Vishal Mega Mart

INTRODUCTION
In the background of high consumerism and income of the urban consumers, in
recent year there are a number of companies have expressed their interest towards
retail sector outlets. As a result numbers of shopping malls have started their
operations in metro and urban areas. Pantaloon, big bazaar, Vishal Mega Mart,
Reliance Fresh are the best known examples of retail sector outlets in India.
Retailing is the interface between the producer and the individual consumer buying
for personal consumption. This excludes direct interface between the manufacturer
and institutional buyers such as the government and other bulk customers. A
retailer is one who stocks the producer’s goods and is involved in the act of selling
it to the individual consumer, at a margin of profit. As such, retailing is the last link
that connects the individual consumer with the manufacturing and distribution
chain. Some of the key features of retailing include:

 Selling directly to customers with out having any intermediaries

 Selling in smaller units / quantities, breaking the bulk
 Present in neighborhood or in the location which is quite convenient to
the customers.
 Very high in numbers
 Recognized by their service levels
 Fitting any size and or location

It is assumed that due to the entry of a number of retail outlets in the urban and
semi urban areas, the mindset of the existing customers have undergone drastic
changes. Besides it is also reported that the traditional retailing such an age old
Grocery shops have directly faced competition with the organized retailing sector.
In some parts of the country, it is reported that the traditional retails are resisting
the entry of organized shopping malls. For instance the traditional retails of
Bhubaneswar with the active support of the consumers at large didn’t allow
reliance Fresh to start outlet initially.

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RECENT TRENDS
 Retailing in India is witnessing a huge revamping exercise as can be seen in
the graph
 India is rated the fifth most attractive emerging retail market: a potential
goldmine.
 Estimated to be US$ 200 billion, of which organized retailing (i.e. modern
trade) makes up 3 percent or US$ 6.4 billion
 As per a report by KPMG the annual growth of department stores is
estimated at 24%
 Ranked second in a Global Retail Development Index of 30 developing
countries drawn up by AT Kearney.

RETAIL SALES IN INDIA

GROWTH FACTOR FOR INDIAN ORGANIZED RETAIL INDUSTRY

India's economy is booming, due to so many economic reforms.
The rise in the working population which is young and reduction of the
unemployment rate:

 pay- packets which are hefty, and having a huge package of salary package.
 more nuclear families in urban areas
 rise in the number of working women
 more disposable income and customer aspiration
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 western influenced life style is adopted by all the people.

 growth in expenditure for luxury items increases.

GROWTH OF RETAIL INDUSTRY:

Growth of Retail Companies in India exhibits the boom in the retail

industry in India over the years. The increase in the purchasing power of
the Indian middle classes and the influx of the foreign investments has been
encouraging in the Growth of Retail Companies in India.
Reasons for the growth of retail industry are:

 Existing Indian middle classes with an increased purchasing power

 Rise of upcoming business sectors like the IT and engineering firms
 Change in the taste and attitude of the Indians
 Effect of globalization
 Heavy influx of FDI in the retail sectors in India

TYPES OF RETAIL
The retail industry is divided into organized and unorganized sectors. Organized
retailing refers to trading activities undertaken by licensed retailers, that is, those
who are registered for sales tax, income tax, etc. These include the corporate-
backed hypermarkets and retail chains, and also the privately owned large retail
businesses.
Unorganized retailing, on the other hand, refers to the traditional formats of low-
cost retailing, for example, the local kirana shops, owner manned general stores,
paan/beedi shops, convenience stores, hand cart and pavement vendors, etc.

Retailing Formats in India

Malls
The largest form of organized retailing today. Located mainly in metro cities, in
proximity to urban outskirts. Ranges from 60,000 sq ft to 7, 00,000 sq ft and
above. They lend an ideal shopping experience with an amalgamation of product,

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service and entertainment, all under a common roof. Examples include Shoppers
Stop, Vishal Mega Mart, India bulls, Pantaloon.

Specialty Store
Chains such as the Bangalore based Kids Kemp, the Mumbai books retailer
Crossword, RPG's Music World and the Times Group's music chain Planet M, are
focusing on specific market segments and have established themselves strongly in
their sectors.

Discount Stores
As the name suggests, discount stores or factory outlets, offer discounts on the
MRP through selling in bulk reaching economies of scale or excess stock left over
at the season. The product category can range from a variety of perishable/ non
perishable goods.

Department Stores
Large stores ranging from 20000-50000 sq. ft, catering to a variety of consumer
needs. Further classified into localized departments such as clothing, toys, home,
groceries, etc. Departmental Stores are expected to take over the apparel business
from exclusive brand showrooms. Among these, the biggest success is K Raheja's
Shoppers Stop, Vishal Mega Mart and now has more than seven large stores (over
30,000 sq. ft) across India and even has its own in store brand for clothes.

Hyper Markets / Super Markets

Large self service outlets, catering to varied shopper needs are termed as
Supermarkets. These are located in or near residential high streets. These stores
today contribute to 30% of all food & grocery organized retail sales. Super
Markets can further be classified in to mini supermarkets typically 1,000 sq ft to
2,000 sq ft and large supermarkets ranging from of 3,500 sq ft to 5,000 sq ft.
having a strong focus on food & grocery and personal sales.

Convenience Stores
These are relatively small stores 400-2,000 sq. feet located near residential areas.
They stock a limited range of high-turnover convenience products and are usually
open for extended periods during the day, seven days a week. Prices are slightly
higher due to the convenience premium.

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MBO’s
Multi Brand outlets, also known as Category Killers, offer several brands across a
single product category. These usually do well in busy market places and Metros.

