, Katina Studio, Famine, Flthierier Women and Roseau. In fiscal 2007, thier income from thier private labels was Rs. 583.60 million, which accounts for 9.68% of thier

total sales for fiscal 2007. It believes that their focus on thier private labels and their recognition in thier customer segment enables us to differentiate themselves from thier competitors.

Information technology systems It believes that efficient information technology systems, processes and business applications are essential to handle retail chain of thier magnitude. Thier office processes are computerized which support procurement, supply chain logistics, distribution centres management and store operations including inventory management and billing. It is in the process of implementing SAP. All thier stores and distribution centres are connected through a company-wide virtual network connection which helps to efficiently manage thier network of outlets throughout the country.

Experienced and skilled management team It has an experienced management team which is complemented by a committed workforce. Their management team comprises of talented professionals who are skilled in the retail sector. This has assisted us in management of thier stores. It believes it has created the right balance of performance bonuses and other incentives for thier employees.

Thier Strategy----------It intends to pursue the following strategies in order to consolidate thier position as an operator in the ‘value Retail’ segment in India. Thier growth strategy is based on:

Increasing thier penetration in the country by leveraging thier supply chain, distribution and logistics network It intends to increase thier penetration in the country by setting up new stores in cities where it already have Presence, as also entering into new areas in the country. In particular, it intends to focus on expansion in Tier II and Tier III cities. It believe that thier existing infrastructure have been designed for a higher scale of operations than thier current size, and can help us grow without the need to significantly increase costs. Moreover, their continuous effort to improve systems and processes leads us to believe that it can deal with higher scale of operations without any hindrance. Higher business volumes will also improve thier negotiating pouters and help us get further economies of scale in thier buying.

Emphasis on Backward Integration It believes that through backward integration It will continue to substantially control the cost of production, resulting in such cost benefits being passed on to thier customers. It intends to increase the inhouse manufacture, design and development of thier products and realizes economies of scale. It intends to manufacture at least 25% of thier requirement for apparels and may require expansion of thier existing manufacturing facilities. This will also enable us to reduce thier reliance on external agencies for supply of thier products and will result in loiter turn-around time.

In addition, thier focus would be to undertake in-house such functions of the manufacturing processes, which, in thier view, would add maximum value and would enable us to reduce their procurement costs.

Expansion of FMCG Historically, it has derived significant portion of thier revenue from sale of apparels. In pursuance of their business plan to diversify thier portfolio of offerings, FMCG products play a key role. FMCG products are usually meant to fulfill the daily needs of consumers and therefore, It believe retailing of FMCG products will bring customers to thier stores on a frequent basis and this may in-turn lead to consumption of thier apparels. It believe retailing of FMCG products would help us to eliminate the impact of seasonality of the apparels market in India, which depends on factors such as change in tether conditions and festival celebrations. In furtherance of thier endeavthiers to reduce costs, It intend to procure FMCG products directly from the manufacturers. For this purpose, It has entered into and will continue to explore the possibilities of entering into certain arrangements with domestic FMCG majors on such terms and conditions, which are suitable to their business model.

Procurement from low-cost production centres outside India In addition to thier strategy to continue procurement of goods from small and medium size vendors and manufacturers which leads to cost efficiencies, It intend to procure FMCG and apparels from low-cost production centres located outside India. Towards this objective, It propose to increase thier procurement of finished and semi-finished goods from China and thereby realize economies of scale and pass on the benefits so accrued to thier customers.

Increasing customer satisfaction and thier base of loyal customers It believes that understanding the needs of thier customers is of prime importance for the continuous growth of thier business. In order to continuously provide customer satisfaction, thier customer management team assimilates customer feedback and it endeavthier to take necessary steps to address the requirements of thier customers. In addition, It has introduced, in association with SBI Cards & Payment Services Private Limited, a co-branded credit card. It proposes to continuously undertake such initiatives to increase the satisfaction of thier customers.

Continue to upgrade systems and processes

information

technology

It believe that any retail business requires efficient information technology systems for control over the functioning of various stores including stock management, pricing and promotion, replenishment, sales, quality control and financial accounting. It are currently in the process of upgrading thier information technology set up and have entered into arrangements with leading vendors of information technology services for implementation of more advanced ERP applications such as SAP. It intends to periodically upgrade thier information technology systems and processes.

