SECURITY ANALYSIS

FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY

A
PROJECT REPORT ON

FUNDAMETAL ANALYSIS AND TECHNICAL ANALYSIS
OF INDIAN ORGANISED RETAIL SECTOR WITH PANTALOONS RETAIL AND SHOPPERS’ STOP

NEW DELHI INSTITUTE OF MANAGEMENT
PGDM (2008-10) FINANCE

SUBMITTED BYMANAVI SANKHYAN (73) RAHUL JAIN (142) SHILPA THAKUR (154) SHWETA KAUSHAL (159) VAIBHAV TOLUMBIA (175)
NEW DEHLI INSTITUTE OF MANAGEMENT Page 1

SECURITY ANALYSIS

FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY

MUKESH AGARWAL (211)

CERTIFICATE OF APPROVAL

This is to certify that following students of Post Graduation Diploma In Management (PGDM), batch 2008-10 of NDIM has completed the project.

Fundamental and Technical Analysis of Indian Organised Retail Sector With Pantaloons Retail and Shoppers’ Stop With authenticity and accuracy ,under my guidance and supervision.

PROJECT GUIDE: Prof. Kumar Bijoy

MANAVI SANKHYAN (73) RAHUL JAIN (142) SHILPA THAKUR (154) SHWETA KAUSHAL (159) VAIBHAV TOLUMBIA (175) MUKESH AGARWAL (211)
NEW DEHLI INSTITUTE OF MANAGEMENT Page 2

SECURITY ANALYSIS

FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY

DECLARATION

We, the students of New Delhi Institute of Management hereby declare that all the information, facts and figures furnished in this report is based on our own findings and experience collected, during our project. This information has been used for purely academic purpose.

We hereby declare that the material provided in this report is original and has not been submitted anywhere for any other educational purposes.

The project report is the result of our own hard work and self belief.

MANAVI SANKHYAN (73) RAHUL JAIN (142) SHILPA THAKUR (154) SHWETA KAUSHAL (159) VAIBHAV TOLUMBIA (175) MUKESH AGARWAL (211)

NEW DEHLI INSTITUTE OF MANAGEMENT

Page 3

India Retail Industry  Overview Fundamental Analysis  Role of GDP  Role of Monsoon  Impact of Inflation Industry Analysis  Swot Analysis  BCG Matrix  Porter‟s Five Forces  Industry life cycle Company Overview  Pantaloon  Shopper‟s Stop  Ratio Analysis  Technical Analysis  Dow Theory  Head and Shoulder CHAPTER 2 CHAPTER 3 CHAPTER 4 CHAPTER 5 CHAPTER 6 .NO.SECURITY ANALYSIS FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY TABLE OF CONTENT S.Recommendation -Bibliography NEW DEHLI INSTITUTE OF MANAGEMENT Page 4 . TOPIC Acknowledgement Preface CHAPTER 1 PAGE NO.

In particular. opinions. Lastly. Kumar Bijoy who gave us an opportunity to work on this project. encouragement and blessings. suggestions.SECURITY ANALYSIS FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY ACKNOWLEDGEMENT Getting this project work successfully completed required the work of many hand. As a Project Guide. MANAVI SANKHYAN (73) RAHUL JAIN (142) SHILPA THAKUR (154) SHWETA KAUSHAL (159) VAIBHAV TOLUMBIA (175) MUKESH AGARWAL (211) NEW DEHLI INSTITUTE OF MANAGEMENT Page 5 . we are grateful to Prof. We are also thankful to all the friends who directly or indirectly gave their support and trust on us. he laid his trust in us and gave us his valuable time. we would like to thank our family members and friends for their support and encouraging words due to which this project became a success. Many people offered us the benefit of their expertise in getting this work done.

and demographic patterns which are favourable. It is the latest bandwagon that has witnessed hordes of players leaping onto it.SECURITY ANALYSIS FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY PREFACE Retailing.USA) and India shows a wide gap between the two countries. Indian retail industry is going through a transition phase. which means „to cut up‟ or „break the bulk‟. The growth of scope in the Indian retail market is mainly due to the change in the consumers‟ behaviour. Most of the retailing in our country is still in the unorganized sector. The word retailing is derived from the French word „retailer‟. NEW DEHLI INSTITUTE OF MANAGEMENT Page 6 . non business use. While the retailing industry itself has been present through history in our country. changing lifestyle. The spread out of the retails in other developed countries (e. For the new generation have preference towards luxury commodities which have been due to the strong increase in income. Retailing is the final stage in the distribution process. it is only in the recent past that it has witnessed so much dynamism. Though retailing in India is undergoing an exponential growth. the road ahead is full of challenges.g..is the most active and attractive sector of the last decade. Retailing includes all the activities involved in selling goods or services directly to final customers for personal.

SECURITY ANALYSIS FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY INDIAN RETAIL INDUSTRY: AN OVERVIEW India retail industry is the largest industry in India.branded items.5 billion. NEW DEHLI INSTITUTE OF MANAGEMENT Page 7 . Since at present 60% of the Indian grocery basket consists of non.200 billion. food is the most dominating sector and is growing at a rate of 9% annually. shopping. Industry of retail in India which have become modern can be seen from the fact that there are multi. Indian retailers preferred means of expansion is to expand to other regions and to increase the number of their outlets in a city. In the Indian retailing industry. as a result a great demand for real estate is being created. and entertainment all under the same roof. India retail industry is expanding itself most aggressively. changing lifestyles. and a steep rise in rural consumption.5 billion by 2010 from the current size of US$ 7. It has further been predicted that the retailing industry in India will amount to US$ 21. Shopping in India have witnessed a revolution with the change in the consumer buying behaviour and the whole format of shopping also altering. rising incomes. and sprawling complexes which offer food. and favourable demographic patterns. The branded food industry is trying to enter the India retail industry and convert Indian consumers to branded food. India retail industry is one of the fastest growing industries. It is expected that by 2016 modern retail industry in India will be worth US$ 175. India may have 600 new shopping centres. India retail industry is progressing well and for this to continue retailers as well as the Indian government will have to make a combined effort. Average growth rate of 7-8% is expected in the industry of retail in India by growth in consumerism in urban areas. Retail industry in India is expected to rise 25% yearly being driven by strong income growth. huge shopping centres.stored malls. with an employment of around 8% and contributing to over 10% of the country's GDP. It is expected that by 2010.