PERCENTAGE OF ORGANIZED RETAIL:-

USA - 85%

Taiwan - 81%

Malaysia - 55%

Thailand - 40%

Brazil - 36%

Indonesia - 30%

Poland - 20%

China - 20%

India - 3%

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EXECUTIVE SUMMARY
The Retail Sector is the largest sector in India after agriculture, accounting for over
10 per cent of the country’s GDP and around 8 per cent of the employment. India
has the most unorganized retail market in the world. Most retailers of the
unorganized retail market have their shop in the front and house at the back. Retail
industry is booming all around the globe at a very fast pace. Vishal Retail is a
known and strong competitor in the retail industry since 23 years. When we talk
about Indian market, the demands of every thing which you can find in every retail
store are increasing every year. Indians are famous for their traditions and festivals
and exchanging gifts with friends and relatives is a part of it.

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.

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 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.

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This project report is the study of various activities and strategies of Vishal Mega
Mart. It also helps us in understanding the different technologies being used by
VRPL.

MISSION STATEMENT:

We shall deliver Everything, everywhere, everytime for every Indian Consumer in

the most profitable manner.

VISION STATEMANT:

We share the vision and belief that our customers and stakeholders shall be served
only by creating and executing future scenarios in the consumption space leading
to economic development

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COMPANY SUMMARY
“Future is thinking beyond horizon” & in order to keep its pace with the modern
retail, Vishal Retail Limited is spreading its wings. Instead of resting on its laurels
the Group are busy identifying new avenues of growth by venturing in other
formats like cash & carry, convenios as well as specialty stores and inspiring local
retailers to grow along with the big names. The group has tied up with HPCL to
open corner stores at their petrol pumps and in addition to the above Vishal has
come up with an institute to train manpower for the service industry.
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.
Today Vishal Retail Limited, Flagship Company of Vishal Group, engaged in
Hyper Market stores with an average area of 25,000 to 30,000 sq. ft. through an
impressive chain of more than 100 fully integrated stores in spread of more than
the area of around 22, 00,000 sq. ft. in 69 cities across India & has a plan to cross
total retail area of 35 lakh sq. ft. in tier II and tier III cities by the end of 2009.
According to Mr. Ram Chandra Agarwal, CMD, Vishal Retail Limited, the group
owes its origin to a small 50 sq ft shop in Kolkata's Lal Bazaar that started selling
readymade garments. In tune with the pulse of the market, he envisioned a mega
store that would sell garments at prices none other could match. . The first big store
opened in Calcutta's Esplanade area in 1997, under the banner of Vishal Garments.
He was involved in all the aspects of the business: right from sourcing the
garments to interacting with customers. And this led to his greatest finding “The
Vishal Group.”
After identifying the immense market in fashion garment for the masses, He
moved to Delhi in 2001 and opened his first store in Delhi’s Rajouri
Garden by the name of Vishal Mega Mart (The jewel in Vishal Group’s crown)
and then there was no looking back for Mr. Ram Chandra Agarwal. At present, in
addition to garments, Vishal Mega Mart stores retail the entire range of household
products, FMCG and electronic goods. Vishal's prices are roughly 15 to 20 per cent
less than other mass market garment labels.

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Mr. Ram Chandra Agarwal, CMD, Vishal Retail Limited believes that the
shopping habits of Indians are changing due to their growing disposable income,

higher aspirations, relative increase in the younger population, and the change in
attitudes towards shopping. The emphasis has changed from price consideration to
design, quality and trendy. Age is also a major factor that affects the spending
decisions of an individual. Consumer spending is an important factor that affects
the economic growth and development in a country. As a trend, consumer is more
educated. He has access to all reforms taking place through various arrays of
communication. He is becoming a “value shopper” everyday.
Keeping this in mind, the group is now looking for franchisees to join hands
with Vishal and grow under common banner. This partnership will help small
retailers to survive the onslaught of organized retail as it will enhance their
competitiveness. Small stores can avail of the benefits on account of the economies
of scale, a key advantage for big retailers.
As per the plans, Vishal Retail will completely take over the supply chain of
its franchisees and provide them with technology, new practices, visual
merchandising skill and special promotional schemes, besides its brand and
costumer base.

Some of the Franchisee exclusive business categories are:

 Mens Fashion
 Ladies and Kids
 Footwear
 Toys and Games
 Home – General
 Convenience (FMCG)
 CDIT
 Watches
 Mobile

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 endeavour to facilitate one-stop-shop
convenience for their customers and to cater to the needs of the entire family. It

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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%.
The Group also has a plan to raise around Rs 200 crore through
preferrential issue in the next few months to fund the company’s expansion plan.
Mr. R C Agarwal said “Rs 100 crore corpus raised through the initial public
offering had already been utilized and more money was required to push the
expansion plans further.”
“Retailing is an engine for taking merchandise to the end-users. There is a
lot of opportunity in this sector for us since demand of the potential consumers are
not being met under the existing facilities. Therein lies the road to success.” says
Mr. R C Agarwal

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.

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DETAILS OF DIRECTORS:-
Mr. Ram Chandra Agarwal, 43 years, is VRPL’s Chairman and Managing
Director. He holds a bachelor’s degree in commerce from St. Xavier’s College,
Kolkata. Mr. Agarwal has more than 20 years of experience in the retail industry
and has been with VRPL since their inception in 1997. He started the business
under the name of “Vishal Garment” with a small store at 9, Lal Bazaar Street,
Kolkata. Mr. Agarwal has made efforts for the development of the value retailing
industry in India and is well known for his business acumen.

Mrs. Uma Agarwal, 33 years, is an executive Director of VRPL. She holds a

bachelor’s degree in arts. Mrs. Agarwal has more than 7 years of experience in the
retail industry. She has been associated with accounts department of VRPL.

Mr. Surendra Kumar Agarwal, 46 years, is an executive Director of VRPL. He

holds a bachelor’s degree in commerce. Mr. Agarwal has more than 17 years of
experience in the retail industry. He has been associated with store development
and management at various locations of VRPL.

