QUARTERLY PERFORMANCE ANALYSIS OF COMPANIES (October-December 2007)

INDIAN RETAIL INDUSTRY

January 2008

Cygnus Business Consulting & Research

4th & 5th Floors, Astral Heights, Road No. 1, Banjara Hills, Hyderabad-500034, India Tel: +91-40-23430203-05, Fax: +91-40-23430201, E-mail: info@cygnusindia.com Website: www.cygnusindia.com

Disclaimer: All information contained in this report has been obtained from sources believed to be accurate by Cygnus Business Consulting & Research (Cygnus). While reasonable care has been taken in its preparation, Cygnus makes no representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such information. The information contained herein may be changed without notice. All information should be considered solely as statements of opinion and Cygnus will not be liable for any loss incurred by users from any use of the publication or contents

QPAC-Indian Retail Industry- October-December 2007

CONTENTS
EXECUTIVE SUMMARY .........................................................................................................3 INDUSTRY ANALYSIS ............................................................................................................4 OUTLOOK FOR THE SECTOR .............................................................................................7 INTER-FIRM COMPARISON ..................................................................................................8 COMPANY ANALYSIS ..........................................................................................................12 1. 2. 3. 4. 5. 6. Provogue (India) Limited ..............................................................................................12 Shoppers Stop Limited .................................................................................................13 Bata India Limited ........................................................................................................14 Pantaloon Retail (India) Limited ...................................................................................15 Trent Limited................................................................................................................16 Piramyd Retail Limited..................................................................................................17

METHODOLOGY USED FOR COMPANY PROJECTIONS .............................................18

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QPAC-Indian Retail Industry- October-December 2007

EXECUTIVE SUMMARY
The growth story of Indian economy is intact. Indian economy grew at annual rate of 8.9% during second quarter (JAS07), down from 9.3% during AMJ07. Higher farm output and improved growth in the mining sector helped Indian economy to grow at 8.9% despite a sharp slowdown in manufacturing growth. The growth beat the expectations as it was predicted that major slowdown because of higher interest rates will affect the key sectors such as automobiles and consumer goods. The developing economy and the resulting improvements in income dynamics along with factors like favourable demographics and spending patterns are driving the consumption demand. With rising income, the consumption has also scaled a new height, giving rise to a new middle class, with higher aspiration. Indian retail industry is ranked among the ten largest retail markets in the world. India has high percentage of consumers, whose spending power is rising contentiously since the past few years and is expected to continue in the future. Hence, India is witnessing an unprecedented consumption boom. The Indian retail sector is at an inflexion point, with growing economy, favourable demographics, rising consumer incomes, real estate developments and changing lifestyles. The Indian retail sector is the largest contributor to the GDP but is highly fragmented. The share of organised retail in India was around 4.6% in 2006. A huge investment is expected by the organised players, resulting in the expansion of its share to 1518% by 201112. The penetration of organised retail is increasing rapidly and more number of players are making their footprints in this industry in the anticipation to tap the growth opportunity. According to the India Retail Report 2007, Organized retail in India accounted for 4.6% of the Rs12000 billion retail market in India in 2006 that is around Rs550 billion. Of the total retail market, food and grocery retail is the single largest block, estimated to be worth of Rs7,439 billion in 2006. Clothing, textiles and fashion accessories constitute the second largest block. Retailing contributes to 10% of GDP. In OND07, as per Cygnus estimates, the total revenue of the industry is expected to register a growth of 44% to Rs20,623m compared with OND06. The industry is expected to post operating profit growth of 78% with OPM of 9.6%, an expansion of 184 basis points as against OND06. But NPM is expected to expand by 43 basis points during OND07. The growth momentum in the sector is likely to continue in the coming quarters as retail sector in India is growing comfortably. Provogue is expected to register a growth of around 40.89% in net sales for OND07 and Pantaloon is expected to achieve new level of growth at 61.84% compared with OND06. Trent is expected to achieve a growth rate of 12.24%. Different developments in the industry signify the ongoing retail revolution. Reliance will invest around Rs300 billion by FY10; Future Group wants to expand space to acquire 30m square feet by FY10; Piramyd will add 1.75m square feet in the next five years; Trent will open 20 Westside stores and 10 Star India Bazaar stores. One of the main concerns is that in the rush to expand, the organised retailer lacks the strategic vision, which resulted in increasing gap between claims and what was actually happens on the ground. According to Cygnus estimates, the retail industry is expected to record net sales of Rs20,367m for the quarter JFM08, showing a growth of 38% over the corresponding quarter of the previous year. The net profit growth for most of the retail companies would primarily depend on the cost-cutting measures adopted by them. Although the outlook for retail industry in India looks bright, most Indian retail players are under serious pressure to deliver the levels of quality and service to meet the consumers demands. This is because of the lack of good supply chain and efficient 3PL services. Lack of proper infrastructure and stringent labour laws are discouraging factors for retail players. Further, the retail sector does not have 'industry' status, making it difficult for retailers to raise finance from banks to fund their expansion plans. Hence, the government needs to create conducive environment for the growth of retail industry in India.