The population in these cities is projected to almost double by 2025 and with the globalisation sweeping everyone off their feet. there would be a scope for all types of formats and sub-categories to exist. The initial expansion undertaken by players was limited to the metros but gradually they are making a foray into other large cities to gain from the first mover advantage and building customer loyalty.SECURITY ANALYSIS FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY The above chart clarifies that by 2025 the major opportunity resides in the crème-de-lacrème eight cities and top 27 cities providing the market players to sweep up their shares in almost 40% of the Indian retail market. NEW DEHLI INSTITUTE OF MANAGEMENT Page 8 .

social changes also had a positive impact.SECURITY ANALYSIS FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY FUNDAMENTAL ANALYSIS The above figure shows the growth of retail sector in comparison with growth in foodbeverages segment and clothing segment. the Indian customer witnessed an increasing exposure to new domestic and foreign products through different media. With the liberalization and growth of the Indian economy since the early 1990s. Farm credit target of Rs. and qualified manpower also boosted the growth of the organized retailing sector. Increased availability of retail space.5 billion and surpassed portfolio investment of US$ 6. rapid urbanization. 000 crore for 2007-08 has been set with an addition of 50 lakh new farmers to the banking system. The foreign direct investment in the India market amounted to US$12. such as television and the Internet.225.8 billion. leading to the rapid growth in the retailing industry. 35 projects have been completed in 2006-07 and NEW DEHLI INSTITUTE OF MANAGEMENT Page 9 . Apart from this. It shows that there has been simultaneous increase in both of these sectors with the growth of retail sector as whole in last 10 years. This is also causing the growth of retail sector because most of the foreign organized retailers want to enter Indian economy.

Modern retail in India could be worth US$ 175-200 billion by 2016.Retail sector contributes nearly 12% of total GDP and around 8% of employment. and a steep rise in rural consumption. has come to be identified with lifestyles. the modern retailer is yet to feel the saturation' effect in the urban market and has. the modern retailing trend. First. NEW DEHLI INSTITUTE OF MANAGEMENT Page 10 . Whenever there is increase in agriculture production.5 billion by 2010 from the current size of US$ 7.200 billion.000 billion. The traditional food and grocery segment has seen the emergence of supermarkets/grocery chains and fast-food chains. The Mobile phone Retail Industry in India is already a US$ 16. The retail industry in India amounted to Rs 10. India retail industry is one of the fastest growing industries with revenue expected in 2007 to amount US$ 320 billion and is increasing at a rate of 5% yearly.000 hectares to be created and training of farmers arranged.7 billion business. rising incomes. Retailing is going through a transition phase not only in India but the world over. Second. This is also pushing retail sector upward because agriculture and retailing are directly related to each other. The Food Retail Industry in India dominates the shopping basket. For a long time. the corner grocery store was the only choice available to the consumer. It has further been predicted that the retailing industry in India will amount to US$ 21. growing at over 20 per cent per year. It is expected that by 2016 modern retail industry in India will be worth US$ 175. the boom in retailing has been confined primarily to the urban markets in the country. ROLE OF GDP. The organized retail market in India out of this total market accounted for Rs 360 billion which is about 4. A further increase of 7-8% is expected in the industry of retail in India by growth in consumerism in urban areas. There are two primary reasons for this.5% of the total revenues. especially in the urban areas. This is slowly giving way to international formats of retailing. large chunks are yet to feel the impact of organised retailing. despite its cost-effectiveness.5 billion. retail sector will also grow accordingly. However. Indian retail is expected to grow 25 per cent annually.SECURITY ANALYSIS FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY additional irrigation potential of 900. therefore. probably not looked at the other markets as seriously. Even there.

which has revamped NEW DEHLI INSTITUTE OF MANAGEMENT Page 11 .clocks around $350 billion a year in sales. Service sector contributes around 55% of total GDP and agriculture sector contributes around 20%. It causes retail spends to dip and the prices of commodities to move upward. After independence it was the agricultural sector that contributed the most to the India GDP but in recent years it has been the services sector. And thousands of new shops have sprouted in the past few years. retail was among the first sectors to be hit. This proves that there is a tremendous scope for growth in the Indian retail market. and inflation is only partly to be blamed.a not inconsiderable consumer of real estate.In a nation where 60% of farmland depends on rains.SECURITY ANALYSIS FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY Service sector contributes most to the GDP.including housing. some retail executives are taking a closer look. leaving consumers with little money to spend on capital goods .including everything from carrots to cars . India's largest retailer by sales." says Kishore Biyani. so there are more players competing for the same consumer. ROLE OF MONSOON. These migrations add to the burden of already strained civic infrastructure of these cities. now I have become a realist. But now. and where farms provide livelihood to more than 60% of the population. which has contributed the most. IMPACT OF INFLATION-Inflation is felt everywhere. Similar effects will be seen on the leisure and entertainment sector . Lower agriculture production will lead to the diminishing supply of basic necessities that will push the price upward and will hit the overall sector adversely. Retailers are discovering more about the Indian customer. and 1500 supermarkets. Growth is less than hoped for. Retailers curtail their expansion plans due to lowered revenue growth perceptions. India's retail industry -. As stated earlier agriculture is very much related to the retail sector. and are going back to the drawing board to sketch new plans. Other than this a vast segment of marginal farmers are rendered jobless and tend to migrate to urban areas for subsistence. chairman of Pantaloon Retail India Ltd. That figure had been expected to double in the next seven years. affecting the retail real estate sector to feel the heat.. The impact of a failed or inadequate monsoon is multifold. monsoon plays significant role in overall economy. The Indian potential has not been met. "I was an eternal optimist. Retailing is the part of service sector and it is also related to the agriculture sector. Apart from that there are under construction at present around 325 departmental stores. 300 new malls. Agriculture production will lower down if monsoon is unfavourable in a particular year and that will affect retail sector adversely.

