Fundamental and Technical Analysis On Retail Sector

SECURITY ANALYSIS
FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY
A
PROJECT REPORT ON
FUNDAMETAL ANALYSIS AND TECHNICAL ANALYSIS

OF INDIAN ORGANISED RETAIL SECTOR WITH PANTALOONS RETAIL AND SHOPPERS STOP
NEW DELHI INSTITUTE OF MANAGEMENT

PGDM (2008-10) FINANCE
SUBMITTED BYMANAVI SANKHYAN (73) RAHUL JAIN (142) SHILPA THAKUR (154) SHWETA KAUSHAL (159) VAIBHAV TOLUMBIA (175)
NEW DEHLI INSTITUTE OF MANAGEMENT Page 1
SECURITY ANALYSIS
MUKESH AGARWAL (211)
CERTIFICATE OF APPROVAL
This is to certify that following students of Post Graduation Diploma In Management (PGDM), batch 2008-10 of NDIM has completed the project.
Fundamental and Technical Analysis of Indian Organised Retail Sector With Pantaloons Retail and Shoppers Stop With authenticity and accuracy ,under my guidance and supervision.
PROJECT GUIDE: Prof. Kumar Bijoy
MANAVI SANKHYAN (73) RAHUL JAIN (142) SHILPA THAKUR (154) SHWETA KAUSHAL (159) VAIBHAV TOLUMBIA (175) MUKESH AGARWAL (211)
SECURITY ANALYSIS
DECLARATION
We, the students of New Delhi Institute of Management hereby declare that all the information, facts and figures furnished in this report is based on our own findings and experience collected, during our project. This information has been used for purely academic purpose.
We hereby declare that the material provided in this report is original and has not been submitted anywhere for any other educational purposes.
The project report is the result of our own hard work and self belief.
NEW DEHLI INSTITUTE OF MANAGEMENT
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TABLE OF CONTENT
S.NO. TOPIC Acknowledgement Preface
CHAPTER 1
PAGE NO.
India Retail Industry Overview Fundamental Analysis Role of GDP Role of Monsoon Impact of Inflation Industry Analysis Swot Analysis BCG Matrix Porters Five Forces Industry life cycle Company Overview Pantaloon Shoppers Stop Ratio Analysis Technical Analysis Dow Theory Head and Shoulder
CHAPTER 2
CHAPTER 3
CHAPTER 4
CHAPTER 5
CHAPTER 6
- Recommendation -Bibliography
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ACKNOWLEDGEMENT
Getting this project work successfully completed required the work of many hand. Many people offered us the benefit of their expertise in getting this work done.
In particular, we are grateful to Prof. Kumar Bijoy who gave us an opportunity to work on this project. As a Project Guide, he laid his trust in us and gave us his valuable time, opinions, suggestions, encouragement and blessings.
We are also thankful to all the friends who directly or indirectly gave their support and trust on us.
Lastly, we would like to thank our family members and friends for their support and encouraging words due to which this project became a success.
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PREFACE
Retailing- is the most active and attractive sector of the last decade. While the retailing industry itself has been present through history in our country, it is only in the recent past that it has witnessed so much dynamism. It is the latest bandwagon that has witnessed hordes of players leaping onto it.
The word retailing is derived from the French word retailer, which means to cut up or break the bulk. Retailing includes all the activities involved in selling goods or services directly to final customers for personal, non business use. Retailing is the final stage in the distribution process.
Indian retail industry is going through a transition phase. Most of the retailing in our country is still in the unorganized sector. The spread out of the retails in other developed countries (e.g.- USA) and India shows a wide gap between the two countries. Though retailing in India is undergoing an exponential growth, the road ahead is full of challenges.
The growth of scope in the Indian retail market is mainly due to the change in the consumers behaviour. For the new generation have preference towards luxury commodities which have been due to the strong increase in income, changing lifestyle, and demographic patterns which are favourable.