Continue to train employees entrepreneurship from employees

and

seek

It believes a key to thier success will be thier ability to continue to maintain and grow a pool of strong and experienced professionals. It has-been successful in building a team of talented professionals and intend to continue placing special emphasis on managing attrition and attracting and retaining thier employees. It intend to continue to encthierage thier employees to be enterprising and expect them to ‘learn on the job’ and contribute constructively to thier business, either through ideas, personal networks or effective knowledge management. It also intend to continuously re-engineer thier management and organizational structure to allow us to respond effectively to changes in the business environment and enhance thier overall profitability.

PACTICAL ISSUES-----------------An Empirical Study on Customer Perceptions about Vishal Mega Mart and Its Impact on Shopping Behavior in Dehradun CityThe organized retail business in the country is witnessing a boom. Market liberalization, a growing middle-class, and increasingly assertive

consumers are sowing the seeds for a retail transformation, which will bring more Indian and multinational players on the scene. The cost of organized retailing was estimated around Rs. 26,000 cr in 2004, which is about 3% of the total. However, it is now set to grow at a rate of 25%30% per annum. Such a rapid growth will bring many challenges and the way in which these challenges are managed will determine the prospects of organized retail in India. In Dehradun city, Vishal Mega Mart (VMM) came up as the first organized retail outlet in the form of a mini hypermarket cum discount store in the year 2006. Due to its inception in Dehradun, shopping got an all together new meaning. A big parking lot, a centralized Air-Conditioned (AC) environment covering four spacious floors, soothing music, a tempting visual display of products with self selection facility to choose from a wide assortment and a variety of products priced with occasional heavy discounts are some of the striking features of VMM retail outlet. It has made shopping, an altogether enjoyable experience. Unlike the traditional stores where one had to go to many outlets under scorching heat, VMM has many items under one roof along with a reasonably priced food joint where one can relax, if tired. It is assumed that it will affect the way in which people in Dehradun, purchase and consume things. Moreover, competing retailers are afraid that they would get eaten by this big fish. This research paper is an effort to bring out customer perception regarding Vishal Mega Mart strategies, and its impact on the shopping behavior of customers in Dehradun city.

SBI, Vishal mega mart launches card SBI Card launched a co-branded card in association with leading retail chain Vishal Mega Mart to tap the booming organized retail market that is pegged to hit Rs 1, 09,000 crore by 2010. "SBI Vishal Mega Mart Card is one of the best co-branded credit cards that offers reward points and other benefits to frequent shoppers and will

be free for those who spend above Rs 7,500 per annum," SBI Card CEO Roopam Asthana said.

Asthana said the card would be free of cost for the first year, but would charge Rs 700 per annum if purchase on the card was less than Rs 7,500. Other SBI Card holders could also flip their card for SBI Vishal Mega Mart Card and use it like any other credit card. "By partnering with SBI Card, we are not just offering customers a convenient payment mechanism but a unique consumer loyalty programme that rewards them every time they shop," Vishal Retail MD Ram Chandra Agarwal said. Some of the features of the co-branded card include Rs 250 discount voucher on signing up for the card and a set up by which the card holder earns five reward points on every Rs 100 spent that could go up to eight points on spends above Rs 7,500 and the points are redeemed at any Vishal Mega Mart store. Other offers in the credit card are no transaction fee on fuel purchase at select IOC and IBP petrol pumps and balance transfer facility without any interest for 75 days and complementary personal accident insurance. Vishal Mega mart retails a large variety of household, FMCG and consumer durable goods at bargain prices at its 24 self-owned stores, which are likely to increase to 50 by the end of 2006. How attractive is the funding of retail industry, from an investor perspective? In the initial years, returns are limited due to the high real estate costs, large and sustained capital expenditure to create scale, and start-up costs for store infrastructure.

