Companies & Sectors
In a change of course, Future Group bets big on e-commerce

A company whose entire growth has been based on opening newer and newer stores, is betting on cyberspace to fuel growth

Future Group has launched a new e-commerce initiative, which it expects will fetch revenues of Rs10 billion in about two years. For a company that has grown all these years by setting up more and more large-format physical stories, this is an important new initiative. Future Group CEO Kishore Biyani says he is confident of its e-commerce venture and expects gross margins of 10%-12% from it. The new initiative will require potential buyers to register for deals known as "The Battle", which will offer the cheapest mobile phones in the first round, and can be purchased a day before the offer is available to all customers.

"Through this launch from, we aim to empower Indian males between 21-44 years to indulge in aspirational purchases at unbeatable prices and guaranteed quality. We believe that this initiative will set the stage for digital retail to contribute a substantial part of our overall revenues and will possibly start a 'D-Commerce' revolution within the country," Mr Biyani said in Mumbai.

The Future Group was unsuccessful in its last e-commerce venture, but Mr Biyani said he is optimistic that he would be able to change the trend this time because he has sensed the key driver for consumers. According to popular perception, Indians prefer to see an item in demonstration before going for purchase. Biyani said, "Zamana badal gaya hain (the market has changed) and we'll try to change it further with our new model. Our last e-commerce venture was like the Silsila movie - way ahead of time. When we created the supermarket offer, we never expected that kind of demand. Secondly, the infrastructure we had was not able to cope with the demand we created. We have learnt from that mistake. Now, we are much (more) prepared."

Pantaloon's emphasis on e-commerce is interesting because it comes against the backdrop of higher sales through opening of new stores with large dollops of debt than from increase in same stores sales. Analysts say the company might be required to take additional debt to meet its repayment obligations.


SC stays Madras HC order for closure of Sterlite's plant

New Delhi: The Supreme Court today stayed the order of the Madras High Court directing Sterlite Industries to close down its copper smelting plant in Tuticorin, Tamil Nadu, reports PTI.

A bench comprising Justice R V Raveendran and H L Gokhale stayed operation of the order of the high court till 18th October, the next date of hearing.

"There would be a stay on the judgement of the high court. List it on 18th October for hearing," the bench said.

Senior advocate C A Sundaram, appearing on behalf of Sterlite Industries, submitted that if the high court order is not stayed, then it would be a great injury to the company, as the plant would have to be shut down.

Sterlite Industries, a subsidiary of UK-based Vedanta Group, had moved the apex court yesterday against the order of the high court, which on 28th September ordered shutting down of the smelting plant for not complying with environmental norms.

The company, in a special leave petition against the order, had claimed that the high court did not give it a proper hearing and ignored its submissions.

The high court had held that Sterlite's plant was within 25km of an ecologically fragile area and the company has failed to develop a green belt of 250metre width around the plant.

The order came a month after the Vedanta Group's Rs7,000 crore bauxite mining project at Niyamgiri Hills in Orissa was denied environmental clearance. The company was also issued a show-cause notice by the ministry of environment and forests for allegedly flouting green norms.

"The materials on record show that the continuing air pollution being caused by the noxious effluents discharged into the air by the respondent company is having a more devastating effect on the people living in the surroundings," the high court order said.


Street Beat: Minda Industries and Atul

These companies have strong underlying economic growth prospects, they are off the radar of most analysts and their stock prices have not already run up 

  • Auto components maker Minda Industries is growing at a steady pace

Delhi-based Minda Industries (MIL), the flagship company of the Minda group, manufactures a range of automotive components and supplies to global original equipment manufacturers (OEMs). The group has an annual turnover of Rs930 crore.

MIL designs, develops and manufactures switches for two- and three-wheelers and utility vehicles. The company also manufactures batteries for two-, three- and four-wheelers and utility vehicles. It enjoys more than 70% market share in the two- and three-wheeler segment in India.

The Automotive Component Manufacturers Association of India (ACMA) expects that the Indian auto components industry will achieve an annual turnover of $110 billion by 2020, and towards this it is likely to make an investment of $35 billion. An estimated $80 billion of the turnover is expected to come from the domestic sector and the remainder from exports.