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INDIAN RETAIL INDUSTRY: AN OVERVIEW
India retail industry is the largest industry in India, with an employment of around 8% and contributing to over 10% of the country's GDP. Retail industry in India is expected to rise 25% yearly being driven by strong income growth, changing lifestyles, and favourable demographic patterns. It is expected that by 2016 modern retail industry in India will be worth US$ 175- 200 billion. India retail industry is one of the fastest growing industries. Average growth rate of 7-8% is expected in the industry of retail in India by growth in consumerism in urban areas, rising incomes, and a steep rise in rural consumption. It has further been predicted that the retailing industry in India will amount to US$ 21.5 billion by 2010 from the current size of US$ 7.5 billion. Shopping in India have witnessed a revolution with the change in the consumer buying behaviour and the whole format of shopping also altering. Industry of retail in India which have become modern can be seen from the fact that there are multi- stored malls, huge shopping centres, and sprawling complexes which offer food, shopping, and entertainment all under the same roof. India retail industry is expanding itself most aggressively, as a result a great demand for real estate is being created. Indian retailers preferred means of expansion is to expand to other regions and to increase the number of their outlets in a city. It is expected that by 2010, India may have 600 new shopping centres. In the Indian retailing industry, food is the most dominating sector and is growing at a rate of 9% annually. The branded food industry is trying to enter the India retail industry and convert Indian consumers to branded food. Since at present 60% of the Indian grocery basket consists of non- branded items. India retail industry is progressing well and for this to continue retailers as well as the Indian government will have to make a combined effort.
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The above chart clarifies that by 2025 the major opportunity resides in the crme-de-lacrme eight cities and top 27 cities providing the market players to sweep up their shares in almost 40% of the Indian retail market. The population in these cities is projected to almost double by 2025 and with the globalisation sweeping everyone off their feet, there would be a scope for all types of formats and sub-categories to exist. The initial expansion undertaken by players was limited to the metros but gradually they are making a foray into other large cities to gain from the first mover advantage and building customer loyalty.
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FUNDAMENTAL ANALYSIS
The above figure shows the growth of retail sector in comparison with growth in foodbeverages segment and clothing segment. It shows that there has been simultaneous increase in both of these sectors with the growth of retail sector as whole in last 10 years. With the liberalization and growth of the Indian economy since the early 1990s, the Indian customer witnessed an increasing exposure to new domestic and foreign products through different media, such as television and the Internet. Apart from this, social changes also had a positive impact, leading to the rapid growth in the retailing industry. Increased availability of retail space, rapid urbanization, and qualified manpower also boosted the growth of the organized retailing sector. The foreign direct investment in the India market amounted to US$12.5 billion and surpassed portfolio investment of US$ 6.8 billion. This is also causing the growth of retail sector because most of the foreign organized retailers want to enter Indian economy. Farm credit target of Rs.225, 000 crore for 2007-08 has been set with an addition of 50 lakh new farmers to the banking system. 35 projects have been completed in 2006-07 and
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additional irrigation potential of 900,000 hectares to be created and training of farmers arranged. This is also pushing retail sector upward because agriculture and retailing are
directly related to each other. Whenever there is increase in agriculture production, retail sector will also grow accordingly. Retailing is going through a transition phase not only in India but the world over. For a long time, the corner grocery store was the only choice available to the consumer, especially in the urban areas. This is slowly giving way to international formats of retailing. The traditional food and grocery segment has seen the emergence of supermarkets/grocery chains and fast-food chains. However, the boom in retailing has been confined primarily to the urban markets in the country. Even there, large chunks are yet to feel the impact of organised retailing. There are two primary reasons for this. First, the modern retailer is yet to feel the saturation' effect in the urban market and has, therefore, probably not looked at the other markets as seriously. Second, the modern retailing trend, despite its cost-effectiveness, has come to be identified with lifestyles.
ROLE OF GDP- Retail sector contributes nearly 12% of total GDP and around 8% of employment. The retail industry in India amounted to Rs 10,000 billion. The organized retail market in India out of this total market accounted for Rs 360 billion which is about 4.5% of the total revenues. Indian retail is expected to grow 25 per cent annually. Modern retail in India could be worth US$ 175-200 billion by 2016. The Food Retail Industry in India dominates the shopping basket. The Mobile phone Retail Industry in India is already a US$ 16.7 billion business, growing at over 20 per cent per year. It is expected that by 2016 modern retail industry in India will be worth US$ 175- 200 billion. India retail industry is one of the fastest growing industries with revenue expected in 2007 to amount US$ 320 billion and is increasing at a rate of 5% yearly. A further increase of 7-8% is expected in the industry of retail in India by growth in consumerism in urban areas, rising incomes, and a steep rise in rural consumption. It has further been predicted that the retailing industry in India will amount to US$ 21.5 billion by 2010 from the current size of US$ 7.5 billion.
