Mumbai: The deal, announced on Thursday, between Kishore Biyani’s Future Retail Ltd, Hyper City Retail India Ltd with the agreement to purchase the Hyper city retail from Shoppers Stop Ltd by paying Rs655 crore for expending his fold the acquisition into its largest retail network, Big Bazaar,
It clearly that Kishore Biyani’s FRL, adding 19 stores, largely in prime locations in the top five metro cities of India, and 1.4 million sq. ft of retail space. For Shoppers Stop, it is become a difficult business as it goes with nearly Rs400 crore of debt.
HyperCity is likely to be rebranded Big Bazaar NXT. HyperCity stores have an area of 25,000-40,000 sq. ft, the typical size of a supermarket. Future Retail Ltd,runs 235 Big Bazaar department stores spread over 10.1 million sq. feet, as per their annual report.
“FRL (Future Retail Ltd) will gain access to prime locations in metros and HyperCity’s private labels. The company can easily turn HyperCity profitable in the first year (-1.5% Ebitda margin in FY17) itself by enhancing apparel share (~35% gross margin) and pruning headquarter cost,”Roy said.
“We expect the deal to win the proposition for both players,” Abneesh Roy, senior vice-president at Edelweiss Financial Services, said in a note on Friday.
Analyst of equities broking firm noted that almost 85% revenue of Future Retail’s comes from Big Bazaar.
“HyperCity will be rebranded as Big Bazaar NXT and it will see its own contribution from apparel rise from 16% currently to around 30%, the same as that of Big Bazaar,” the analyst said on condition of anonymity.
“Big Bazaar has the maximum revenue contribution from apparel among the retail chains, and HyperCity definitely has a higher contribution from apparel than D-Mart does,” the analyst said.
D-Mart is the country’s most profitable retail chain and has the highest market capitalization of Rs69, 000 crore.