Mr. Bharat Jain, 45 years, is an independent Director of VRPL. He holds

bachelor’s degree in commerce. Mr. Jain is engaged in the business of leather
garments and accessories and has more than 23 years of work experience. Mr. Jain
joined VRPL Board on May 8, 2006.

Mr. Rakesh Aggarwal, 44 years, is an independent Director of VRPL. He holds a

master’s degree in commerce. Mr. Aggarwal is currently engaged in roto-moulding
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industry has more than 20 years of work experience. Mr. Aggarwal joined VRPL
Board on October 31, 2006.

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)

Name of Shareholders & 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

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
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(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.

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VRPL’s BUSINESS:-
VRPL started as a retailer of ready-made apparels in Kolkata in 2001. In 2003,
VRPL 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, VRPL diversified their portfolio of offerings
to include other retail goods. Currently, VRPL sell ready-made apparels and a wide
range of household merchandise and other consumer goods such as footwear, toys,
watches, toiletries, grocery items, sports items, crockery, home furnishing,
beverages, drinks, gift and novelties.
VRPL follow the concept of value retail in India. In other words, VRPL’s business
approach is to sell quality goods at reasonable prices by either manufacturing
themselves or directly procuring from manufacturers (primarily from small and
medium size vendors and manufacturers). VRPL endeavor to facilitate one-stop-
shop convenience for their customers and to cater to the needs of the entire family.
VRPL believe this concept has helped them grow to their current size within a
short time frame of 8 years.
In order to reduce costs and take advantage of economies of scale VRPL have
embarked on backward integration of their products. VRPL’s apparel
manufacturing plant is located at Gurgaon, Haryana. For ensuring efficiency in
supply chain, VRPL have set up seven regional distribution centers located around
Kolkata (West Bengal), Thane (Maharashtra), Jaipur (Rajasthan), Ghaziabad (Uttar
Pradesh), Ludhiana (Punjab), Gurgaon (Haryana) and Delhi. Further, VRPL have
focused on developing a cost and time efficient distribution and logistics network,
which currently comprises seven distribution centers and a fleet of trucks for
transportation.
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VRPL achieved total sales of Rs. 1005.31 cr for fiscal 2008, as opposed to a
turnover of Rs.602.65 cr for fiscal 2007 and Rs. 288.46 million for fiscal 2006.
During the same period VRPL’s profit after tax was Rs. 40.64 cr, Rs.25.07 cr and
Rs. 12.39 cr, respectively.

VRPL Business Processes:-

VRPL’s business process can be summarized as below:
Establishment of Stores:
 Selection of location
In selecting location for a new store, VRPL start by identifying the city/town.
VRPL target primarily cities/towns which may be classified as Tier II or Tier III
cities. In this regard, an analysis of the demography, literacy levels, nature of
occupation and income levels. Within a city/town, VRPL target locations with
good infrastructural facilities such as easy accessibility, provision for water,
electricity, parking, security and other basic amenities. VRPL prefer to locate their
stores in areas where real estate is available at reasonable prices. The efforts of
VRPL’s retail business are targeted towards families having total income which
can be classified under the “lower middle” and “middle” income groups.
Accordingly, VRPL plan their strategy to search for areas within cities where such
customers are domiciled in large numbers and make efforts to locate themselves
within the reach of such customers.
VRPL believe that adoption of standard formats for their stores has led to their
brand establishment and identification among their customers and will increase
their base of loyal customers. In pursuance of this, they have adopted standard
parameters for store planning and establishment. For ensuring standardized formats
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of their stores, VRPL consider various factors, such as internal and external décor
and colour schemes, allocation of store space, stock mix and pricing and
accounting methods.
 Insurance
VRPL maintain comprehensive insurance coverage with Tata AIG, Bajaj Allianz,
Royal Sundaram and IFFCO-TOKIO for their existing stores, distribution centers,
manufacturing facilities and trucks. VRPL insurance policies include
comprehensive coverage for electronic equipment, fire and special perils and
burglary. Further, VRPL has filed a claim of Rs. 22.50 million on account of fire in
their store at Meerut as on July 7, 2006. In this regard, they have received Rs. 7.50
million as an interim payment.
 Factories
VRPL’s existing manufacturing facilities are located at Plot No. 224, Phase 1
Udyog Vihar, Gurgaon, for which they have leasehold interest until May 4, 2009.
In addition, VRPL have recently acquired freehold interest in relation to a land
admeasuring 7.24 acres in Dehradun, Uttaranchal, where they are exploring the
possibilities for establishment of another manufacturing facility.
 Other Properties
VRPL have recently acquired freehold interest in relation to a land admeasuring
82,830 square feet in Hubli, Dharwad.
 Merchandise Planning
VRPL’s merchandise planning is based on the concept of category management
rather than traditional brand management practices.

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Apparels and Non Apparels

Under category management for, say, apparels, VRPL create and cater to products
across length and breadth of a category at different price points, fabrics, designs,
shapes, seasons, colors and sizes. VRPL formulate annual merchandising plan for
each division of merchandise taking into consideration factors such as past sales
data, regional customer tastes and preferences, number of stores (established and
proposed), likely fashion and trends, in-house production resources, vendor
management and price. Each division is further divided into major categories (for
instance, men’s apparel as a division is further divided into three major categories,
namely, upper, lowers and sports and ethnic wear). These major categories are in
turn segregated into various subcategories. For example, men’s upper as a major
category would be further divided into several sub-categories such as formal shirts,
casual shirts, party wear etc. Each sub-category consists of pre-defined SKUs,
which are classified on the basis of price point, brand, style, pattern and size.
VRPL draw annual sales projections for different SKUs and, accordingly, ascertain
their sourcing requirements. Based on such information and lead time estimates for
supplies, purchase orders with delivery schedules are issued. The inventory
position for each SKU is reviewed fortnightly taking into account the actual sales
and variations from the budgeted plans. Regular visits to the stores are made by the
category merchandising team to identify the slow-moving-SKUs and explore the
options to expeditiously dispose of them.
For certain non apparel categories, their merchandise planning and scheduling also
depends on introduction of new products and schemes by the vendors. For
instance, if a branded home appliance manufacturer replaces a product with a new
version, then their planning for the product would need to be reviewed based on
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the acceptability of the new version.