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QPAC-Indian Retail Industry- October-December 2007

INDUSTRY ANALYSIS
The Indian retail sector is at an inflexion point, with growing economy, favourable demographics, rising consumer incomes, real estate developments and changing lifestyles. All these changes are driving the growth of organised retailing. In 2006, retail market in India was valued at Rs12,000 billion. Food and grocery, clothing, textiles and fashion accessories are dominant in the sector. Organised retail in India was estimated to be around 4.6% that is around Rs550 billion. Organised retail has grown by leaps from around Rs355 billion in 2005 to Rs550 billion in 2006. It is on a high growth trajectory due to abovementioned favourable factors. Apart from the growth, the fresh investments by retail players Reliance, RPG and Pantaloon are boosting the present growth. Industry Aggregate (Rs m ) Particulars OND 2007 Net Sales 20623.17 Change 44% EBITDA 1974.53 Change 78% Depreciation 418.13 Interest 474.67 Other Income 96.83 PBT 1178.56 Tax 345.13 Tax rate 29% PAT 833.43 Change 59% Industry Market Cap 100529.49
Source: BSE; Cygnus Research

Overall Performance of Retail Industry in OND07

Note: The aggregate consists of following companies: Future Group, Shoppers Stop, Trent, Piramyd, Provogue and Bata India

Strong revenue growth According to Cygnus estimates, the retail sector is estimated to post strong revenue growth of around 44% for the quarter OND07 as against OND06. The estimated aggregate net sales for the retail sector, comprising of top six players in the sector, was 25 50 Net Sales and Growth around Rs20,623.17m in OND07. It is estimated to experience a phenomenal jump, in terms of Net Sales (LHS) 20 40 growth, in the operating profit for the quarter Growth (RHS) OND07 in comparison with OND06. 15 30 Operating profit is estimated to rise by around 78% and net profit by 59% in OND07 compared to OND06 (Net profit growth taken 10 20 after excluding one time exceptional item of Rs 171.30m for company BATA). OPM registered 5 10 an expansion of 184 basis points to 9.6%, whereas NPM is also estimated to expand by 43 basis points to 4% in OND07 as against 0 OND06. OND06 OND07
Rs in bn

900 800 700 600 Rs in m 500 400 300 200 100 0

Net Profit and NPM

Net Profit (LHS) NPM (RHS)

2500 2000 1500 1000 500

EBITDA and OPM

EBITDA (LHS) OPM (RHS)

12 10 8 6 4 2 0 %

2 OND06 OND07

Rs in m

0 OND06 OND07

Source: BSE; Cygnus Research

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QPAC-Indian Retail Industry- October-December 2007 Cost structure

Cost saving is a challenge for majority of the retail industry players. As per Cygnus estimates, there will be an improvement in the cost structure as percentage of sales for most of the players in this quarter. The raw material cost is estimated to have risen by 262 basis points in OND07 compared to OND06 as a percentage of net sales. But the staff costs and other expanses for the industry is estimated to have dropped by 115 basis points and 152 basis points respectively. Tax related costs will also see some drop of around 133 basis points in OND07 as compared to OND06. Interest and depreciation as a percentage of sales is estimated to have increased by 65 basis points and 34 basis points in OND07 as against OND06.
70 60 % of Net sales 50 40 30 20 10 0 -10 Raw materials Staff cost Factory Overheads Selling Expenses Other Depreciation expenditure Interest Tax

Cost Structure
OND06 OND07

Source: BSE; Cygnus Research

Segmental Performance
Food and grocery retail
Food and Grocery segment is expected to be the major driver of organised retail industry in India. Shops selling food and grocery constitute over 5m of the 12m retail outlets in India. Food and grocery retail is the single largest block estimated to be worth of Rs7,439 billion in 2006 of which food grains and unprocessed fruits and vegetables account for half of total food and grocery sales. Some of the major players ITC Group, TATA, RPG Group and AV Birla Groupare showing a keen interest in this segment. It is understandable that most international and domestic retailers are making a beeline for it. Gems and jewellery retail According to the World Gold Council, Indias gold consumption this year could in fact cross the 1,000-tonne mark for the first time. The jewellery market size is estimated to be Rs602 billion in 2006 with the unorganised sector dominating the country's jewellery retail landscape with a 96% market share. The organised sector
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Food and Grocery 2006