However, investors with longer investment horizons are beginning to recognise the potential for long-term value appreciation of investing in differentiated businesses with large-scale plans and able execution teams. Apart from the traditional sources like banks and financial institutions, there are multiple avenues including PE funds. Companies have even successfully approached the IPO (initial public offering) route to raise funds. We have seen many PE investors taking stakes in retail ventures. For example, Subhiksha raised PE from ICICI Ventures, while Actis took a controlling stake in Nilgiris. After the initial rounds of PE-funding, companies like Vishal Megamart and Koutons approached the public for capital through an initial offering of shares. Large players like Shopper’s Stop, Trent and Pantaloons are already listed on the stock exchanges.

COMPARATIVE DATA OF DIFFERENT RETAIL STORE Compiling data from various sources - Annual reports, Magazines, Websites etc Here is how Pantaloon Retail, Vishal MEGAMART , Trent, Shoppers Stop and Spencers stack up against each other in the following key factors. Retail Space under Operations [in million sft at the end of March-2008]: •

Pantaloon Retail - 8.9

• • • •

Vishal MEGAMART - 2.2 Shoppers Stop - 1.6 Spencers - 1.2 Trent - 1.1

Retail Sales for FY 2008 [in Rs million]: • • • • •

Pantaloon Retail - 55,218 Vishal MEGAMART - 10,053 Shoppers Stop - 11,901 Spencers - 8,061 Trent - 7,162

Retail Gross Margins [in %ge]: • • • • •

Pantaloon Retail - 33.7 Vishal MEGAMART - 44.1 Shoppers Stop - 36.7 Spencers - 14.4 [Lowest in the Industry] Trent - 42

Retail Real Estate Expense as Percentage of FY08 Sales: • • • • •

Pantaloon Retail - 7.2 Vishal MEGAMART - 6.0 Shoppers Stop - 8.6 Spencers - 8.8 Trent - 3.5

Retail Space Addition in FY 2008 [%ge growth YoY]: • •

Pantaloon Retail - 67.5 Vishal MEGAMART - 68.6

• • •

Shoppers Stop - 36.9 Spencers - 133.8 Trent - 27.3

Retail Revenue in INR / sft in FY 2008: • • • • •

Pantaloon Retail - 7,788 Vishal MEGAMART - 5,838 Shoppers Stop - 8,585 Spencers - 9,113 Trent - 7,575

SALES STATUS OF DIFFERENT RETAIL STORE Top 10 Food and Grocery retailers in India as chosen by respondents [Multiple selections were allowed] Apna Bazaar - 42%, Subhiksha 26%, Reliance Fresh - 21%, Trinethra / More Retail - 11%, Food Bazaar - 11%, Hyper city -10%, Metro - 7%, Spencer's 6%, Big Apple - 5% and Sabka Bazaar - 3%. It was really interesting to note that Apna Bazaar was

the

most

sought

after

place

Top Lifestyle Store Retailers in India

for

Food

&

Groceries.

Big Bazaar - 52%, Vishal Mega mart - 17%, Shopper's Stop -13%, Landmark - 12%, Pantaloon - 10%, Globus - 8% , Westside -3% and Trent - 2%.

RETAIL VALUE OF DEFFERENT RETAIL STORE

Value Retail same store sales (SSS) growth rebounded in Nov'07 to 40% after a 25% decline in Oct'07, due to late Diwali this year. This implies a growth of mere 2.8% in the festive season (Oct-Nov’07 combined). Lifestyle SSS growth in Nov is at 30% as against a decline of 7% in Oct. Collectively in the festive season SSS growth is 9% compared to over 20% growth maintained for most of the months of the previous fiscal. The chart below represents sales mix of Pantaloon Retail India Ltd. VISHAL MEGAMART still account for bulk of the sales for the company. The company has added retail sales space aggressively in last financial year. In FY2005, the company added 1 mn sft while it declined to 0.85 mn sft in FY06 and zoomed to 2.7 mn sft in FY07. This FY, the company has been little bit slow due to unrealistic realty prices and has managed to add mere 1.5 mn sft till the end of Nov.The company is expected to clock sales of Rs 7,400 crore for FY2008 but going by the recent reported numbers, a slowdown is imminent.