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Service sector contributes most to the GDP. Retailing is the part of service sector and it is also related to the agriculture sector. Service sector contributes around 55% of total GDP and agriculture sector contributes around 20%. After independence it was the agricultural
sector that contributed the most to the India GDP but in recent years it has been the services sector, which has contributed the most. Apart from that there are under construction at present around 325 departmental stores, 300 new malls, and 1500 supermarkets. This proves that there is a tremendous scope for growth in the Indian retail market. ROLE OF MONSOON- In a nation where 60% of farmland depends on rains, and where farms provide livelihood to more than 60% of the population, monsoon plays significant role in overall economy. The impact of a failed or inadequate monsoon is multifold. It causes retail spends to dip and the prices of commodities to move upward, leaving consumers with little money to spend on capital goods - including housing. Retailers curtail their expansion plans due to lowered revenue growth perceptions, affecting the retail real estate sector to feel the heat. Similar effects will be seen on the leisure and entertainment sector - a not inconsiderable consumer of real estate. Other than this a vast segment of marginal farmers are rendered jobless and tend to migrate to urban areas for subsistence. These migrations add to the burden of already strained civic infrastructure of these cities. As stated earlier agriculture is very much related to the retail sector. Agriculture production will lower down if monsoon is unfavourable in a particular year and that will affect retail sector adversely. Lower agriculture production will lead to the diminishing supply of basic necessities that will push the price upward and will hit the overall sector adversely. IMPACT OF INFLATION-Inflation is felt everywhere, retail was among the first sectors to be hit. The Indian potential has not been met, and inflation is only partly to be blamed. Retailers are discovering more about the Indian customer, and are going back to the drawing board to sketch new plans. India's retail industry -- including everything from carrots to cars - clocks around $350 billion a year in sales. That figure had been expected to double in the next seven years. But now, some retail executives are taking a closer look. Growth is less than hoped for. And thousands of new shops have sprouted in the past few years, so there are more players competing for the same consumer. "I was an eternal optimist; now I have become a realist," says Kishore Biyani, chairman of Pantaloon Retail India Ltd., India's largest retailer by sales, which has revamped
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its expansion plans as it discovered more about Indian consumers. "Everybody has miscalculated."
Most retailers say they are grappling with the same problems: rising costs and fewer buyers. In the early days of the boom, retail rents and salaries soared, though recently they have started to come down a bit. Many outlets discovered that consumers didn't really want their products. And unlike shoppers in Asia's other booming economy, China, Indians are rarely willing to pay three to 10 times more for an international brand than for its domestic equivalent. The average Chinese consumer has more disposable income, and more than a decade extra of experience with international brands. Nevertheless, India still generates excitement among some investors. Earlier this month, both British retailer Tesco PLC and Vornado Realty Trust, one of the largest mall developers in the U.S., announced plans to enter the country with local partners Shoppers Stop Ltd., one of the first companies in India to attempt modern clothing and houseware chains, has posted net losses for the past two quarters. Some companies that still have big plans, including Indiabulls Financial Services Ltd. and Aditya Birla Group, have changed tack, closing some stores and making management changes.
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INDUSTRIAL ANALYSIS
Industrial analysis of any industry may include SWOT analysis, BCG (Boston Consulting Group) Matrix Analysis, Five Forces Model and Industrial Life Cycle. Firstly SWOT analysis has prime significance in understanding the sector.