UnOrganised 99% Organised 1%

Consumer Durables, Home Appliances 2006

Unorganised 90%

Organised 10%

Source: IMAGES F&R Research

QPAC-Indian Retail Industry- October-December 2007

forms only 4% of the overall market. But the trend is gradually changing with the organised sector witnessing upward trend due to factors such as increasing consumer sophistication and competition from other luxury products. According to a KPMG study, Indias growing importance in the global jewellery market is only expected to increase in the future with total estimated jewellery sales of US$21 billion by 2010 and US$37 billion by 2015. Diamond jewellery consumption in India is also estimated to jump by 78% in 2010. Consumer durables, home appliances retail In the last ten years, a huge growth has taken place in the consumer durables retail market. The market for consumer durables and home appliances was valued at Rs481 billion in 2006, with organised retail having a share of 10.4%. The factors that are pushing the market are the continuous change in technology and in the mindset of the consumers. Among consumer durable retail goods, flat-screen television, LCD televisions and frost-free refrigerators have been in huge demand in recent times. Clothing, textiles and fashion accessories retail Clothing, textiles and fashion accessories segment was estimated to be at Rs1135 billion in 2006 with the organised retail contributing around 19%. This is the only segment wherein organised retail is showing its presence. This segment is attracting more and more organised retailers, pushing for the retail revolution. The designer apparels will also play a role in boosting the market.
Clothing, Textiles & Fashion Accessories 2006

Unorganised 81%

Organised 19%

Pharma retail Price reduction and rupee appreciation, Source: IMAGES F&R Research the growth of the Indian drug industry has slowed down this year. The domestic retail market for the 12-month period ended November 2007 grew by 12.3% compared to growth of over 15% last year. According to market research firm ORG IMS, the market size of the domestic retail market at the end of 12-month period ended November 2007 stood at Rs305.98 billion. Sales from the overseas market is expected be around Rs310 billion for the year, a growth of 20% over last year. In addition, the industrys institutional sales are estimated to be over Rs70 billion. Organised retail in this segment is around 3%, but Pharma retailing is becoming more organised. A few corporates that have already entered into this segment include Dr Morepen, Medicine Shoppe, Apollo Pharmacies and CRS Health.

Driving Factors
Changing Demographic profile

100% 90% 80% 70%

Share of Population by Age

41.9 38.2

36

India has the youngest consumer profile; 60% over 67% of the population is below 35 50% 27.1 25.5 years of age and around 52% of the 40% population is below 24 years of age. 30% 22.9 21.8 (Source: Ministry of Home Affairs, Govt 20% of India). The composition of the Indian 10% 11.8 10.9 population is moving towards the age 0% group 20-54 ie the working population 2006 2011 55+ 35-54 20-34 with higher purchasing power. This is expected to be a major driver of Source: Indiastat; Cygnus Research consumption. Changing lifestyles and preferences are prominent driving factor too.
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27.2

23.9 13 2016 0-19

QPAC-Indian Retail Industry- October-December 2007 Consumer Spending

Growth in income is supported by the changing demographics. This has resulted in higher consumption spending. The estimated growth in consumption spending during 2005-08 is Projected Mall Space - 2007 around 7.1%. According to AC Nielsen, India is in the highest category of Aspiration Index in Asia along with China, Indonesia and Thailand. Consumers are increasingly becoming North brand conscious and are looking for 39% West products with quality. Easier acceptance 33% of luxury products and an increased willingness to experiment with are the main drivers for retail segment in India. South East
18% 10%

Emergence of Malls The emergence of mall culture and rapid Source: FICCI KPMG development of malls is expected to boost the retail industry in India. Approximately 100m sq ft of quality shopping centre is expected to come up by the end of 2007-08. Following are some expansion plans by major retailers: Pantaloon is going to have 30m sq ft by FY10; Reliance to invest Rs300 billion to set up multiple retail formats by 2009-10; Lifestyle to invest more then Rs4.5 billion investment in next five years to expand on Max Hypermarkets & value retail stores, Home & Lifestyle Centres.

Investments
According to Standard & Poor's, foreign direct investment (FDI) to India is likely to grow the fastest in next few years. India is investing over US$130 billion in infrastructure by the end of this decade. Indian retail industry itself has attracted investment of over Rs200 billion in creating infrastructures, systems and shop-fit. The additional retail space is expected to add Rs300 billion of business to organised retail.

