The after-effects of the massive boom in engineering, real estate and raw materials of...
India’s second biggest supermarket operator is planning to start three additional megastores over the next three months at Mumbai, NCR and Hyderabad
Aditya Birla Retail Ltd (ABRL), India’s second biggest supermarket operator, is eying a total turnover of Rs1,600 crore this fiscal and hopes to turn earnings (interest, taxes, depreciation, and amortisation) or EBITA, positive by 2012.
“We are targeting revenue of Rs1,600 crore in this financial year. We are looking at 30%-35% growth,” said Thomas Varghese, chief executive, Aditya Birla Retail Ltd.
The Aditya Birla group’s multi-format store company is also ramping up its hyper-market brand ‘more.MEGASTORE’ and would soon launch three new stores at Thane, National Capital Region (NCR) and Hyderabad.
“We are completely astounded by some of our hyper markets in Bengaluru and Indore which have out-performed the competition. In the next three months, we have three more hyper markets coming up at Thane, NCR (Rohini) and Hyderabad (Saroornagar),” said Mr Varghese.
“ABRL has 15- 20 such properties in its bank where it plans to open the hyper markets. It hopes to see these properties on ground in the next 24 months. “We plan to put up 6 to 10 hyper-markets within this financial year and our aim is to put 10to 12 hyper markets every year. Currently we have five hyper markets,” he added.
Talking about the revenue-share deals, Mr Varghese said, “The trend (of revenue-share deals) will be more popular in metros where the shopping centre owners are assured of higher revenue so that the up-side is better. The owners are even protected by minimum guarantee.” ABRL has this kind of arrangement at some of its hypermarkets. However, the official declined to divulge the locations.
ABRL is planning to ramp up its total mall area to 10 million sq ft over the next five-six years. “We hope that in five-six years, we will be a company with 10 million sq ft. At the moment, we have close to 2 million sq ft,” said Mr Varghese.
As a market rally draws a flood of IPOs again, investors are likely to get burnt again, given the inherent nature of IPOs.
Initial public offers (IPO) are back in vogue in the calendar year 2010 as the market has hit a 21-month high. However, investors are still nursing huge losses from the previous IPO boom of 2007. In that year, a total of 83 IPOs were listed on the National Stock Exchange (NSE). Of these 83 IPOs, only 29 IPOs, which is just 35% of the total, have left investors’ capital intact; 54 IPOs are still quoting below the issue price; and 21 IPOs are down by more than 60%.
Among the 83 IPOs in 2007, nine were from the real-estate sector while eight were from construction/infrastructure or software/IT services. Real estate was the hottest sector of 2007. Of the nine real-estate IPOs, eight have inflicted losses. Orbit Corporation has been the only IPO from the real-estate sector to emerge as an outperformer. There were six IPOs each from the engineering and financial services sectors.
Among the major gainers was Power Finance Corporation. This stock has gained 218% from its issue price till 12 January 2010. PFC was followed by Everonn Education—formerly known as Everonn Systems (200%), real-estate firm Orbit Corporation (188%), Redington (175%) and ICRA (159%).
A major underperformer among the 83 IPOs issued in 2007 is Dhanus Technologies. This stock has slumped 89% from its issue price, whereas two IPOs from the garment sector—Indus Fila and House of Pearl Fashions Limited—plunged 82% and 84%, respectively from their issue price. The IPO of Broadcast Initiatives from the media sector has declined 81% from its issue price.
Alpa Laboratories Limited (down 77%) and Decolight Ceramics Limited (down 78%) were other major losers. Abhishek Corporation and Vishal Retail too slumped 76% each from their issue price. Vishal Retail, which once peaked to Rs1,001 in 2008, is now trading at Rs65 after defaulting on loan repayments in 2009.
This pattern of IPO boom and subsequent underperformance of IPOs has been a cyclical phenomenon. The irrational IPO boom of 1995-96, after issue pricing was freed from the clutches of the Controller of Capital Issues, led to the phenomenon of vanishing companies. Many high-profile companies, such as HCL Technologies and TV18, are still quoting below their offer prices.
The recent market rally has rekindled investor interest in IPOs. IPOs are a means for promoters to raise money at the highest possible price from the investors, backed by investment banks and the support of institutional investors. That is usually a recipe for a stock’s severe underperformance, post-listing.