IMPACT OF VARIOUS “VISHAL MEGAMART”

ENVIRONMENT

ON

Social Impact There are variables/factors that effects customer impulse buying behaviour in FMCG sector considering retail market in India. The impact of various impulse buying factors like sales and promotions, placement of products, window merchandising, effective price strategy etc on customer impulse buying behavior has been analyzed. A hypothetical model has created in this paper which has been taken into consideration for our research work on impulse buying behavior of the consumers. The study is based on the primary data collected from Vishal Megamart from the area of DELHI and NCR regions with the help of structured questionnaire on ricer scale. Data analysis has been done using SPSS software. The statistical analysis method employed in this study is Factor Analysis. After the through analysis of the available data it has been found out that since income of individual is increasing and more and more people are moving towards western culture in dressing sense, in eating etc so the purchasing power of the people has really gone up and thus the impulse buying of the commodities is on a great increment mainly due to pricing strategies of retail players and full of festivals throughout the year. Under the social environment effect hoping to usher in a socio-economic revolution VISHAL MEGAMART is all set to create at least 500,000 jobs through its jumbo Rs.80 billion investment in retail network to be launched in the two north Indian states.

"We propose to commence our retail business under the VISHAL MEGAMART seven major cities of Uttar Pradesh and one in Uttarakhand . VISHAL MEGAMART would be spread over 4,500 sq. ft. and would serve as the neighborhood convenience store offering fruits and vegetables, staple foods, dairy and FMCG (fast moving consumer goods) products. The hypermarkets would be spread over an area of 150,000 sq. ft. and sell apparel, consumer durables, IT and lifestyle products, and home furnishings besides all the goods available in VISHAL MEGAMART. Community facilities including a health centre and pharmacy, and a vocational training centre to assist youth in tapping employment avenues would also be provided at these centers. Sixty-eight Town Centers, each spread over 130,000 sq. ft. would be in place in most of the 70 district headquarters of Uttar Pradesh by the end of next year. Poised to usher a new paradigm in rural areas, the agri-business vision of VISHAL MEGAMART is to build infrastructure for efficiency, value addition, logistics and market access to improve farm incomes, create an efficient market place for the true price discovery of farm produce, drive major initiatives to bring the best technology and thereby bring about drastic improvements in farm practices

LEGAL IMPACT In

this

environment govt. plays his legal role to develop the mentioned industry. He makes suitable law for the multi-dimensional growth of the industry. Govt. has also fixed a limited FDI in this sector, no body will invest more money from this limit, but after liberalization govt. changes his policy.

Liberalization of the Indian economy and rationalisation of business procedures have already ensured a high economic growth with a rapidly expanding base for the manufacturing and hi-end services sectors. Fresh avenues for gainful employment to a predominantly young and talented population have created high disposable incomes that translate in to higher consumption and thus better opportunities for all verticals of retail to flourish. The country's dynamic retail landscape presents a grand opportunity to investors from across the globe, to use India as a strategic business hub. prices than what they received from the erstwhile traders/middlemen. Corporate retailers like ITC, Godrej, VISHAL MEGAMART, AV Birla and many others have already established the farm linkages. Indian farmers are finally making good money, after centuries of social and economic exploitation. The Indian government too has chipped in with a massive loan waiver worth Rs 60,000 crore to lighten the farmers' debt burden