have changed tack. Many outlets discovered that consumers didn't really want their products." Most retailers say they are grappling with the same problems: rising costs and fewer buyers. "Everybody has miscalculated. India still generates excitement among some investors.. both British retailer Tesco PLC and Vornado Realty Trust. China. Earlier this month. NEW DEHLI INSTITUTE OF MANAGEMENT Page 12 . including Indiabulls Financial Services Ltd. closing some stores and making management changes. In the early days of the boom. Nevertheless. Some companies that still have big plans. has posted net losses for the past two quarters. one of the first companies in India to attempt modern clothing and houseware chains. announced plans to enter the country with local partners Shoppers Stop Ltd.S. and more than a decade extra of experience with international brands. And unlike shoppers in Asia's other booming economy. and Aditya Birla Group. The average Chinese consumer has more disposable income.SECURITY ANALYSIS FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY its expansion plans as it discovered more about Indian consumers. one of the largest mall developers in the U.. retail rents and salaries soared. though recently they have started to come down a bit. Indians are rarely willing to pay three to 10 times more for an international brand than for its domestic equivalent.

The sector is yet to be excelled.SECURITY ANALYSIS FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY INDUSTRIAL ANALYSIS Industrial analysis of any industry may include SWOT analysis.  Government policies are becoming more favourable towards retail sector and emerging technologies are facilitating retailing operations. Lack of proper infrastructure and distribution channels in the country resulting in inefficient processes.  There is an increasing share of young population in total population of India. Weaknesses. This analysis gives the overall picture of any industry. Firstly SWOT analysis has prime significance in understanding the sector. Following is the SWOT analysis of Indian retail industrySTRENGTHS Retail is the most booming sector in the Indian economy. thefts.  Biggest players of the world are going to enter the industry soon. BCG (Boston Consulting Group) Matrix Analysis. WEAKNESSES     Lack of trained workforce Low skill level of retailing management Logistics and supply chain bottlenecks Vendor frauds. Opportunities and Threats. Five Forces Model and Industrial Life Cycle. NEW DEHLI INSTITUTE OF MANAGEMENT Page 13 . OPPORTUNITIES Retail is one of the most fragmented sector in Indian consisting only 2% of entire retailing business in organised sector. SWOT ANALYSIS OF RETAIL SECTOR SWOT stands for Strengths. shoplifting and inaccuracy in supervision and administration.

The BCG Matrix can be used to determine what priorities should be given in the product portfolio of a business unit. The Boston Consulting Group Matrix has 2 dimensions: market share and market growth. It was developed in the early 70s by the Boston Consulting Group. a company should have a portfolio of products that contains both high-growth products in need of cash inputs and low-growth products that generate a lot of cash.The BCG Matrix method is the most well-known portfolio management tool.  Constant changes in consumer preferences and evolution of new retail formats. The basic idea behind it is: if a product has a bigger market share. Political opposition against organised retail sector‟ Retail majors are under serious pressure to improve their supply chain systems and distribution channels and reach the level of quality and service desired by consumers. BCG Matrix. it is better for the company. or if the product's market grows faster. To ensure long-term value creation. It is based on product life cycle theory. NEW DEHLI INSTITUTE OF MANAGEMENT Page 14 . GDP is not allowed in organised retail sector in India Strong competition from unorganised 12 million mom-n-pop stores.  Government is considering the introduction of multi-brand speciality formats FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY THREATS      Cost of business operation very high in India Organised retail sector has to pay huge taxes regarding their operations.SECURITY ANALYSIS  Rising income of the consumers and improvement in infrastructure are enlarging consumer market and accelerating the  Retail sector is likely to produce two million jobs in next 3-4 years.

NEW DEHLI INSTITUTE OF MANAGEMENT Page 15 . Cash Cows (low growth. high market share)  Stars are using large amounts of cash.  Dogs must deliver cash.  Stars are frequently roughly in balance on net cash flow. investments which are needed should be low. low market share)  Avoid and minimize the number of Dogs in a company. because the rewards will be Cash Cows if market share is kept. Stars are leaders in the business. Therefore they should also generate large amounts of cash. otherwise they must be liquidated.  Watch out for expensive „rescue plans‟.SECURITY ANALYSIS FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY Stars (high growth. Dogs (low growth. However if needed any attempt should be made to hold your market share in Stars. Because of the low growth. high market share)  Profits and cash generation should be high.  Cash Cows are often the stars of yesterday and they are the foundation of a company.

