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February 01, 2005

Why retail is hot

From a Reuters report:
Private-equity firm GW Capital financed a Rs 45 crore deal last month to merge two south Indian department store chains, Trinethra and Fabmall, aiming to grow their combined annual revenues to Rs 1000 crore from 200 crore by 2008.

Another private-equity firm, ICICI Venture, invested Rs 25 crore in Madras-based discount grocery chain Subhiksha, to help it enter new markets. The firm had already invested Rs 15 crore in Subhiksha four years ago. And department store Shopper's Stop plans an initial public offering to raise up to Rs 130 crore as it adds 11 stores to its existing 15 and launches hypermarkets...

"Many retail players are beginning to reach critical mass, and this is a business of scale, so you need to be big," said George Thomas, a business manager at GW Capital...

Organised retail, which has grown 8.5 percent annually in the past few years, makes up just 2 percent of total retail sales. "With just 2 percent penetration, growth is going to be breathtaking. Doubling and even quadrupling of revenues is feasible, so there's a lot of interest from investors," said (V.S.) Sudhakar, managing director of Fabmall).

Organised retail is expected to handle a fifth of all sales by the end of the decade. This year alone, the $4.2 billion industry is tripling space to 25 million square feet.

Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.