More Retail has received an overwhelming response from its two new hypermarkets in Delhi and Hyderabad. Is organised retail finally coming of age?

More Retail, the retail chain of Aditya Birla Retail Ltd, has reported sales of Rs2.5 crore in the first five days since the inauguration of its Saroor Nagar, Hyderabad hypermarket and Rs10 crore worth of sales in the first month since the inauguration (on May 2010) from its Rohini, National Capital Region hypermarket. The company admits that it is surprised to witness such an overwhelming response for its hypermarkets and has decided to open two more hypermarkets in each place (Hyderabad and NCR).

“We have reported mind-boggling sales from our two new hypermarkets in NCR and Hyderabad. After such a great response, we have decided to come up with another two new hypermarkets in Delhi, and two more in Hyderabad, before the end of the current fiscal,” said Thomas Varghese, chief executive officer, More Retail.

The company is looking at opening 10-12 hypermarkets within the current fiscal. Each of these hypermarkets will be between 50,000 sq ft and 70,000 sq ft. More Retail will invest Rs160 crore to Rs192 crore in the current fiscal for expansion of its hypermarket chain and will spend Rs40 crore for expansion of its supermarket chain (each of which will be 2,400 square feet in size) across India.

More Retail will open one hypermarket in Nashik city in Maharashtra and one store in Mumbai within the end of this calendar year. It is also opening one hypermarket in Bengaluru in the current fiscal and two more hypermarkets in the next fiscal in the city. The company has spotted three places in Bengaluru for new hypermarkets. Each hypermarket is expected to contribute Rs5 crore-Rs6 crore worth of sales every month.  

“We invest Rs16 crore to set up one hypermarket (including stocks) and Rs40 lakh to set up a supermarket (including stocks). We are funding the expansion through debt and equity. We have enough funds tied up in terms of equity from the promoters and debt from banks. Currently we are not raising funds for expansion. We have 1:1 debt to equity ratio,” Mr Varghese told Moneylife.   

The company has completed the consolidation of its supermarket chains. It has closed around 100 stores over the past two years. Currently, it has 530 operational stores across 12 States. The company is planning to add another 100 supermarkets in the current fiscal.  

“We have completed the consolidation of supermarkets and we are looking at adding another 100 stores in the current fiscal. We want to add more stores in south India as we have a very strong presence there. We are looking at states like Kerala, Tamil Nadu and Andhra Pradesh. Currently, we have 396 stores across southern India,” explained Mr Varghese.

“By the next fiscal, we should make operating profits in the supermarkets. We target to turn EBITA (earnings before interest, tax and amortisation) positive by 2012 both at the company level (More Retail) and the supermarket level. By 2015, we will start making profit after tax,” claimed Mr Varghese.