etc. share of organised retailing is very low. or invest nothing and generate any cash that you can. organised retail sector comes under QUESTION MARK. Food Bazaar. Shoppers‟ Stop. Also unorganised or traditional retailing is the biggest threat to the organised sector. Subhiksha.SECURITY ANALYSIS FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY Question Marks (high growth... Titan Industries. Increase market share or deliver cash. Shoppers Stop. Pantaloon Retail India Ltd. That means that unorganised retail sector enjoy around 96% of total retailing in India. Trent Retail-Westside etc. So total market share of organised retail is not very high.. Future Group and Pantaloons Retail can be included under the STA NEW DEHLI INSTITUTE OF MANAGEMENT Page 16 . MTR Foods Ltd. Style SPA Furniture Ltd. It is increasing at a very rapid pace. SO WHERE DOES THE RETAIL SECTRO LIE? Organised retail sector in India has a very high growth rate. Archies. because they have high cash demands and generate low returns. or sell off. low market share)  Question Marks have the worst cash characteristics of all. Shoppers‟ Stop. Crossword.. As repeatedly stated earlier it is the one of the faster growing sector in India.  If the market share remains unchanged. Pantaloons Retail. because of their low market share. Pantaloons. Ebony Retail Holdings Ltd.  Either invest heavily. So the sector has a very high growth rate on one side On another side. That said. Big Bazaar. Lifestyle. WHERE RETAIL PLAYERS STAND IN BCG MATRIX Now we will try to put some of the major retail players in the BCG Matrix. So in comparison with unorganised retailing. But the market leaders are Future Group. Some of the players are Future Group. with high growth rate and comparatively low market share. Question Marks will simply absorb great amounts of cash. Bata India Ltd. if we compare organised retail sector to unorganised retail sector then we will realize that organised retail sector has only 4% of total retail sector. Music World Entertainment Ltd. Lifestyle.

SECURITY ANALYSIS FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY PORTER’ FIVE FORCES MODEL :  Industry Competitors – Rivalry among existing firms:  Competition hotting up with many big corporate houses making a bee-line for foraying into the industry with real big investments. are experiencing a lot of competition from organized players.  With the FDI restrictions on pure retailing expected to be removed. Speciality Stores. rivalry is bound to be intense with competitors adopting aggressive growth strategies and primarily eyeing the top cities.  With intensifying rivalry in each vertical.  Not many barriers exist for entering into unorganized retailing but to make a foray into organized retailing is becoming a tough nut to crack. NEW DEHLI INSTITUTE OF MANAGEMENT Page 17 .  Organized retailing is both capital as well as labour intensive requiring big ticket investments to enter the sector. Retailers have to tryout newer formats and constantly generate better ideas to maintain high footfalls. entry of global players will intensify the rivalry.  Potential Entrants – Threat of new entrants:  For small size retailers the entry of organized players poses a major threat to their existence.  In one of the most exciting and rapidly growing sector in India. brands have become the important product differentiator.  Small size stores – Kirana Stores.

suppliers have an upper hand in the bargaining power. reducing the threat for Indian retailers and providing an opportunity to make a stronghold in the market. Retailers have to look for creating brand loyalty to ensure sustained footfalls.   Due to the economies of scale.  Substitutes – Threat of substitutes:  Unorganized retailing is the substitute for the organized format.  Switching costs for the customer is virtually Nil. As it is virtually impossible (at least at the current scenario) for the organized retailers to be present as the Kirana stores are.  Due to the reasons like proximity. whereas in organized format. retailers dominate the terms primarily due to the economies of scale. credit facility.  There are instances where suppliers have integrated forward by launching their own stores and the future possibilities of this nature can‟t be ruled out.  Catalogue. every retailer will have access to good services and would be able to compete effectively.  The current government regulation restricts the entry of global players. The use of sophisticated techniques will create a vast difference in the bottomlines of the companies.  The focus is rapidly changing from the brand of products to the brand of retailers and the differentiating services that they provide. buyers might still want to shop at the nearby Kirana store rather than going to a far-off supermarket.  Suppliers – Bargaining power of suppliers:  In unorganized retailing. Many a supplier work on an outsourcing basis. With the Indian logistics sector getting better and more efficient by the day. direct or online shopping hasn‟t acquired much pace in India and thus can‟t be treated as a threat to retailing.  As many a product are outsourced for manufacturing by the retailers rather than producing them in-house. home delivery and personal attention.  As the organized retailing is both capital and labour intensive entry is not that easy. the quality and service of the supplier plays an important role. just manufacturing the product and branding it for the retailer.  Supply chain management is a key area in modern retailing. FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY NEW DEHLI INSTITUTE OF MANAGEMENT Page 18 . thus not having a brand distinction of their own.  Technology is continuously getting cheaper and accessible. hence the rivalry and threat of new entrants in the industry is high.SECURITY ANALYSIS  The economies of scale with which the major corporate houses are intending to operate intensify the threat. organized retailers are able to provide better quality products at lower prices than their unorganized peers.

 Buyers virtually enjoy Nil switching cost and thus the role of quality and service is immense to retain the customer. it is easy for suppliers to find new customers.SECURITY ANALYSIS  The switching cost for suppliers is not very high.  Also the volume and ticket size for each customer is low.  Customers – Bargaining power of customers: FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY  Buyers do have some bargaining power in unorganized format but due to product standardization and fixed pricing. Loyalty programs help in sustaining relationships. Industry Life Cycle NEW DEHLI INSTITUTE OF MANAGEMENT Page 19 . buyers virtually have no bargaining power in organized format retailing. As all the verticals of retailing are growing rapidly.  Buyers of the retailing industry don‟t pose any sort of threat pertaining to the backward or forward integration into the industry.