In-house Manufacturing
VRPL benefit from backward integration and in-house manufacturing of part of the
apparel products sold in their stores. Through their manufacturing capabilities,
VRPL is able to attain relative independence from intermediaries with a
competitive advantage in terms of value and cost. VRPL use their manufacturing
strengths to focus on enhancing product knowledge and their experiences from
manufacturing enable them to negotiate better terms from the vendors and job
workers.
VRPL currently have an apparels manufacturing plant at Gurgaon, Haryana. The
manufacturing plant is well-equipped with fully automatic machines for fusing,
buttoning, embroidery and welt pocket-making operations. The factory has a
capacity to manufacture 5,000 pieces per day. The plant was commissioned in
2004 and achieved a capacity utilization of 80%. It has 450 machines and is
operated by 500 workers. Further, VRPL are exploring the possibilities for
establishment of another manufacturing facility, for the purposes of which they
have acquired certain portions of land admeasuring 7.24 acres in Dehradun,
Uttaranchal.
In addition to in-house manufacturing, they have outsourced some parts of the
manufacturing to “job workers” who work in their factory premises. VRPL
undertake quality control measures by way of random sampling to ensure the pre-
determined quality standards are met. To verify that the quantity of supplies is as
per the order, they undertake count-check for every receipt of the goods.
VRPL’s manufacturing team works closely with their design team to understand
trends, develop products, value engineer and finally create season wise collection
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that cater to regional tastes.

Purchasing
Purchasing or vendor management assumes critical importance in retail business
where one has to deal with multiple products. VRPL have in place a vendor
management system, under which they identify vendors all over the country and
overseas and seek to develop alliances and arrangements with them. They regularly
interact with the vendors and share information such that the vendors remain
familiar with their goals and targets. It has been their strategy to procure goods
from small and medium sized vendors and manufacturers, which they believe has
led to reduction in the cost of goods they sell and increase in their profitability.
Upon ascertaining the procurements needs based on each SKU, VRPL explore the
various options for sourcing the products. They continuously strive to procure
goods from the place of origin to reduce the costs and control the quality. For
identifying the vendors, VRPL assess the various possible options on factors such
as capacity, credibility in the market, quality awareness and experience.
After identifying the vendors for the goods, VRPL place purchase orders based on
their SKU-wise plan, estimated lead time of each vendor and quantity to be
procured from each vendor. VRPL follow a policy of ‘payment on delivery’ to
negotiate better prices with the vendors and in certain cases they also release
payments in advance. To ensure quality of supplies, VRPL check quality by way of
random sampling at the time of receipt of the goods. To verify that the quantity of
supplies is as ordered, they undertake count-check for every receipt of the goods.
For FMCG products, VRPL procure from large as well as small and medium size
manufacturers. For procurement from the large manufacturers or their distributors,
they endeavor to enter into formal arrangements for supply of products to all
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VRPL stores, such that they are able to derive fixed margins from sales of such
products, irrespective of the locations. Under these agreements, they benefit from
special discretionary discounts and offers directly from the manufacturers or their
distributors.

VISHAL Apparels Brand

Vishal Mega Mart is one of India’s fastest growing retail chains.. The
chain currently has 183 company stores in 24 states / 110 cities in India. The
Vishal brand is known for great modern style for men, women and children.
Vishal offers high level fashion styling. Since 1986, our name has been
synonymous with quality, value and fashion integrity. We offer an unparalleled
collection of clothes for the entire family. Each garment is hand selected for
quality and contemporary styling. Vishal manufactures majority of its own
garments and out sources some under its direct quality supervision. This enables
us to offer the lowest possible and most reasonable prices.

Our goal is to provide a range of fashion wear to suit every pocket. Our product
mix represents the most current fashion trends in tops, bottoms, formals and
accessories for men, women and kids. Our courteous staff will ensure that
consumers get a perfect fit.

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Popular Brands are:

Zeppelin : Mens Shirts & Trousers Fizzy Babe : Ladies & Kids Girls
Kitaan Studio : Mens Shirts & Trousers Jasmine : Ladies & Kids Girls
Blues & Khakis
Mens Trousers Zero Degree : Kids Boys
:
Paranoia : Mens Shirts & T-Shirts Soil : Mens Shirts
Mens Trousers &
Chlorine : Mens Shirts Massa Bay :
Bermudas
Mens Shirts, T-Shirts,
Fume :  
UnderGarments.