OUTLOOK FOR THE SECTOR

Approximately 80% of the 12m retail outlets spread across the country are run by small families using household labour. It is estimated that Rs133 billion capex per annum will finance the growth of organised retail. With average consumer becoming richer, younger and more aspirational, the retail industry is expected to ride on the crest of the growth tide. This becomes very much evident from the growth of organised retail in India, expected to reach a size of Rs1064.52 billion by 2010. With 300 new malls, 1,500 supermarkets and 325 departmental stores under construction, the sector is going to have a red carpet on its way, but not without obstacles. Moving forward, organized retailing is projected to grow at the rate of about 37% in 2007 and 42% in 2008.

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QPAC-Indian Retail Industry- October-December 2007

INTER-FIRM COMPARISON
Operational Performance
Good performance estimated for OND07 As per Cygnus estimates, Pantaloon is expected achieve growth of around 62% to Rs12,181.74m during OND07 compared with OND06. High growth in sales is due to expansion plan to add 5m sq ft during FY08. It is estimated that Provogue would register a growth of 41% in net sales to Rs1,009.09m for the quarter OND07 from Rs716.25m in OND06. Higher growth in sales is achieved mainly due to the companys rapid store expansion and extension of the Provogue brand to include new categories such as footwear, womens wear, and fashion accessories. Trent is estimated to register a growth of around 12% to Rs1,367.43m in OND07 compared with OND06. Piramyd Retail is also estimated to achieve a growth in sales of around 38% with a sales turnover of Rs568.67m. High sales turnover is contributed by opening of its new stores. Bata India is estimated to register a growth of around 13% in net sales, with a sales turnover of Rs2,383m. The growth is due to closing down of a few Bata stores, which were unable to generate revenue. Shoppers Stop is also likely to register a growth of around 33% in sales.
14000 12000 10000 Rs m 8000 6000 4000 2000 0 Bata Pantaloons Piramyd Retail Provogue Shoppers Stop Trent
Source: BSE; Cygnus Research

Net sales and Growth

OND06(LHS) OND07 (LHS) Growth(RHS)

70 60 50 40 30 20 10 0 %

Financial Performance
14000 12000 10000 Rs m 8000 6000 4000 2000 0 OND06 OND07 OND06 OND07 OND06 OND07 OND06 OND07 OND06 OND07 OND06 OND07 Bata Pantaloons Piramyd Retail Provogue Shoppers Stop Trent Net sales(LHS) NPM(RHS) OPM(RHS)

Financial performance

25 15 5 -5 %

-15 -25 -35

Source: BSE; Cygnus Research

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QPAC-Indian Retail Industry- October-December 2007

Provogue and Trent outperformed in terms of growth in profits Provogue is estimated to register highest gain in NPM (10.5%) compared with its peers. OPM would be 14.8%. OPM of Provogue depressed compared with OND06 due to higher staff cost. For Pantaloon, OPM and NPM are estimated to be around 7.9% and 3.3% respectively. OPM expanded due to lower other costs and staff costs but NPM declined due to lower other income. Bata India will register OPM and NPM of 12.4% and 8% respectively. Good operational efficiency made OPM expand as against OND06 but lower other income made NPM decline. OPM and NPM of Shoppers Stop are estimated to be around 9.5% and 4.23% respectively. The OPM and NPM for Shoppers Stop are likely to be under pressure. Trent is estimated to post an OPM of 9.3% and NPM of 6.23%.

Cost Structure
Cost Structure (% of Net Sales) OND 06 Vs OND 07 Shoppers Stop Bata Pantaloon 06 07 06 07 06 07 49.85 47.92 67.80 66.58 7.00 8.29 24.64 21.84 6.52 5.03 16.54 18.13 4.29 3.63 70.91 68.88 18.56 17.83 18.11 19.30 1.39 3.94 2.03 1.68 1.09 1.61 0.49 0.28 0.65 0.50 2.75 3.41 4.01 2.05 3.71 2.77 2.93 1.37 Industry 06 07 55.40 58.02 9.15 8.00 2.58 2.64 1.44 1.18 31.81 30.30 1.39 1.74 1.89 2.54 3.01 1.67

Raw materials Staff cost Overheads Selling Expenses Other expenses Depreciation Interest Tax

Source: BSE; Cygnus Research

Raw materials Staff cost Overheads Selling Expenses Other expenses Depreciation Interest Tax

Cost Structure (% of Net Sales) OND 06 Vs OND 07 Provogue Piramyd Trent 06 07 06 07 06 07 56.12 56.05 74.34 60.41 1.25 0.47 2.62 4.80 13.37 14.00 5.84 6.49 9.05 9.84 24.85 24.38 33.10 25.60 74.02 73.89 1.79 1.77 3.61 2.85 1.30 2.18 2.51 1.77 4.28 2.97 0.27 0.33 2.16 2.31 0.43 0.00 2.07 1.99

Industry 06 07 55.40 58.02 9.15 8.00 2.58 2.64 1.44 1.18 31.81 30.30 1.39 1.74 1.89 2.54 3.01 1.67

Source: BSE; Cygnus Research

For retail companies, the major chunk of cost comes in the form of raw material cost, which is quite inherent from the kind of industry they operate in. Following raw material cost is the other expenses, which mainly comprises power cost, which these companies consume on a large scale. While other expenses are expected to come down for these companies, as a result of increasing use of energy-saving devices, the raw material cost is further expected to go up for almost all these companies during OND07 compared with OND06.