Retail in India is still in its nascent stage. The competition in the industry is rather aggressive because there are many competitors and product substitutes. industry also has its circle of life. At this stage. In addition.Some companies may shift some of the production overseas in order to gain competitive advantage. It is the stage at which a new industry emerges. These stages will be described in the followings section. It contributes nearly 10% of total GDP and provides huge employment opportunities. Price. the new industry normally arises when an entrepreneur overcomes the twin problems of innovation and invention. So retail industry in India comes under shake-out stage. The value of the industry also quickly rises. During the shake-out stage. competition. FRAGMENTATIONSTAGE-OR INRODUCTION STAGE Fragmentation is the first stage of the new industry. shake-out. the demand in the market may be fully satisfied or suppliers may be running out. or they may develop new products or services that meet the demand in the market. Looking at the growth in the Indian retail sector we can not say that retail industry comes under this stage. NEW DEHLI INSTITUTE OF MANAGEMENT Page 20 . and cooperation take on a complex form . Decline is a stage during which a war of slow destruction between businesses may develop and those with heavy bureaucracies may fail. Maturity is a stage at which the efficiencies of the dominant business model give these organisations competitive advantage over competition. Retail nowhere falls under this stage. and works out how to bring the new products or services into the market. This is the stage when the new industry develops the business. Investment in retail is increasing and competition is also growing because many retail players want to enter the Indian market. maturity and decline (Kotler 2003). this will create a new industry. Retail industry is the emerging industry in India. The industry lifecycle imitates the human lifecycle. MATURITY Maturity is the third stage in the industry lifecycle. DECLINE Decline is the final stage of the industry lifecycle. In the stage of decline.SECURITY ANALYSIS FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY Like other living creatures. The stages of industry lifecycle include fragmentation. competitors start to realise business opportunities in the emerging industry. In such cases. It does not come under maturity stage. some companies may leave the industry if there is no demand for the products or services they provide. SHAKE-OUT STAGE OR GROWTH STAGE Shake-out is the second stage of the industry lifecycle. But organised retail is still around 4% of overall retailing business that is why it is emerging.

has over 1000 stores across 71 cities in India and employs over 30. Mumbai. The first one is Pantaloons Retail Pvt. Ltd. Big Bazaar. the supermarket chain is launched. a large-format home solutions store. Home Solutions Retail (India) Limited. a uniquely Indian hypermarket chain. PANTALOONS RETAIL PRIVATE LIMITED. a chain of seamless destination malls. Top 10 and Star and Sitara. convenience and quality and Central. futurebazaar. is India‟s leading retailer that operates multiple retail formats in both the value and lifestyle segment of the Indian consumer market. Raheja Corp.  1992 Initial Public Offer (IPO) was made in the month of May. 1991 by the K. The company‟s leading formats include Pantaloons. Kishore Biyani. Company Timeline  1987 Company incorporated as Manz Wear Private Limited.000people. selling home furniture products and eZone focussed on catering to the consumer electronics segment. The company is headed by Mr.  2001 Big Bazaar. The foundation of Shopper's Stop was laid on October 27. The other company is Shoppers‟ Stop. Food Bazaar. Headquartered in Mumbai (Bombay). Some of its other formats include Brand Factory. accessories. the company operates over 12 million square feet of retail space. Raheja Corp. Launch of Pantaloons trouser. blends the look.SECURITY ANALYSIS FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY COMPANIES OVERVIEWWe have taken two companies for our analysis. Collection i. cosmetics. A subsidiary company. The company also operates an online portal.group of companies. operates Home Town. a supermarket chain. who is the market leader in Indian organised retail segment. The Company houses a host of many international & domestic brands across various categories such as apparel. a chain of fashion outlets. It started in 1991 with its first store in Andheri.  Future Group crosses $1 Billion turnover mark. “Is se Sasta aur accha Khai Nahi ” – India‟s first hypermarket chain. touch and feel of Indian bazaars with aspects of modern retail like choice.Shoppers' Stop Limited is a chain of Retail stores in India owned by K. aLL. home & kitchenware as also its own private brands. Blue Sky. Being NEW DEHLI INSTITUTE OF MANAGEMENT Page 21 .  1997 Pantaloon – India‟s family store was launched in Kolkatta.Pantaloon Retail (India) Limited. India‟s first trouser brand. SHOPPERS’ STOP.  Food Bazaar.com.

In 2007.00 987.146.00 707.14 99. From its inception. Signed a 50:50 Joint Venture with the Nuance Group for Airport Retailing Signed an MOU with the Home Retail Group of UK to enter into a franchise arrangement for the Argos formats of catalogue & internet retailing.85 58. Shoppers’ Stop has become the highest benchmark for the Indian retail industry. Shopper's Stop is a household name.51 45.36 343. With a Gross Retail Turnover of Rs. Shopper's Stop has progressed from being a single brand shop to becoming a Fashion & Lifestyle store for the family.20 0. the company‟s continuing expansion plans aim to help Shoppers‟ Stop meet the challenges of the retail industry in an even better manner than it does today.00 519.65 10.96 39. 8996 million.95 7.43 NEW DEHLI INSTITUTE OF MANAGEMENT Page 22 .68 28.99 696.28 0.91 50.71 7.64 100. services and above all. Today. known for its superior quality products.77 121.59 59.62 0.96 12.00 441.91 0. With an immense amount of expertise and credibility.68 Mar ' 05 510.327.86 510.49 78.51 Mar ' 08 1.147.82 376. the Group crossed yet another milestone with its lifestyle venture . In fact.31 14.68 0. COMPANY FINANCIAL ANALYSIS SHOPPER’S STOP : Investor return Income : Operating Income Expenses Material Consumed Manufacturing Expenses Personnel Expenses Selling Expenses Adminstrative Expenses Expenses Capitalised Cost of Sales Operating Profit Other Recurring Income Mar ' 09 1.01 Mar ' 07 838.42 158.90 5.00 1.37 67.95 35.SECURITY ANALYSIS FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY amongst India's biggest hospitality and real estate players.Shopper's Stop.65 811. Shopper's Stop has become the highest benchmark for the Indian Retail Industry.95 8.73 99.91 87.11 111.69 Mar ' 06 619. for providing a complete shopping experience.18 131.36 10.40 6.50 28.75 0.94 68.87 179.