Apparel Manufacture

The basic raw materials required for the manufacturing process of apparels
includes fabrics and accessories. VRPL merchandising teams source fabrics from
local manufacturers in India depending upon their production plan. VRPL also
source fabrics from the place of origin. VRPL source various other components
and accessories from vendors in various parts of the country and also import them
from China.
Inventory Management, Distribution Network and Logistics
VRPL’s distribution network and logistics encompasses all activities to ensure that
goods are dispatched in right quantities and at right time to reach stores with
sufficient time in hand to promptly cater to customer demands and optimization of
inventory position.
They have built a system to monitor the inventory position on a real-time basis at
each store, under which a stock requisition or delivery order is generated when pre-
determined stock or re-order levels are reached. The re-order levels for stores are

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determined based on factors such as display levels, lead time for replenishment and
average daily sales. VRPL review these re-order levels on continuous basis to
factor in variances in demand based on seasons, trends and promotional schemes.
VRPL have seven distribution centers over approximately 385,033 square feet.
These distribution centers are located around Kolkata (West Bengal), Thane
(Maharashtra), Jaipur (Rajasthan), Ghaziabad (Uttar Pradesh), Ludhiana (Punjab),
Gurgaon (Haryana) and Mahipalpur (New Delhi). VRPL have clearly demarcated
the stores which will be serviced by each distribution centre. The reorder levels for
distribution centers are ascertained on the basis of factors like average daily sales
of all the stores services, lead time for replenishment and buffer stock, which caters
to both the existing and proposed stores to be fed. As for the stores, they regularly
review these re-order levels.
VRPL’s distribution centers and stores are connected through company-wide
virtual network connection through broadband which helps to efficiently manage
their network of stores and distribution centers throughout the country.
They primarily utilise their own vehicles to transport the inventory to their stores
from the distribution centers. In addition, VRPL use the services of logistic
solution providers including low cost transport service providers in order to deliver
products on time to VRPL stores and optimize transportation costs. Distribution
centers operations have been streamlined through the standardisation of racking
system, layouts and implementation of automatic replenishment system.
Under arrangements with some of their merchandise manufacturers, they receive
payment on account of display of their products.

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Our products

FOOTWEAR

Mens

Shoes Sandals Slippers

Ladies

Shoes Sandals Slippers

Girls

Shoes Sandals Slippers

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Boys

Shoes Sandals Slippers

HOUSE HOLD

Cleaning aids plastic aids

Gifts and novelties thermoware

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 Vishal Mega Mart
Appliances kitchen aids

LADIES ACCESSORIES

Personal items fashion jewellery

Cosmetics haircare

HARDWARE

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 Vishal Mega Mart

Drill Machine Measuring Tape

   
   
  

Tower Bolt Spanner

   

Lock Hammer

   

CAR ACCESORIES

Music Sysrem Covers

   
   

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 Vishal Mega Mart
  

Lights Mirror
   

ELECTRICALS 

Bulb Ceiling Fan

    

Regulator Tester
   

Extension Cord Exhaust Fan

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 Vishal Mega Mart
Home Furnishing

Covers bath furnishing

Kitchen furnishing drawing room furnishing

Bed room furnishing

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 Vishal Mega Mart
FOODMART

Chinese and Indian food food and beverages

Fruits and vegetables

Imported fruit Regular Fruit

 

Regular Vegetables Imported fruit

 

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 Vishal Mega Mart

HOUSE HOLD

Hair Dryer Chopper

 

Waffle Maker Griller

  

GARMENTS

Men’s wear women’s wear

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 Vishal Mega Mart

Boy’s wear girl’s wear

Infant’s wear

FMCG 

Additives - Preservatives Aftermints Diary Products

 

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 Vishal Mega Mart

Drink Beverages Health Food Home Care

 

Personal Care Ready To Cook Ready To Eat

 

Basic Staple Cereals Cooking Medium

 

Flours Pulses Pulse-loose

     

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SERVICES AND SEMI-DESCRIPTION

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.

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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.

E-COMMERCE:

The uses of computers and internet have been expanding significantly over the

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years. Presently internet has been used widely as a means of communication, as a

potential source of information, as a means of entertainment and many more. With
in few years after existence of internet, business men realized the possibilities of
using internet as a medium of business. This idea kick started the first online
business ventures. Modern technology has been developed to the extent that even
shopping made possible over the internet. The process of shopping done over the
internet is called online shopping.
Both products and services can be purchased by online shopping. Online shopping
is used for business to business transactions or business to customer transactions
with applications of electronic commerce (ECommerce). Vishal Mega Mart is soon
launching its online shopping website this summer named as
www.vishalmegamart.com which promises to be a boon for its customers.
VRPL has its own site named as www.vishalmegamart.net.

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Vishalmegamart.net is concerned about the safety and security of their website

and customers. Accordingly, they have put a number of technological protections
in place to ensure that their transaction process is extremely safe and that their
customers' information is secure. They provide a large amount of information to
their customers, suppliers through their website. This information includes their
stores in different areas, cities with correct address and contact no’s, products
being offered by them, career opportunities, enquiry, supplier’s zone etc.

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Vishal Mega Mart also provides opportunities to its customers by

collaborating with shopping.indiatimes.com and with shopping.rediff.com.

How to Shop

Firstly, you have to register yourself with the shopping.indiatimes.com &

shopping.rediff.com. Place your order through following these 7 quick and easy
steps:

1. Find the Items You Want to buy.

2. Add the Items to Your Shopping Bag.

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3. Proceed to Checkout

4. Sign In/Create a New Account/Choose guest checkout

5. Enter a Shipping Address

6. Provide Payment Information and authorization

7. View or print your Order Acknowledgment and check your Order status.

Here are a few important action points that you should bear in mind:-

1. Keep your PC updated with the latest anti-virus / anti-spy ware software.
2. Install a personal firewall on your PC to protect your account.
3. Keep your PC updated with the latest security patches and, most
importantly,
4. Do not click on links or open attachments in unknown or unsolicited (spam)
emails.
Management Information Systems (MIS)

They have strong MIS capabilities that make use of their technological investments
to generate valuable insight for them and help them in improving their operations,
as well as in enhancing their speed of response to what the customers want. They
are thus able to monitor their performance on a day-to-day basis, across stores,
departments and product categories and compare the same with other stores as well
as across periods. This helps them take corrective action on a timely basis, and
optimize their stock. They are currently using Business Objects to analyze data
related to the buying trends of their loyalty customers.

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Following are the table which shows the different software used by the
organization in the organization activities, for customer transaction & for
employees working in the organization.

1. “JDA ERP” software.