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QPAC-Indian Retail Industry- October-December 2007 Stock Scan:

370 320 270 220 170 120 70 Sensex Piramyd Pantaloon Provogue

Relative Market Cap performance

11-Oct

16-Oct

21-Oct

26-Oct

31-Oct

1-Oct

6-Oct

10-Dec

15-Dec

20-Dec

25-Dec
25-Dec

150 140 130 120 110 100 90 80

Relative Market Cap performance

Sensex Bata india Shopper Trent

11-Oct

16-Oct

21-Oct

26-Oct

31-Oct

1-Oct

6-Oct

10-Dec

15-Dec

20-Dec

Source: BSE; Cygnus Research

BSE Sensex: The Sensex witnessed an Stock performance in OND07 increase of 17.07% from October to Change (%) P/E High P/E Low December 2007 on account of large Sensex 17.07 27.75 23.42 number of Foreign Institutional Piramyd 281.98 --Investors (FII) entering the market. In 46.71 231.14 104.42 October, the Sensex zoomed by 14.48% Pantaloon 45.60 47.89 24.93 due to strong buying by FIIs, firm Bata India 36.03 58.78 31.38 global market and an expectation of Trent good JAS07 results. SEBI clearing the Provogue 35.85 135.83 82.7 doubts over the involvement of Shoppers Stop 3.90 92.51 56.73 participatory notes in the market came Source: BSE; Cygnus Research as a boon in the later part of October. After the rally party, the Sensex declined by 1.84% in November on account of weak global cues, slower foreign inflow and ever rising oil prices, touching US$100 barrels. For the first time, the Sensex lost some points during the muhurat trading. After a slum in November, the Sensex steered forward by 3.49% in December, owing to expectations that Fed would further slash the interest rate, and anticipation of drop in oil prices and huge buying by FIIs in small cap stocks.

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30-Dec

10-Nov

15-Nov

20-Nov

25-Nov

30-Nov

5-Dec

5-Nov

30-Dec

10-Nov

15-Nov

20-Nov

25-Nov

30-Nov

5-Dec

5-Nov

10

QPAC-Indian Retail Industry- October-December 2007

Piramyd: It registered a gain of 281.98% in share price. Indiabulls Wholesale Service has agreed to buy 63.9% of Piramyd Retail for Rs400m. Indiabulls has also made an open offer to acquire a further 20% from Piramyd shareholders. Pantaloon: It registered a gain of 46.71% in share price. During OND07, Pantaloon Retail and National Textile Corporation are planning to sign accords of joint ventures to enhance market presence. Pantaloon Retail India Ltd increased its revenues by 78.5% and reported an 87% increase in net profit. Bata India: It registered a gain of 45.6% in share price. During OND07, Reliance Retail and Bata formed an alliance for footwear vertical. Bata India revamped its retail strategy; its net was up 56.30% in JAS07 quarter. Bata India is also diversifying into clothing. Trent: It registered a gain of 36.03% in share price. During OND07, Trent set up Star Bazaar in Bangalore. The company is going to launch value stores for apparels in next six months. Tatas retail arm Westside will launch its first store for women.

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QPAC-Indian Retail Industry- October-December 2007

COMPANY ANALYSIS
1. Provogue (India) Limited
Net Sales (Rs m) March 07 (A) March 08 (E) March 09 (E) 2387.75 3367.85 4487.03 PAT (Rs m) 195.98 322.08 490.85 EPS (Rs) 10.26 16.70 25.20 P/E 44.23 27.19 18.01 ROE 7% 8% 9% ROCE 11% 11% 12% (Rs m) Quarter Y/E March Net Sales Change EBITDA Change Depreciation Interest Other Income PBT TAX Tax Rate PAT Change OND FY07 716.25 59% 117.59 99% 12.81 17.95 3.93 90.76 15.50 17% 75.26 105% OND FY08 (E) 1009.09 41% 149.07 27% 17.86 17.86 15.94 129.29 23.27 18% 106.02 41% JFM FY08 (E) 905.05 41% 137.52 77% 16.02 16.02 14.30 119.78 21.60 18% 98.18 101% Industry Aggregate OND FY08 (E) 20623.17 44% 1974.53 78% 418.13 474.67 96.83 1178.56 345.13 29% 833.43 59% Full year ended March 07(A) 2387.75 53% 325.43 61% 47.71 61.91 16.23 232.04 36.06 16% 195.98 64% March 08 (E) 3367.85 41% 495.05 52% 69.24 92.16 56.47 390.12 68.04 17% 322.08 64% March 07(A) 2387.75 53% 325.43 61% 47.71 61.91 16.23 232.04 36.06 16% 195.98 64%