56 6.71 18.82 22.89 -37.20 0.16 0.SECURITY ANALYSIS Adjusted PBDIT Financial Expenses Depreciation Adjusted PBT Tax Charges Adjusted PAT Non Recurring Items Other Non Cash adjustments Reported Net Profit Earnigs Before Appropriation Equity Dividend Dividend Tax Retained Earnings FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY 187.00 -63.66 1.00 26.5 1 0.89 49.42 5.94 13. Current Ratio 3.74 0.01 25.00 19.22 0.5 0 Mar ' 05 Mar ' 07 Mar ' 09 Current ratio Interpretation: The current ratio has a decreasing trend which shows increase in liabilities of the company 2.81 RATIO ANALYSIS LIQUIDITY RATIOS: 1.27 13.77 36.46 68.13 69.00 0.Quick Ratio NEW DEHLI INSTITUTE OF MANAGEMENT Page 23 .23 0.94 40.28 8.97 0.27 6.00 27.50 8.28 142.89 49.07 166.91 2.08 0.88 5.03 -14.00 -14.11 39.5 3 2.11 -0.59 155.31 55.18 5.11 0.92 5.95 -26.72 31.76 0.63 48.27 14.14 39.02 0.98 20.52 26.05 -0.13 -31.94 113.30 107.76 55.04 12.36 9.14 27.5 2 1.64 63.14 52.72 -1.65 -0.

2.Net Profit Margin 6 4 2 0 -2 -4 -6 Mar ' 05 Mar ' 07 Mar ' 09 Net profit margin Intrepretation: The Net profit margin is decreasing continuously and it has become negative also in the year 2008 which shows increase in fixed cost of the firm and the downfall in the sales of the company.5 0 Mar ' 05 Mar ' 07 Mar ' 09 Quick ratio FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY Interpretation : The quick ratio has also decreasing trend which shows decrease of the cash of the firm in relation to its liabilities.Inventory turnover ratio 10 8 6 4 2 0 Mar ' 05 Mar ' 07 Mar ' 09 Inventory turnover ratio Interpretation: The inventory turnover ratio has increased in the year 2008 which shows efficiency of the firm in selling its products.5 1 0.Earning Per Share NEW DEHLI INSTITUTE OF MANAGEMENT Page 24 .Gross Profit Margin 15 10 5 0 Mar ' 05 Mar ' 07 Mar ' 09 Gross profit margin Interpretation: The gross profit margin has a decreasing trend which shows decrease in sales of the firm.SECURITY ANALYSIS 2.5 2 1. PROFITABILITY RATIOS : 1. 3. 3.

61 52.47 Jun ' 06 1.49 445.09 NEW DEHLI INSTITUTE OF MANAGEMENT Page 25 .54 78. LEVERAGE RATIOS :1.960.295.48 50.084.Fixed Assets Turnover Ratio 5 4 3 2 1 0 Mar ' 05 Mar ' 07 Mar ' 09 Fixed assets turnover ratio Interpretation: The fixed assets turnover ration has increasing trend till the year 2007 and after that it has a decreasing trend which shows deficiency of the firm in using its fixed assets to generate sales.96 112.4 0.6 0.Total debt/equity 1 0.74 291.71 19.15 716.556.72 170.19 27.268.393.21 2.SECURITY ANALYSIS 10 5 0 -5 -10 -15 Mar ' 05 Mar ' 07 Mar ' 09 Adjusted EPS (Rs) FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY Interpretation: The earning per share is decreasing and it has also become negative in the year 2009 which shows downfall in profit of the firm.53 1.88 Jun ' 07 3.239.00 3.8 0.07 37.11 Jun ' 04 655. Pantaloon Retail : Balance SHEET Income : Operating Income Expenses Material Consumed Manufacturing Expenses Personnel Expenses Selling Expenses Jun ' 08 5. 2.72 58.86 Jun ' 05 1.75 90.67 100.2 0 Mar ' 05 Mar ' 07 Mar ' 09 Total debt/equity Interpretation: The total debt/equity has an increasing trend which shows increase in total debt of the company with relation to the equity of the company.66 275.15 207.78 372.

77 70.71 1.28 227.14 30.00 3.33 0.81 329. Current Ratio NEW DEHLI INSTITUTE OF MANAGEMENT Page 26 .48 57.00 1.95 FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY 198.44 54.76 130.63 5.96 28.63 4.31 95.11 64.31 87.03 125.00 0.45 83.28 0.175.00 601.63 84.73 10.38 0.82 4.28 104.00 999.50 69.05 38.78 RATIO ANALYSIS LIQUITIDY RATIOS: 1.79 0.66 6.39 0.52 60.00 76.24 14.86 0.78 341.36 54.58 20.54 0.49 -0.25 4.52 3.SECURITY ANALYSIS Adminstrative Expenses Expenses Capitalised Cost of Sales Operating Profit Other Recurring Income Adjusted PBDIT Financial Expenses Depreciation Other Write offs Adjusted PBT Tax Charges Adjusted PAT Non Recurring Items Other Non Cash adjustments Reported Net Profit Earnigs Before Appropriation Equity Dividend Preference Dividend Dividend Tax Retained Earnings 527.06 119.72 0.38 50.00 209.00 0.67 0.00 89.73 0.97 -0.13 25.88 91.03 2.00 1.03 8.56 3.18 27.78 26.47 463.22 20.07 -13.58 152.20 0.54 33.00 92.21 43.68 139.94 123.12 48.41 358.34 201.52 217.87 0.55 -0.79 -0.00 4.16 0.93 36.93 494.30 0.50 0.69 0.00 0.86 53.82 0.56 19.99 -0.67 64.25 236.08 13.58 7.808.00 1.93 156.832.56 21.36 222.