Functional Area:
 Merchandising Buying,
 product ordering, Receipt
 confirmation, Stock
 transfer, Inventory
 Management, Sales
 Merchandise event

Comments: JDA is one of the leading ERP systems used by many retailers for
multiple
Business models in regards to retailing. The system is fully integrated and takes
care of
the Supply chain from a manufacturer to the end customer by using back-end and
front-end systems like MMS (Merchandise Management System) & WinDSS
(Windows Distributed Stores Systems).

2. “Oracle Financial” software.

Functional Area:
 Financial Accounting

Comments: Completely integrated with their retail ERP- MMS, allows them to get
online integrated financials.

3. “RAMCO HRMS” software

Functional Area:
 Human Resources.

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Comments: Their system supports Personnel Management, Payroll Management,

Employee Benefits Management, Training Management and Executive
Information.

4. “WMS” software

Functional Area:
 Distribution and Logistics.

Comments: WMS enable the space planning and also integrated SKU location
which enable faster picking and putting of merchandising.

5. “Arthur Planning” software

Functional Area:
 Merchandising Planning.

Comments: An integrated planning and decision making tool.

6. “Microsoft Exchange” software

Functional Area:

 Internal/External communication.

Comments: Enterprise wide mailing solution.

FUTURE SERVICES:

 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

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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.

Vishal Mega Mart Moves Into Second Orbit Of Expansion

New Delhi: Entry in Delhi has transformed the fortunes of Vishal Mega Mart, a medium-sized
14-store apparel retailing chain, which started in Kolkata with a 100-sqft store 12 years ago.
Within 15 months of its debut in Delhi, Vishal has opened five large-format stores with a
combined retail area of around 90,000 sqft—and it has plans to add two-three more. Delhi is now
expected to account for around half of its estimated turnover of Rs 90 crore in fiscal ’03-04.

Says Vishal Retail Ltd chairman RC Agarwal: ‘‘In the next one month, we expect to tie up a Rs
45-crore fund through a bank to drive our next phase of expansion (primarily towards lease,
interiors, and stocks) in fiscal ’04-05. We had earlier financed our projects in a small measure
through the Punjab & Sind Bank and Bank of Baroda.’’

Mr Agarwal also owns Kolkata’s three-year old entertainment property Vishal Waterworld Ltd.

The new retail expansion drive will increase Vishal’s network from 14 stores in 10 cities to 29
stores in 15 cities. Under the company-owned model, Vishal will add ten stores—all large format
(25,000-40,000 sqft)—while under the new franchisee model (it has one in Kota) it will add
another five mid-sized stores (around 10,000 sqft) in fiscal ’04-05.

‘‘We’re hoping to finalise a 40,000 sqft-store in Delhi’s Mathura Road area. In the next couple
of months a franchised store will open in Hyderabad, and another will follow in Agra in four
months,’’ he says.

Vishal expects the company’s turnover to more than double to Rs 200-225 crore in ’04-05. The
new territories: Chandigarh, Lucknow, Ahme-dabad and Surat.

Mumbai and south will be targeted not before ’05-06, says Mr Agarwal. Vishal now has
presence in towns with large ‘middle-middle class’ consumers like Jaipur, Varanasi, Siliguri,
Cuttack, Ranchi, Bhubaneswar and Indore.
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What is driving Vishal’s expansion? ‘‘Our philosophy is to make the customer feel that he is
paying for a dhaba chai (cheap tea joint) in five-star surrounding. We price our products up to 50
per cent cheaper than leading department stores and this, we think, appeals to a good number of
middle-middle class consumers. We believe in volume turnover; margins are low,’’ says Mr
Agarwal.

He adds: ‘‘So far the industry has seen competition in the premium-end of the retailing market,
but for the price-sensitive middle-class buyer, we only have large unorganised apparel market—
we hope to play a role here.’’

KSA Technopak manager Munir Suri points out that margins vary across formats —in a
premium department store retail margins could be 10-25 per cent for branded labels while in
hypermarkets it could be around 30-40 per cent.

Says Mr Suri: ‘‘Traditionally, retailers have targeted SEC A and SEC B consumers through
department stores—like Shoppers’ Stop, Westside, Ebony, Lifestyle. But now hypermarkets and
discount stores like Big Bazaar and Giant—where pricing is positioned at substantial discount to
MRP—are stirring the marketplace by targeting mass consumers.”

‘‘The Indian market is huge: it has enough room for speciality, department or hypermarket
model. However, I don’t see any clutter at the top-end— their proposition is different,’’ he adds.

Vishal is looking at expanding its vendor base too, which is already huge with around 35-40
vendors. Also, in order to bring a level of consistency in supplies, Vishal has recently
operationalised its first apparel-making facility in Gurgaon.

Employing 500 people on a single shift basis, the Gurgaon plant makes 1.25 lakh pieces a month.
‘‘The plant has just opened, we will ramp it up once the need arises,’’ says a company source.

Vishal is now looking at engaging a creative agency to convey its mass-market gameplan. It is
also weighing its options to retail non-apparel products in future through its chain.

COMPETITIVE ADVANTAGE:

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.

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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

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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 Lifestyle Store Retailers in India

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

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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.

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M A R K E T I N G A N A LY S I S S U M M A R Y

Marketing help to define the business for the customer's interests, not your own. It
is the process of learning what customers want or need and determining how to
satisfy those wants or needs. It is also used to confirm whether the customer
reacted to a marketing program as expected. The benefits of market research
include:
 Learning who your customers are and what they want.
 Learning how to reach your customers and how frequently you should try to
communicate with them.
 Learning which advertising appeals are most effective and which ones get no
response.
 Learning the relative success of different marketing strategies, thus
improving return on investment.
 Learning how not to repeat your mistakes.
Vishal Mega Mart has been the pioneer of retail revolution. Its first fight was
against local ‘Kirana’ stores. The task was to change the mindset of consumer to
bring about changes in their shopping patterns. It wanted people to do bulk
shopping for their monthly ration instead of going to the shop each week.