Source: Cygnus Research Note: 1. All calculations are on the basis of trailing method 2. PBT and PAT are projected figures 3. EPS is projected on the basis of profit
The company registered a growth of 53% in sales in FY07 compared to FY06 and plans to maintain its growth momentum in relation to the industry, which is growing at a CAGR of 35%. Even the domestic apparel market in India is growing at the rate of 13% per annum. Provogue mainly deals in menswear, womens wear, innerwear, footwear and fashion accessories. It is going to launch perfumery and deodorants. The company is on a major expansion spree and expects to bring 500,000sq ft under operation by 2010. It expects to add 21 mega outlets of 5,000-7,000sq ft, 40 Provogue studios and four Promart stores. The bottom-line of the company will get affected as the income tax exemption enjoyed by the manufacturing unit at Daman is available till March 2008. During the OND07 quarter, the company is estimated to have registered sales of Rs1,009.09m, a growth of 41% as against OND06. PAT registered a growth of 41% to Rs106.02m.

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QPAC-Indian Retail Industry- October-December 2007

2. Shoppers Stop Limited

Net Sales (Rs m) March 07 (A) March 08 (E) March 09 (E) 7995.98 10776.07 13906.30 PAT (Rs m) 261.95 301.60 565.17 EPS (Rs) 7.52 8.65 16.22 P/E 82.23 71.46 38.13 ROE 9% 9% 16% ROCE 12% 11% 17% (Rs m) Quarter Y/E March Net Sales Change EBITDA Change Depreciation Interest Other Income PBT TAX Tax Rate PAT Change OND FY07 2343.93 30% 238.59 24% 31.09 11.07 33.91 230.34 89.64 39% 140.70 16% OND FY08 (E) 3113.24 33% 295.76 24% 118.30 8.28 24.00 193.18 61.64 32% 131.54 -7% JFM FY08 (E) 2786.09 33% 264.67 69% 105.87 6.97 17.90 169.73 55.16 32% 114.57 -604% Industry Aggregate OND FY08 (E) 20623.17 44% 1974.53 78% 418.13 474.67 96.83 1178.56 345.13 29% 833.43 59% Full year ended March 07 (A) 7995.98 36% 674.46 38% 256.27 21.06 90.00 487.13 225.18 46% 261.95 -3% March 08 (E) 10776.07 35% 811.01 20% 408.97 31.74 84.37 454.67 153.07 34% 301.60 15% March 09 (E) 13906.30 29% 1321.09 63% 584.06 21.69 91.78 807.12 241.95 30% 565.17 87%

Source: Cygnus Research Note: 1. All calculations are on the basis of trailing method 2. PBT and PAT are projected figures 3. EPS is projected on the basis of profit
The top-line has shown a growth of 36% in FY07 compared to FY06. It is expected to remain on a high growth trajectory due to its huge expansion plans and improvement in conversion ratio. Currently, it has 1.2m sq ft under operation, which is expected to go up to 2.5m sq ft by March 2008 and 6m sq ft by 2010. However, there is pressure on the margin due to increasing employee cost, which in the future, is expected to match industry standards. With the strong store growth, the companys profitability is sure to receive a boost. During the quarter OND07, the company is expected to have registered sales of Rs3,113.24m, a growth of 33% as against OND06. PAT dipped by 7% to Rs131.54m.

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QPAC-Indian Retail Industry- October-December 2007

3.

Bata India Limited

Net Sales (Rs m) PAT (Rs m) 398.50 458.00 651.23 EPS (Rs) 6.20 7.13 10.14 P/E 183.21 159.40 112.10 ROE 19% 17% 24% ROCE 21% 24% 31% (Rs m) Quarter Industry Aggregate OND FY08 (E) 20623.17 44% 1974.53 78% 418.13 474.67 96.83 1178.56 345.13 29% 833.43 59% Full year ended Dec 06 (A) 7702.00 9% 425.20 166% 136.20 68.80 271.60 491.80 93.30 19% 398.50 219% Dec 07 (E) 8718.10 13% 718.27 69% 156.67 64.50 61.90 559.00 101.00 18% 458.00 15% Dec 08 (E) 9234.90 6% 964.65 34% 168.65 56.59 54.82 794.23 143.00 18% 651.23 42%

Dec 06 (A) Dec 07 (E) Dec 08 (E)

