Indiabulls to enter retail

Plans foray in 30 hypermarkets

After consumer finance and real estate, the Indiabulls Group is set to step into the retail business. Indiabulls Wholesale Services Ltd, a subsidiary of listed firm Indiabulls Real Estate Ltd, will set up 30 hypermarkets across as many smaller cities in the country in the next 15 to 18 months with an outlay of Rs 1,500 crore.

The first of these stores is expected to come up by March/April 2008 in one of the three cities the company is targeting simultaneously, confirmed Indiabulls director Gagan Banga.

These large-format stores, spread over 100,000 to 150,000 square feet, will be modelled on the lines of Costco Wholesale stores in the US, which operates the largest membership warehouse club chain in the world.

Costco focuses on selling products at low prices but at very high volumes. Goods are bulk-packaged and marketed primarily to large families and businesses "" it expects customers to buy 10 kg of Surf against 500 gm.

Indiabulls hypermarkets would be a B2C (business-to-consumer) format and not business-to-business format like Metro (though the wholesale word may connote a different meaning). It will bank on a low operating cost model to provide higher discounts to customers.

"The value proposition to the consumer will be in the form of discounts," added Banga.

Indiabulls plans to offer discounts of 15 to 18 per cent on maximum retail price (MRP) against 5 to 10 per cent offered by other organised retailers today.

Each small city may have just one store. "We want to connect with as many people as possible. So, instead of having ten stores in Ahmedabad, we want to just one and pass on the benefits of scale to our customers," said Banga.

These stores will be located in the heart of the city, and not on the outskirts or suburbs as most hypermarkets are located in the US or Europe.

The company is targeting Ahmedabad, Jodhpur, Indore, Kanpur, Patiala and Ludhiana, many of which have seen a spurt in per capita income (India's per capita income has doubled to $1,000 in the last five years).

"Tier-II cities are better suited for a discount model. Bulk-purchasing cannot take off in big cities as there's no space to store," said Banga.

The company has procured land in 21 of these 30 cities, where construction is on, claimed Banga. Indiabulls Wholesale will be the anchor tenant in these malls, which will also house a multiplex, and other smaller shops.

The malls will be owned by the parent, Indiabulls Real Estate Ltd, which is also developing 3.5 million sq feet of commercial space in Mumbai's mill lands.

Indiabulls' retail foray is being led by CEO Ikroop Singh, an Indian who was working with the Microsoft and has huge experience in deploying technology in retail and has done so for several wholesale companies in the US. Ikroop has put together a team of 70 to 80 people, including three expatriate executives.

Indiabulls' entry into retail comes after big groups like Reliance, Aditya Birla, and RPG and Future Group have got a headstart and are busy consolidating.