MARKETING STRATEGY OF VISHAL MEGA MART

Product
Vishal Mega Mart offers a wide range of products which starts from apparels to
food items, footwear to home furnishing, crockery to sport items, child care

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 Vishal Mega Mart
products to toys, watches, drinks etc. There are many in house brands promoted by
Vishal Mega Mart. In pursuance of their business plan to diversify their portfolio
of offerings, FMCG products play a key role. FMCG products are usually meant to
fulfill the daily needs of consumers and therefore, VRPL believe retailing of
FMCG products will bring customers to their stores on a frequent basis and this
may in-turn lead to consumption of their apparels. VRPL have a number of private
labels for apparels such as Zepplin, Paranoia, Chlorine, Kitaan Studio, Famenne,
Fleurier Women and Roseau.

Price

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 Vishal Mega Mart
Vishal Mega Mart promises its consumers the lowest available price. The concept
of psychological discounting (Rs. 99, Rs. 49, etc.) is used as promotional tool.
Vishal Mega Mart also caters on Special Event Pricing (Close to Diwali,
Christmas, New Year etc.). Selling combo-packs and offering discount to
customers. The combo-packs add value to customer. Through Bundling, they also
reduced the price of the products. In addition to VRPL’s strategy to continue
procurement of goods from small and medium size vendors and manufacturers
which leads to cost efficiencies, VRPL intend to procure FMCG and apparels from
low-cost production centers located outside India. Towards this objective, VRPL’s
propose to increase their procurement of finished and semi-finished goods from
China and thereby realize economies of scale and pass on the benefits so accrued
to their customers. The efforts of VRPL’s retail business are targeted towards
families having total income which can be classified under the “lower middle” and
“middle” income groups. VRPL follow uniform pricing policy across their stores
in respect of private labels and non-branded products sold by them. This enhances
brand loyalty, encourages customer confidence and results in operational
convenience. In relation to the other products, the prices may vary between stores
on account of state-specific taxation and vendor policies.

Place
Vishal Mega Mart stores are located in 110 cities with more than 180 outlets.
Vishal Mega Mart has presence in almost all the major Indian cities. They are
aggressive on their expansion plans. VRPL intend to increase their penetration in
the country by setting up new stores in cities where they already have presence, as
also entering into new areas in the country. In particular, they intend to focus on

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 Vishal Mega Mart
expansion in Tier II and Tier III cities. VRPL target locations with good
infrastructural facilities such as easy accessibility, provision for water, electricity,
parking, security and other basic amenities.

Promotion
Advertising has played a crucial role in building of the brand. Vishal Mega Mart
advertisements are mainly seen in print media i.e. newspapers, Television with
Tina Parekh as there in advertisement, and sometime road-side bill-boards.
VRPL’s category management system is used to plan promotional schemes. They
launch promotional schemes weekly. Apart from general sales promotion, the
category manager formulates promotional plans for ‘slow movers’. In addition, to
promote sales, they focus on layout of the stores and positioning, presentation and
display of merchandise, in order to appeal to the customer. In addition, VRPL have
introduced, in association with SBI Cards & Payment Services Private Limited, a
co-branded credit card. VRPL’s propose to continuously undertake such initiatives
to increase the satisfaction of their customers. Some of the features of the co-
branded card include Rs 250 discount voucher on signing up for the card and a
process by which the cardholder earns five reward points on every Rs 100 spent. A
cardholder accumulates points on the basis of purchases made and the points
accumulated can be redeemed for gifts or purchases. In September 2005, VRPL
entered into a long term advertising agreement with Bennett, Coleman & Company
Limited (“BCCL”). Under the agreement, they are entitled to fixed discounts for
their advertisement in print publications of BCCL for a period of five years from
the date of the agreement. In addition, BCCL would also act as a facilitator for
other print and non-print media of the Times Group i.e. internet, radio and

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 Vishal Mega Mart
television or any other new medium launched during the tenancy of the agreement.
As a part consideration, VRPL had issued 1,670,605 Equity Shares of Rs. 10 each
and 384,190 Preference Shares of Rs. 146 each amounting to an aggregate of Rs.
300 million.

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:

Understanding of the ‘value retail’ segment

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

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 Vishal Mega Mart
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

Their supply chain management involves planning, merchandizing sthiercing,

standardization, vendor management, production, logistics, quality control,
‘pilferage’ control replacement and replenishment. Their 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.

Strong and efficient logistics and distribution network

VRPL’s distribution and logistics network comprises seven distribution centers.
Besides, VRPL have their own fleet of 31 trucks, which helps VRPL to transport
and deliver their products in a cost and time efficient manner. VRPL believe that
their distribution and logistics set up is well networked and allows them to fulfill
the store requisition within short time period of generation and receipt of order,
which has helped VRPL to optimize in-store availability of merchandise and
minimize transportation costs. Their strong distribution and logistics network has
enabled them 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,
they are able to benefit from optimum utilization of the space allocated for display
in their stores. This provides them assistance in maintaining a low working capital
requirement and less carrying cost.

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 Vishal Mega Mart
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.

Their 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:

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 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 in-house 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

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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.

IMPACT OF VARIOUS ENVIRONMENT ON “VISHAL MEGAMART”

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

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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.

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

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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

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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.

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.

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

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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

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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.

