So far the rural markets were supposed to be safe from the economic downturn. Though urban retailers were facing inclement weather, rural retailers were safe and sound. The National Rural Employment Guarantee Scheme and high support prices for key crops had improved purchasing power. The expansion in the network of rural roads had begun to fetch better prices for farm produce. Rural income, of course, is not taxed.
Signals have come that all is not well in that market. Triveni Khushali Bazaar, the rural retail arm of Triveni Engineering and Industries, one of the country’s leading sugar producers, has hit a rough patch. A media report even suggested that the company has decided to shut the business after finding no buyers for it, and has begun to hand out pink slips to its 300-odd employees.
Triveni Engineering and Industries Executive Director Tarun Sawhney admits all is not well but says there is no plan to down shutters. But he does say that a strategic rethink is urgently called for. “Retail has seen adverse business conditions both in rural and semi-urban areas. We are looking at various ways to restructure Triveni Khushali Bazaar to make it viable in the best interests of the shareholders,” says he. A decision on the future course for the retail chain is expected soon. Rural retail, Sawhney adds, contributes an insignificant part of the company’s turnover.
Sector experts say that the rural retail business has taken a turn for the worse after the sub-optimal monsoon rains in large parts of the country. Customers had begun to down-trade almost two months ago in anticipation of less than normal rainfall. “Income in rural households comes twice a year when the crops are harvested but the expenditure is spread across the year. So, there is the tendency amongst farmers to hold back expenditure at the first sign of sub-optimal rains,” says a Delhi-based industrialist who also has interests in rural retail.
The late revival in the monsoons is expected to improve the situation to some extent as the festival season approaches. The recent spell of rains is likely to leave sufficient moisture in the soil for the next crop. Rural retailers have drawn some comfort from it. The consumer electronics industry too had seen a slowdown in the rural markets in June and July, though there are signs that buying has picked up once again now.
Triveni Engineering and Industries had ambitious growth plans in rural retail. With large sugar mills in Uttar Pradesh, it planned to leverage its presence amongst farmers to get into the sector. It had parked its retail business in a fully-owned subsidiary called Triveni Retail Ventures. Businessmen usually float subsidiaries for a new business to induct a partner or raise money in the future. It runs 42 stores in Uttar Pradesh and Uttarkhand. These sell farm consumables (seed, fertiliser and so on), fast-moving consumer goods and financial services.
The portents are ominous. Triveni Engineering and Industries is not the only one to invest in rural retail. ITC, the Goderj Group and DCM Shriram Consolidated have also put in substantial money and effort in the sector. Will they come out of the current slowdown unscathed?