ECONOMIC IMPACT Asian Markets Securities report on Vishal Retail IPO

VRL’s focus is on tier II and tier III cities, which account for 87% of its total retail space. Of the 50 stores, Vishal Retail has 43 stores located in Tier II and Tier III cities. An average store is 20,000-30,000 sq.ft. in size generating sales of Rs 7500 per squre feet. VRL’s business model is based on value retailing, where by it offers quality products at reasonable prices to customers primarily in the lower and middle income group. VRL sells around 7,000 products of household needs, ready-made apparels, footwear, toys, watches, toiletries, grocery items, sports items, crockery, gift and novelties. North India accounted for 62% of FY 2007 sales, east India 19%, west India 15% and south India 4%. In FY07, the apparel business contributed 63% of revenues, while the non-apparel business contributed 22% and the FMCG sector 15%. house In Apparel Manufacturing & Private Labels VRL has a garment facility in Gurgaon having a capacity of 5,000 pieces per day. The in house apparel manufacturing facility offers private labels under the banner of Vishal Mega Mart. In FY2007, income from private labels was Rs 58.4 crore, which accounted for 9.7% of total sales. Strong Infrastructure VRL’s distribution and logistics network comprises seven distribution centers with a total area of 471,426 sq. ft. The company also has its own fleet of 41 trucks, which helps in transport and delivery of products in a cost and time efficient manner. The company is in the process of implementing SAP to connect all its stores and distribution centres through a virtual network connection which will help it to efficiently manage the network of outlets throughout the country. Solid Financial Performance During FY2002-2007 the company gre 112% & 163% CAGR on top line & bottom line respectively. During FY2007, the sales & PAT was at

Rs 602 & Rs 25 crore respectively. The OPM & NPM were decent at 11.50% & 4.15% respectively.

Expansion Plans VRL plans to scale up its nationwide presence increasing store space from 1.28million sq. ft. in March 2007 to 5 million sq. ft. by March 2010. The company plans to open 32 retail stores in FY2008 of which, 22 stores will be funded from the IPO proceeds while the balance 10 would be funded through debt and internal accruals. Most of the 22 stores will be located in Tier III cities (18 stores) followed by Tier I cities (three stores) and Tier II cities (one store). VRL is also significantly increasing its garment manufacturing capacity setting up another plant at Dehradun in Uttaranchal, which will commence production by July / August 2007. This facility is expected to double VRL’s garment facility to about 10,000 cloth pieces a day. One more garment unit is planned at Hubli in Dharwad, Karnataka. Organised Retailing: A Sun rise Industry in India Organised retail in India is on a high growth trajectory and is growing at the rate of 24-26% annually. The size of the total retail industry market is estimated to be around Rs. 9,990 billion in 2004-05, with organized retailing accounting for a mere 3.5% of the India’s total retail market. In its Annual Review, CRIS INFAC estimated the organised retail penetration to increase to 8% by 2010 at a CAGR of 26%. The organized retail penetration is projected to increase to 5.8% by 2007-08. Outlook and Valuation

Vishal compares well in terms of profit margins & Mcap / Sales, although its average sales per square feet is very low compared to its peers because of its presence mainly in smaller cities. At the upper price band of Rs 270 per share, the P/E would be 24.1 times the FY 2007 EPS of Rs 11.15 on post-issue equity of Rs 22.40 crore. The leading players like Pantaloon Retail, Shopper’s Stop and Trent (India), enjoy very high valuation with the PER of around 90, 80 and 40, respectively. Although VRL does not fall in to that league due to its value retail business model focused on smaller towns & cities, nevertheless, retail being a high growth industry, Vishal Retail will also do well & command good valuation. VISHAL MEGAMART expect the company to post sales & PAT growth of 60% & 70% respectively over FY07-09. Valuing conservatively at 18 - 20x FY2009 EEPS of Rs 29.91, VISHAL MEGAMART see the stock scaling up to Rs 538-600 levels over next one year. Investors can certainly subscribe to this growth stock. Currently, the India retail market is $332.8 billion (Rs 13,30,000 crore) strong, growing at the rate of 10.8% per annum, as per Images F&R Research estimates. Of this, the share of organised retail in 2007 is estimated to be only 5.9%, which is $19.6 billion (Rs 78,300 crore). But this modern retail segment grew at the rate of 42.4% in 2007, and is expected to maintain a faster growth rate over the next three years, especially in view of the fact that major global players and Indian corporate houses are seen entering the fray in a big way. Even at the going rate, organized retail is expected to touch $57.5 billion (Rs 2,300 crore) by 2010, constituting roughly 13$ of the total retail market. With several states in the country permitting retailers to purchase produce directly from farmers, the farmers too are adapting to the new opportunity to cultivate assigned crops and take special care of the same. This gets them instant credit at higher.