MIL is well-positioned in this growing market. The company has eight state-of the-art facilities. Its manufacturing plants are located in Gurgaon, Pune, Hosur (Tamil Nadu), Delhi, Aurangabad and Pantnagar (Uttarakhand).
Among its clients are Yamaha, Bajaj, Hero Honda, Mahindra & Mahindra, Toyota, Tata Motors, Ford, Honda, General Motors and John Deere.

With the revival in the auto sector, MIL has improved its performance too. The company's net profit rose 50.86% to Rs22.87 crore in the year ended March 2010, from Rs15.16 crore in the previous year. Total revenues rose 31.40% to Rs598.57 crore in the March 2010 period, from Rs455.54 crore in the previous year. Net profit in the June 2010 quarter also registered a 158.66% increase to Rs10.71 crore, from Rs4.14 crore in the previous corresponding quarter. Revenues also increased to Rs195.48 crore in the June 2010 quarter, up 62.23% from Rs120.73 crore in the year-ago period. 

Sales and operating profit grew 62% and 37%, respectively, in the June 2010 quarter over that in the year-ago period. The June 2010 quarter operating profit margin stood at 10%, which is not encouraging. Based on the June quarter annualised sales and annualised operating profit, market-cap to sales was 0.50 times and market-cap to operating profit was five times. Return on equity last year was 25%. Buy the stock at around Rs330.

  • Expansion plans to help Atul achieve higher turnover

Atul Ltd operates through six business divisions, namely, agrochemicals, aromatics, bulk chemicals and intermediates, colours, pharmaceuticals and intermediates and polymers. Its colours division is the largest supplier of dyestuffs in India and the company also exports 40% of its production to 40 countries. Atul's aromatic division is one of the world's largest manufacturers of p-cresol, p-anisic, aldehyde and p-anisic alcohol, which are mainly used by flavours and fragrance, personal-care and pharmaceutical industries.

Its crop protection division is among the world's leading manufacturers of 2-D, 4-D range of chlorophenoxy derivatives with a nearly 8% market share, while its bulk chemicals and intermediaries division is a market leader with a 36% market share.

Atul manufactures over 700 products at three units in India and at the facilities of four overseas subsidiaries. It has around 2,800 employees and over 1,000 distributors. Atul also has offices in the US, the UK, Germany, China and Vietnam, servicing international clients.

The company has also made a significant contribution in the development of infrastructure in villages in Gujarat. It has already built over 1,000 houses, two schools, a medical centre, a sports complex, an open-air theatre and a community centre.

Steady growth in revenues has been a catalyst for continuous expansion. In the year ended March 2009, Atul's crop protection capacity increased by 1,500mt (metric tonnes) or 14%, fragrance intermediates capacity increased by 2,400mt (40%), chemicals intermediates capacity increased by 1,000mt (71%) and composite intermediate capacity increased by 540mt (68%) over the previous fiscal.

The company is hoping to improve its manufacturing efficiencies and bring down costs in a bid to enhance its competitiveness. On 18 June 2010, Atul had announced that its polymer division has acquired Polygrip, the country's leading rubber and polyurethane (PU)-based adhesive brand, for Rs10 crore. The acquisition will give Atul access to the rubber and PU-based adhesives market. Atul has chalked out plans for manufacturing new products. It also proposes to expand the existing capacity of para-cresol and set up facilities for the manufacture of sunscreen chemicals and an aromatic product - para-toluene sulphonic acid. 

The outlay for the new projects is pegged at Rs150 crore. The International Finance Corporation (IFC) is likely to extend a corporate loan of $15 million (Rs67.5 crore). IFC had earlier extended a loan of $16.3 million for the company's expansion project. In the June 2010 quarter, Atul's sales and operating profit grew by 26% and 5% respectively. It paid a total dividend of 40% in fiscal 2009-10.

On the basis of the June quarter annualised sales and operating profit, Atul's market-cap to sales ratio was 0.32 times and market-cap to operating profit was 3.14 times. In a market where reasonably priced stocks are hard to find, Atul is attractively priced. Return on equity in 2009-10 was 172%. Buy the stock at around Rs120.

(This article is based on secondary research. The report is for information only. None of the stock information, data and company information presented herein constitutes a recommendation or solicitation of any offer to buy or sell any securities. Investors must do their own research and due diligence before acting on any security).


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