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M A N A G E M E N T O F T E C H N O L O G Y , I N N O VA T I O N
& CHANGE

Technology is important to cut costs, improve efficiency, providing value to

customers and increasing the customer experience. IT solutions help in
synchronizing activities across various verticals such as procurement of inventory.
Securities from both external and internal threats are also important when the scale
of the operations increases. Most of their critical functions such as Supply Chain,
Operations, Finance & Accounts, and Customer Loyalty Program & Human
Resources are linked through a computer network. This has enabled them to reduce
their time to market and respond to the changing customer requirements. This has
also helped them reduce their costs of operations through both, reduction in
wastages and missed opportunities as well as a consequent reduction of the overall
costs of operations.
VRPL are focused on acquisition and implementation of advanced information
technology systems, processes and business applications in order to handle all store
operations including inventory management and billing. VRPL office processes are
also computerized which support procurement, supply chain logistics, distribution
centers management and inventory control. All the locations are connected through
company-wide virtual network connection which helps to efficiently manage their
network of outlets throughout the country.
VRPL believe that their business requires efficient management and storage of data
and information to utilise for business analysis, research and forecast. Based on
VRPL’s existing information technology systems, they are able to generate
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detailed daily reports covering the various aspects of their business such as
division wise sales per store, inventory movement and position at stores and
distribution centers and generation of purchase and delivery orders.
In August 2005, VRPL had entered into a software end-user license agreement
with Systems, Applications and Products in Data Processing Private Limited
(“SAP India”) for grant of a non-exclusive and perpetual license to VRPL to use
the SAP software, documentation and other information related thereto. SAP for
Retail provides an integrated technology platform for retailers and a one point
solution for supporting and managing different business models such as owned
stores, franchise stores, shop n shop concepts. Strong business decision and
analytical capabilities have enabled retailers of all sizes the power to make the
right decisions quickly and profitably.
Beginning with a computerized cash memo, to use FoxPro for operations &
accounting and, implementation of a complete ERP from JDA (J. D. Armstrong
Software Group), they have gradually extended the Use of technology in their
various areas of operations. In order to increase the speed and traceability to the
supply chain management Vishal Mega Mart introduces Bar Code Technology.
Bar code is tried and tested technology—the “no-brainer” choice for identifying
items in the supply chain. Yes, it does have short comings in that applying it means
that everything has to be in line of sight because light is used to capture and read
the bar code. But as goods are handled either by humans or machines, the goods
are always visible, as are their labels—labeling standards mean that it is virtually
impossible to not see the label and its bar code. This means that some form of
scanner is used—the range of available technology is broad—either by an operator
wielding a hand-held device or by a machine-mounted or fixed-position scanner.
Beyond the bar code is RFID (radio frequency identification) where a chip
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within a tag carries information and is read using radio waves. Vishal Mega Mart
uses the latest technology to improve its performance Quality as well as Quantity
Wise. Bar code scanners are very sophisticated devices these days. Functionality
and reliability is extremely important. Vishal Mega Mart also uses CCTV to
monitor its stores. Various CCTV’s are being installed in a store, with a room
where the entire functioning taking place in a store can be monitored by a human
operator.
VRPL have partly implemented their information technology set up and are
currently in the midst of completing the process of upgrading their information
technology set up and have entered into an agreement dated September 6, 2005
with Tata Consultancy Services Limited for providing information technology
services including implementation of more advanced ERP applications such as
SAP, rendering services inter alia for management information system on reports
related to stock management, receipt processing, picking and packing, project
systems, merchandise assortment management, pricing and promotion, sales,
controlling and financial accounting.

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O R G A N I Z AT I O N S T R U C T U R E

The Company places a huge emphasis on fostering a culture of innovation and

enterprise that allows people within the Company to realise human beings' infinite
potential. The Company continues to increasingly focus on internal growth and
development of its associates, cutting across levels and functions, through focused
developmental efforts and growth opportunities. For the year under review, the
Company has provided 66 hours of training per associate. Apart from regular
training in skills enhancement and customer engagement, the Company also
emphasizes on building a sense of pride, belonging and self-confidence among its
employees working at the stores.

Compensation and Performance Based Incentives

VRPL’s compensation policy is performance based and they believe it is
competitive with industry standards in India. VRPL endeavor to recognize talent
and potential in their employees and encourage them to take additional
responsibilities. Based on performance, VRPL calibrate their employees and
reward loyalty by preferring in-house promotions. Their compensation policy
reflects their continuing efforts to build a world class performance driven culture.
They benchmark ourselves on compensation externally through consultants
biannually, and aspire to be on the upper quartile of their target segment,
comprising of FMCG companies and other retail companies and are currently at
the 75 percentile.

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Continue to train employees and seek entrepreneurship from employees

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
VRPL encourage their employees to be enterprising and expect them to ‘learn on
the job’ and contribute constructively to their business, either through ideas,
personal networks or effective knowledge management. In essence, they train their
employees to become next generation entrepreneurs, who can effectively lead the
growth of their business. Their corporate objective is to provide every associate
with an average of 5 man days of training per annum through internal and external
resources.
All senior management members are required to contribute 30 hours per annum
towards training.

Management Organization Structure:-

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REFERENCES

 http://www.vishalmegamart.net/
 http://www.vishalmegamart.net/aboutus.htm
 http://en.wikipedia.org/wiki/Special:Search?
search=vishal+mega+mart&go=Go
 http://en.wikipedia.org/wiki/Retailing_in_India

 http://www.business-standard.com/india/news/weakness-continues-sterlite-

mm-plunge-8/15/51/50474/on
 http://indiaretailbiz.wordpress.com/2006/11/03/11-vishalmegamart
customers-petty-traders-have-no-reason-to-worry-say-vishal-officials/

STORE MANAGER:

 NAME: SUNIL SINGH

 ADDRESS: PLOT NO. 16, SECTOR-23, SANJAY NAGAR DISTRICT

CENTER, NEAR ALT BUS STAND, GHAZIABAD-201002

 PHONE NUMBER: 9313812864

 E-MAIL ID: sh.ghaziabad2@vrpl.in

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