7,702.00 8,718.10 9,234.90

Y/E March Net Sales Change EBITDA Change Depreciation Interest Other Income PBT TAX Tax Rate PAT Change

OND FY07 2102.30 9% 146.00 83% 42.70 13.60 212.50 302.20 78.10 26% 224.10 308%

OND FY08 (E) 2,383.00 13% 295.87 103% 39.97 12.00 13.70 257.60 66.00 26% 191.60 -15%

JFM FY08 (E) 2109.0 15% 144.1 49% 40.2 19.9 12.1 96.1 24.0 25% 72.1 56%

Source: Cygnus Research Note: 1. All calculations are on the basis of trailing method 2. PBT and PAT are projected figures 3. EPS is projected on the basis of profit
Bata has recovered from its loss-making position since last two years and registered a net profit of Rs398.5m in December 2006, showing a growth of 219% compared to December 2005. In the year 2006, the company closed down 139 of its unviable stores and undertook restructuring of the existing ones. The company sells over 45m pairs of shoes every year and expects to have an annual sales turnover of more than Rs8,000m. It has 1,250 stores and is planning to add 200 new stores in the next three years, which shall give a boost to its top-line. The company has also improved its operational efficiency and has cut down its staff cost. During the quarter OND07, the company is estimated to have registered sales of Rs2,383.00m, a growth of 13% as against OND06. Net profit is estimated to decline by 15%, it is due to one time exceptional item of Rs 171.30m which was added in other incomes in OND06.

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QPAC-Indian Retail Industry- October-December 2007

4. Pantaloon Retail (India) Limited

Net Sales (Rs m) March 07 (A) March 08 (E) March 09 (E) 32544.81 51470.21 77124.67 PAT (Rs m) 1198.20 1338.90 1807.27 EPS (Rs) 8.52 9.52 12.85 P/E 58.14 52.03 38.55 ROE 13% 13% 11% ROCE 17% 20% 19% (Rs m) Quarter Y/E March Net Sales Change EBITDA Change Depreciation Interest Other Income PBT TAX Tax Rate PAT Change OND FY07 7526.86 59% 570.17 51% 82.29 207.29 377.67 658.26 220.30 33% 437.96 136% OND FY08 (E) 12181.74 62% 1106.71 94% 196.00 415.09 14.00 509.62 167.00 33% 342.62 -22% JFM FY08 (E) 12689.32 47% 987.83 64% 142.12 494.88 116.99 467.82 154.00 33% 313.82 68% Industry Aggregate OND FY08 (E) 20623.17 44% 1974.53 78% 418.13 474.67 96.83 1178.56 345.13 29% 833.43 59% Full year ended June 07(A) 32544.81 74% 2333.43 64% 368.61 897.55 742.81 1810.08 611.88 34% 1198.20 87% June 08 (E) 51470.21 58% 4075.26 75% 607.49 1925.23 441.66 1984.20 645.30 33% 1338.90 12% June 09 (E) 77124.67 50% 6247.10 53% 913.80 3027.87 408.84 2714.27 907.00 33% 1807.27 35%

Source: Cygnus Research Note: 1. All calculations are on the basis of trailing method 2. PBT and PAT are projected figures 3. EPS is projected on the basis of profit
Pantaloon Retail has shown a growth of 74% in its sales turnover in FY07 compared to FY06 and is expected to maintain its growth momentum in future. It is on an expansion spree and plans to increase the retail space to 10m sq ft by the end of 2008 and take it further to 30m sq ft by 2010. The company is planning a capital expenditure of Rs6,500m and an investment of Rs7,000m for maintaining inventory and working capital for new stores. This will push up the depreciation and interest cost. Pantaloon will set up 60 Big Bazaars, 15 Pantaloon stores, 100 Food Bazaar and 20 more E-zones by June 2008. About 35% of the turnover is expected to be generated from the opening of new stores. During the OND07 quarter, the company is estimated to register sales of Rs12,181.74m, a growth of 62% as against OND06. Its PAT dipped by 9% to Rs396.49m in OND07 as against OND06

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QPAC-Indian Retail Industry- October-December 2007

