11 retailers readying Rs 2000 crore IPOs

As many as 11 retail companies are gearing up to hit the primary market to raise an estimated Rs 2,000 crore in 2007.

According to Prime Database, a market-monitoring firm, the list includes Vishal Retail, Ebony Retail, Great Wholesale Club, Hidesign, Hotspot, Koutons, Landmark, Maheshwari Mega Ventures, Multiple Zones, Radhakrishna Foodland and Talwalkars.

Domestic retail story is so attractive that companies cannot give it a miss. The country's organised retail is estimated to be $7 billion and this, according to Ernst & Young, is growing at a whopping 400 per cent a year and is expected to touch the $30-billion mark by 2010. The sector contributes 40 per cent to GDP of the country.

In 2006, there were no significant IPOs barring Gitanjali Gems and Kewal Kiran Clothing which raised capital in the first half of the year. Many domestic corporates and global retailers have already announced or are planning sector forays. Year 2005 had witnessed a series of IPOs from the retail sector, with Shoppers Stop, Provogue, Piramyd Retail, Bombay Rayon Fashions and Celebrity Fashions raising money from the market.

PRIME Database Managing Director Prithvi Haldea believes that there is the primary market has still scope for more retail players. "Basically the performance of these IPOs will depend on the market conditions. Otherwise, there is a lot of interest among investors in good stocks. If the issue is good and the price is correct, collecting money is not an issue," said Haldea.

KSA Technopak Chairman Arvind Singhal says the new entrants need huge money to fund their expansion and growth strategy. "Smaller players now have to compete with bigger players entering the market. When they realise their own funds and bank credit is insufficient for expansion, they go for IPOs. The existing retail companies are giving handsome returns. That would be another driving factor," Singhal says.

Some analysts, however, caution that the new entrants to the stock market must take care of their performance as well as the accountability on capital to be raised from the market.

"Most of these firms are either family-promoted or venture capital/ private equity funded and in the second and third stages of their growth. Most of them do not focus on the quarterly performance and lack accountability on capital. People with good performance will succeed and other will get struck," said Pankaj Joshi, assistant vice-president, Singhi & Associates.

Joshi said the performance of a retail company in the stock market without having a well-structured retailing record in place may not attract investors' intention.

On the other hand, a retail company with a sound production background as well as having venture capital or private equity funding may do wonders on the bourses, he says.