then it decreased in the year 2007 and again it increased in the year 2008 which shows the increasing sales of the firm.5 0 Jun ' 04 Jun ' 06 Jun ' 08 Quick ratio Intrepretation:The quick ratio is also increasing till the year 2007 and it has started decreasing in the year 2008 which shows decrease of the cash of the firm in relation to its liabilities. 3.Quick Ratio 2.SECURITY ANALYSIS FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY 5 4 3 2 1 0 Jun ' 04 Jun ' 05 Jun ' 06 Jun ' 07 Jun ' 08 Curre… Interpretation: The current ratio is increasing till the year 2007 but it has started decreasing in the year 2008 which shows the increasing liability of the company. NEW DEHLI INSTITUTE OF MANAGEMENT Page 27 .Gross Profit Margin 8 6 4 2 0 Jun ' 04 Jun ' 06 Jun ' 08 Gross profit margin Intrepretation:The gross profit margin is almost constant for continuous three years. 2.8 3.6 3.5 1 0.5 2 1.2 4 3.Inventory Turnover Ratio 4.4 Jun ' 04 Jun ' 06 Jun ' 08 Inventory turnover ratio Interpretation: The inventory turnover ratio is decreasing continuously from the year 2004 to 2008 that shows deficiency of the firm in selling its product PROFITABILITY RATIOS :1.

5 0 Jun ' 04 Jun ' 06 Jun ' 08 Total debt/equity Intrepretation:The debt/equity has a decreasing trend which shows decrease in debt of the company 2. NEW DEHLI INSTITUTE OF MANAGEMENT Page 28 .5 2 1.5 1 0. It has decreased in the year 2008 which shows increase in fixed costs in relation with sales of the firm.SECURITY ANALYSIS FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY 2. LEVERAGE RATIOS :1.Total debt/equity 2.Fixed assets turnover ratio 6 5 4 3 2 1 0 Jun ' 04 Jun ' 06 Jun ' 08 Fixed assets turnover ratio Intrepretation :The fixed assets turnover ration has increasing trend till the year 2006 and after that it has a decreasing trend which shows deficiency of the firm in using its fixed assets to generate sales .Net Profit Margin 4 3 2 1 0 Jun ' 04 Jun ' 06 Jun ' 08 Net profit margin Intrepretation:The net profit margin has a increasing and decreasing trend.

Rises to a peak and subsequently declines. the price rises above the former peak and again declines. Then. we will try to see if they are following Head and Shoulders Pattern or not. Head and Shoulders Pattern 2. And finally. A technical analysis involves majorly following theories and tools1. Elliott Wave Theory Head and Shoulders Pattern: What does it say? It is a technical analysis term used to describe a chart formation in which a stock's price: 1.SECURITY ANALYSIS FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY TECHNICAL ANALYSIS The technical analysis involves a study of market generated data like prices and volumes to determine the future direction of price movement. 2. As we took Pantaloons Retail and Shoppers‟ Stop for our analysis. rises again. and declines once more. Dow Theory 3. but not to the second peak. 3. NEW DEHLI INSTITUTE OF MANAGEMENT Page 29 .

2008 Above chart is showing daily closing price of Pantaloons Retail for last 7 years.SECURITY ANALYSIS FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY Pantaloons Retail. it is again increasing to the peak and again falling and then again increasing but not to the peak. It went up to the level of 1869. 2003 Feb 26. 2005 Apr 7.on 20 December. 2008 Dec 4. 2002 Feb 7.72 on 28 December. 2006 Jul 13. 2005 then declined to the level of 1018.4 – a sharp decline. 2007 Feb 12. 2004 Sep 2. 2005 Dec 29. 2003 Nov 20. 2003 May 19. We have taken the data from January 2002 to February 2009. 2007 May 3. 2005 Jun 15. NEW DEHLI INSTITUTE OF MANAGEMENT Page 30 . As seen in the chart price is increasing then falling. 2004 Mar 14. It is clearly showing Head and Shoulders Pattern. 2006 and then again rising to the level of 752. 2002 Apr 25. 2002 Nov 4. So the share price trend of Pantaloons Retail is showing Head and Shoulders Pattern. 2004 Jun 2. 2007 Nov 8. 2007.We will try to analyse Head and Shoulders Pattern of Pantaloons Retail by taking the closing price of its stock in last 07 years (on a daily basis). 2004 Dec 8. 2006 then again declined to the level of just 382. The chart shows following pattern- Close 2500 2000 1500 1000 Close 500 0 Jan 21. 2002 Jul 29.20 on September 13.9 on 05 December. 2007 Aug 6. 2008 Aug 26. 2006 Jan 22. 2005 Sep 21. 2008 May 23.86 on 24 July 2006. 2006 Oct 17. After that it attained the peak of 2133. 2003 Aug 20.