5. Trent Limited
Net Sales (Rs m) March 07 (A) March 08 (E) March 09 (E) 4557.82 5180.11 5676.00 PAT (Rs m) 324.10 313.11 338.54 EPS (Rs) 20.56 19.87 21.48 P/E 33.29 34.46 31.87 ROE 8% 7% 6% ROCE 9% 8% 8% (Rs m) Quarter Y/E March Net Sales Change EBITDA Change Depreciation Interest Other Income PBT TAX Tax Rate PAT Change OND FY07 1218.28 28% 119.75 13% 15.81 3.31 31.75 132.38 25.24 19% 107.14 67% OND FY08 (E) 1367.43 12% 127.22 6% 29.79 4.55 19.50 112.38 27.22 24% 85.16 -21% JFM FY08 (E) 1201.76 11% 64.35 63% 26.43 4.04 36.36 70.24 13.63 19% 56.61 -20% Industry Aggregate OND FY08 (E) 20623.17 44% 1974.53 78% 418.13 474.67 96.83 1178.56 345.13 29% 833.43 59% Full year ended March 07 (A) 4557.82 32% 336.76 2% 79.09 14.12 166.34 409.89 85.79 21% 324.10 29% March 08 (E) 5180.11 14% 366.98 9% 98.25 16.03 103.15 398.51 82.17 21% 313.11 -3% March 09 (E) 5676.00 10% 445.86 21% 112.00 18.00 120.00 435.86 97.32 22% 338.54 8%

Source: Cygnus Research Note: 1. All calculations are on the basis of trailing method 2. PBT and PAT are projected figures 3. EPS is projected on the basis of profit
The company has achieved a growth of 32% in sales in FY07 compared to FY06 and expects to maintain the momentum in future. It currently has 39 stores operating as Westside, Star India Bazaar and Landmark and plans to add 11 Westside stores, five Landmark stores and three Star India Bazaars by 2008. Its principal activities are to develop, manufacture and market apparels, cosmetics, toilet preparations and perfumes. The company has entered into a strategic partnership with Benetton Group for the Sisley brands commercial expansion in India, which will give Trent an opportunity to capture the premium segment of consumers and increase profitability. During the quarter OND07, the company is estimated to have registered sales of Rs1,367.43m, a growth of 12% as against OND06.

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QPAC-Indian Retail Industry- October-December 2007

6. Piramyd Retail Limited

Net Sales (Rs m) March 07 (A) March 08 (E) March 09 (E) 1589.47 2149.25 2723.95 PAT (Rs m) -428.67 -469.39 -57.86 EPS (Rs) -23.90 -23.47 -2.89 P/E -2.71 -2.76 -22.42 ROE -38% -37% -5% ROCE -21% -20% 1% (Rs m) Quarter Y/E March Net Sales Change EBITDA Change Depreciation Interest Other Income PBT TAX Tax Rate PAT Change OND FY07 410.86 44% -85.51 -1979% 14.85 17.60 0.96 -117.00 1.77 -118.77 OND FY08 (E) 568.67 38% -0.10 -100% 16.21 16.89 9.69 -23.51 0.00 -23.51 JFM FY08 (E) 676.25 38% 44.09 -144% 19.27 20.08 11.53 16.27 3.00 18% 13.27 Industry Aggregate OND FY08 (E) 20623.17 44% 1974.53 78% 418.13 474.67 96.83 1178.56 345.13 29% 833.43 59% Full year ended March 07 (A) 1589.47 60% -340.23 -196% 59.98 61.87 30.84 -431.24 -2.57 -428.67 March 08 (E) 2149.25 35% -311.19 9% 69.16 105.72 22.08 -463.99 5.40 -469.39 March 09 (E) 2723.95 27% 56.73 118% 77.64 80.90 46.45 -55.36 2.50 -57.86 -

Source: Cygnus Research Note: 1. All calculations are on the basis of trailing method 2. PBT and PAT are projected figures 3. EPS is projected on the basis of profit
Piramyd Retail registered a growth of 60% in FY07 compared to FY06. Its increasing cost is ringing alarm bells since it is possible that its profitability will fall in future. The company is planning to open 17 mega stores and 69 Trumart by 2008. The company fears acquisition by Aditya Birla groups non-listed retail arm Aditya Birla Retail. Reason behind this possibility is that the company is facing stiff competition from Pantaloon, Provogue and Shoppers Stop, which are gradually increasing their market share. The possible acquisition by Aditya Birla will definitely improve its profitability in future. During the quarter OND07, the company is estimated to register sales of R568.67m, a growth of 38% as against OND06.

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QPAC-Indian Retail Industry- October-December 2007

METHODOLOGY USED FOR COMPANY PROJECTIONS

The methodology for company is based on: 1. Recent company annual report Chairmans statement and MD & A 2. Understanding companys product services business segments exports 3. Recent Quarterly growth rate 4. Analysis of growth rate of last 8 quarters 5. Press release and news items for capturing any stark deviation in quarterly performance YoY or across industry value chain 6. Understanding Industry and economic trends a. b. c. d. e. a. b. Demand Supply prices Technology Regulation M&A Product launches Capacity addition

7. Recent strategies and initiatives in terms of:

8. Making revenue projection for quarters for segments 9. Validating with aggregate figures for comparison

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