We identify four reasons why organised
retail growth is slower than expected
􀀗 Indian retailers business models
weak – low margin and high
working capital
􀀗 Titan (OW(V)) is our top pick;
downgrade Pantaloon from Neutral (V)
to UW(V)
We believe there are four reasons why organised retail in
India is not growing as fast as initially expected: (1) Overoptimism
on consumer purchasing power. (2) Category
development lopsided – certain categories developed well
(apparel), while others did not (food and grocery). (3) Stores
are often located in places where real estate was available
rather than where customers want them. (4) An effective
small store network.
In addition, our analysis indicates that organised retail
generates low margins, has high working capital
requirements as well as large debt burdens. We now think
the organised retail penetration (ORP) rate will be slower
than expected, rising from 5.9% in 2007 to 10.4% in 2012
rather than our earlier estimate of 16%.
We also identify the following future trends: (1) Retailers will
have to concentrate on supply chain management, especially
preventing stock-outs and balancing bulk discounts with the
ability to sell. (2) Small store formats will become more
popular. (3) Churn of tenants in malls will increase.
In the current difficult environment, we prefer stocks with
good working capital management and pricing power with
affordable valuations. Our top pick is Titan OW(V) at 20x
FY10e target PE multiple. We downgrade Pantaloon from
Neutral () to UW(V) on a SOTP basis on the back of
disappointing same store sales and slower store additions.

目录

Coverage overview 2
Caught on the wrong foot 4
Where organised retail in India went wrong 4
Reasons for slow growth 4
Retail business models 7
Operating and financial parameters of Indian retailers 8
DuPont analysis 12
Summary 12
Retail: today, tomorrow 13
Indian retail in 2007 13
The way ahead 14
ORP estimates 15
Future trends 16
Company sections 17
Titan 18
Pantaloon Retail 21
Vishal Retail 25
Shopper’s Stop 28
Gitanjali Gems 31
Disclosure appendix 35
Disclaimer 40