2006 Jan 9. 2005 May 9. 2003 Sep 17.000. 2008 Jan 15. It does not show any direct or indirect relationship between share price and volume traded in the market as shown in the chart.000 1. that day the volume traded was 17494. 2008 Sep 10. SHOPPERS’ STOP. 2009 26-May-09 4. 2004 Jan 6. 2005 Jan 6.000 2.SECURITY ANALYSIS FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY RELATIONSHIP OF CLOSING PRICE AND VOLUME TRADED IN THE MARKET-(in last 7 years on daily basis) 2500 2000 1500 1000 500 0 Jan 21. 2006 Sep 8.500.500. For example when share prices of the company were on the peak of 2133.000. 2007 May 15. 2003 May 21. 2005 Sep 5.500. 2008 May 13. 2004 May 14.000 2. 2007 Sep 11. 2002 Sep 17. 2006.Now we will try to see the same pattern in the case of Shoppers‟ Stop. 2007 Jan 9. 2006 May 12. close 800 700 600 500 400 300 200 100 0 24/May/05 24/May/06 24/May/07 24/May/08 24/May/09 close NEW DEHLI INSTITUTE OF MANAGEMENT Page 31 .000 3.000. 2003 Jan 13.000 500. 2004 Sep 8.000 1. 2002 May 21.000 3.9 on 5 December. 2002 Jan 17.000.000 0 Close Volume The above chart shows the relationship between the closing share price of the company and volume traded in the market in last 7 years on daily basis.

4 on 27 August.1 on 17 May. In the case of Pantaloons. It says that market has always following three movements1.They are random day-to-days fluctuations. Prices went up to the level of 675. Prices are increasing first then decreasing. 2009. three and five rupees. the founder and first editor of The Wall Street Journal and co-founder of Dow Jones and Company in the late nineteenth century. Here it is also following HSP. This theory is perhaps the oldest and best know theory of technical analysis.65 on 22 January. 2006 and then again declining to the level of 95. These are minor movements. 2009 and was again on increasing path at the level of 262. Thereafter it attained peak of 730 on 06 December. again increasing and attaining peak then declining and then again rising. Dow. Now the following chart shows share price relation with volume traded in the market1800000 1600000 1400000 1200000 1000000 800000 600000 400000 200000 0 close volume THE DOW THEORY The Dow Theory was proposed by Charles H. In case of Shoppers‟ Stop also there have been daily movements ranging from two. It can vary hours-to-hours or day-to-day. NEW DEHLI INSTITUTE OF MANAGEMENT Page 32 . 2006 and then declined to the level of 415 on 08 June. They are also called “short swing” or minor movement. there are daily fluctuations in its share prices ranging from one or two rupees or sometimes less than one rupee. 2006. Daily Fluctuations.SECURITY ANALYSIS FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY The above chart shows the closing price pattern of the Shoppers‟ Stop.

SECURITY ANALYSIS FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY Sensex is also showing daily fluctuations as short swings. 2002 it was Rs.59 on 21 January. 2002.31. 27.05 on 25th May 2009. For example its share price was Rs.9 on 05 December.7. 27. 600. That was the primary movement. After one month i. On 24 May 2005.e. Same is the case of Shoppers‟ Stop. 37.95. 2002 it was Rs. 2. share price of the company was Rs. 2005).1. For the Pantaloons Retail as stated earlier the share price was Rs. And after three months i.7 and it went up to Rs. so this is representing long-term movement in the share prices. So it is depicting the secondary movements in stock prices.50 on 21st January 2002 and after four years it rises to the level of 2133. It is also called “main movement”. And after three more years the share price was Rs.e. It is the long term phenomenon. 182.e.e.it represents bull and bear phases of the market. Secondary movement is also there in the case of Pantaloons. on 22 April.These movements are corrections that may last for a few weeks to some months. So it is depicting long term primary movements in the price of the share of both the companies. After one year (25th May 2006). secondary reaction or intermediate reaction. the price of its shares was Rs. Shoppers‟ Stop is also following the same trend. And after three more years i. 2009. 349. It is called “medium swing”. on 3 rd September. 2006. On 24 th May 2005. on 24 August. Secondary Movements. 2005 it declined to Rs. More specifically it may range from 10 days to three months. 363. 3. After three months i. 390. 349. It may last from less than one year to several years.05 after 15 days (10 June. 44. primary movement or major trend. it was Rs. it was again Rs. Primary Movements. NEW DEHLI INSTITUTE OF MANAGEMENT Page 33 . on 21 February. 312.

NEW DEHLI INSTITUTE OF MANAGEMENT Page 34 .lead to retailers having state-level procurement and storage leads to Indian retailers having higher inventories.  Increased adoption of IT and shrinkage management will be a critical area. Policies not favourable. VAT has helped alleviate this a bit. Efficient replenishment practices practiced in the Indian auto and auto-component industry can be leveraged to implement efficient supply chain management techniques.retailers clearly need to augment their operations. in terms of adherence to delivery schedules and delivering the quantity ordered.SECURITY ANALYSIS FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY Recommendation  Political issues  Unavailability of inadequate infrastructure  Price band strategies  Awareness in rural market  FDI cap should be increased. facilities management and vendor development are areas which have significant gaps and proactive training is a key imperative for overcoming these. is an issue  Sales tax laws .  Poor inventory turns and stock availability measures .  Supplier maturity.  Operations of retailers and suppliers are not integrated.  Govt.  Supply chain and customer relations followed by merchandising.

stored malls.SECURITY ANALYSIS FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY Conclusion  India retail industry in India which have become modern can be seen from the fact that there are multi. shopping.  India retail industry is expanding itself most aggressively. huge shopping centres. and sprawling complexes which offer food. and entertainment all under the same roof. Indian retailers preferred means of expansion is to expand to other regions and to increase the number of their outlets in a city  India retail industry is progressing well and for this to continue retailers as well as the Indian government will have to make a combined effort. as a result a great demand for real estate is being created. NEW DEHLI INSTITUTE OF MANAGEMENT Page 35 .

nseindia.religareonline.com www.com NEW DEHLI INSTITUTE OF MANAGEMENT Page 36 .SECURITY ANALYSIS FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY sBibliography       www.com www.yahoofinance.googlefinance.bseindia.com www.com www.moneycontrol.com www.

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