POLITICAL IMPACT This environment is very important from the view of these particular topics, because every way would pass through the political coridor.The Government of India has succeeded in its reform process; the economy is poised to grow at an annual rate of 5% during 2005-2010. The reforms include policies to woo foreign investors, make import duties in compliance with WTO commitments and customize the EXIM policy to boost imports. Due to some political region at least three major cities saw protests in May against Reliance, India’s largest corporation, entering the business of retailing fresh vegetables and fruits through its brand Reliance Fresh. In Ranchi and Indore, the protests had political backing and turned violent. The protestors, mostly street vendors, fear the company’s low prices will destroy their market. While it is too early to know if their fears are founded in reason or hype, the protests also stem from the fact that they feel cheated by a government that is in a hurry to promote large retail businesses and refuses to keep its promises made to small vendors and retailers, who control about 95 per cent of the country’s overall retail business. India has an estimated 12 million street vendors in its cities— the 2004 National Policy for Urban Street Vendors pegs it at 10 million —and roughly 2.5 per cent of each city’s population is engaged in vending on streets. Many visible corporate brands are into the retail business: VISHAL MEGAMART, Bharti, Big Bazaar, Godrej and Subhiksha. India has not allowed FDI in multi-brand retailing. But international behemoths like Wal-Mart, which has a deal with Bharti, are raring for joint ventures. (Wal-Mart is world’s largest retailer and the second largest corporation. Labour unions, women’s rights groups, and grassroots organizations have long argued that the reason for Wal-Mart’s cheap prices is how shoddily it treats its employees. Wal-Mart had to leave Germany and

South Korea because it did not get the kind of room for its policies as in the US and other countries.)

TECHNOLOGICAL IMPACT India’s organized retail industry, constituting 3 per cent of the total retail, is indeed on a growth path. It has necessitated the development of sophisticated IT solutions to enable more profitability, efficiency and an enriching customer experience. Retailing is the second largest income generator in India after agriculture and constitutes 38 per cent to gross national income. Dynamic Vertical Solutions Pvt Ltd, based in Gurgaon, has already made a mark in the field by providing complete end-to-end solutions for different types of retailers. Atanu Ghose, Technology Head at DVS and an IT veteran with 37 years of experience, who was in Bangalore recently to attend FRO2008 — the Franchise and Retail show — shares some of his perceptions on IT deployment in retail sector. Technology is a one-time investment but the return on investment is continuous. For the first three years ROI may not be there but then onwards there is no cost. Many of the large retailers spent crores of rupees on doing up their premises but buy some cheap software at Point of Sale (PoS) for computerized invoicing. I think it is a wrong strategy because it doesn’t help you to find out who your customers are, it doesn’t generate information on stocks and shelf space analysis is very critical. Why do some products move faster while others don’t? Mere PoS computerization is not going to help in these matters. Technology-driven companies like Wal-Mart have minute information, even to the point, let us say, which truck will reach their warehouse in next 45 minutes. Proper supply chain is essential and customer experience is very critical for retail success. The retailer has to ensure that customer is not required to hang around or take too much time to spot his product. If you are a large retailer, even a one percent saving makes a huge difference. The problem with ordering through phone is that it may not be properly registered or the person concerned might

forget about the call 15 minutes later. If you can’t provide the product or service, the customer will go to next shop.

SUGGESTION AND RECOMMENDATION  Customer facility should always be under watch.  Store should provide free home delivery facility.  Company should take initiative to open new outlets in sub-urban area also to improve the life standard of people living there.  Company should ensure that quality and quantity of the commodity is accurate.  Generate employment in that area in which the retail store is situated.  Company should do some CSR initiatives in that area to develop the economic condition of people living in that area.  Company should provide regular training to their staff and aware him with the modern technique of selling and customer dealing.  To be improved the parking facility.  Range of products should be maintained.

 Pricing of products compared to other stores should always monitor.  Freshness & quality of products should be always checked.  Teach the counterman how to behave with customer and maintain Courtesy and helpfulness of store staff.  There is a long delay at the billing/payment counter, mainly because of less number of billing machines.  There is always a lot of crowd at the weighing counter of the vegetable section. People do not follow queue system but charge directly to the counter without considering that other people are in the line. The placement of the weighing counter is also not appropriate, creating lot of inconvenience of shopping.

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