SWOT ANALYSIS OF RETAIL SECTOR SWOT stands for Strengths, Weaknesses, Opportunities and Threats. This analysis gives the overall picture of any industry. Following is the SWOT analysis of Indian retail industrySTRENGTHS Retail is the most booming sector in the Indian economy. Biggest players of the world are going to enter the industry soon. Government policies are becoming more favourable towards retail sector and emerging technologies are facilitating retailing operations. There is an increasing share of young population in total population of India. WEAKNESSES Lack of trained workforce Low skill level of retailing management Logistics and supply chain bottlenecks Vendor frauds, thefts, shoplifting and inaccuracy in supervision and administration. Lack of proper infrastructure and distribution channels in the country resulting in inefficient processes.
OPPORTUNITIES Retail is one of the most fragmented sector in Indian consisting only 2% of entire retailing business in organised sector. The sector is yet to be excelled.
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Rising income of the consumers and improvement in infrastructure are enlarging consumer market and accelerating the Retail sector is likely to produce two million jobs in next 3-4 years. Constant changes in consumer preferences and evolution of new retail formats. Government is considering the introduction of multi-brand speciality formats
THREATS Cost of business operation very high in India Organised retail sector has to pay huge taxes regarding their operations. GDP is not allowed in organised retail sector in India Strong competition from unorganised 12 million mom-n-pop stores. Political opposition against organised retail sector Retail majors are under serious pressure to improve their supply chain systems and distribution channels and reach the level of quality and service desired by consumers.
BCG Matrix- The BCG Matrix method is the most well-known portfolio management
tool. It is based on product life cycle theory. It was developed in the early 70s by the Boston Consulting Group. The BCG Matrix can be used to determine what priorities should be given in the product portfolio of a business unit. To ensure long-term value creation, a company should have a portfolio of products that contains both high-growth products in need of cash inputs and low-growth products that generate a lot of cash. The Boston Consulting Group Matrix has 2 dimensions: market share and market growth. The basic idea behind it is: if a product has a bigger market share, or if the product's market grows faster, it is better for the company.
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Stars (high growth, high market share) Stars are using large amounts of cash. Stars are leaders in the business. Therefore they should also generate large amounts of cash. Stars are frequently roughly in balance on net cash flow. However if needed any attempt should be made to hold your market share in Stars, because the rewards will be Cash Cows if market share is kept. Cash Cows (low growth, high market share) Profits and cash generation should be high. Because of the low growth, investments which are needed should be low. Cash Cows are often the stars of yesterday and they are the foundation of a company. Dogs (low growth, low market share) Avoid and minimize the number of Dogs in a company. Watch out for expensive rescue plans. Dogs must deliver cash, otherwise they must be liquidated.
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Question Marks (high growth, low market share) Question Marks have the worst cash characteristics of all, because they have high cash demands and generate low returns, because of their low market share. If the market share remains unchanged, Question Marks will simply absorb great amounts of cash. Either invest heavily, or sell off, or invest nothing and generate any cash that you can. Increase market share or deliver cash.
SO WHERE DOES THE RETAIL SECTRO LIE? Organised retail sector in India has a very high growth rate. As repeatedly stated earlier it is the one of the faster growing sector in India. It is increasing at a very rapid pace. So the sector has a very high growth rate on one side On another side, if we compare organised retail sector to unorganised retail sector then we will realize that organised retail sector has only 4% of total retail sector. That means that
unorganised retail sector enjoy around 96% of total retailing in India. Also unorganised or traditional retailing is the biggest threat to the organised sector. So in comparison with unorganised retailing, share of organised retailing is very low. So total market share of organised retail is not very high. That said, with high growth rate and comparatively low market share, organised retail sector comes under QUESTION MARK.
WHERE RETAIL PLAYERS STAND IN BCG MATRIX

Now we will try to put some of the major retail players in the BCG Matrix. Some of the players are Future Group, Pantaloons, Shoppers Stop, Archies, Bata India Ltd, Big Bazaar, Crossword, Ebony Retail Holdings Ltd., Food Bazaar, MTR Foods Ltd., Music World Entertainment Ltd., Pantaloon Retail India Ltd., Shoppers Stop, Style SPA Furniture Ltd, Subhiksha, Titan Industries, Lifestyle, etc. But the market leaders are Future Group, Pantaloons Retail, Shoppers Stop, Lifestyle, Trent Retail-Westside etc. Future Group and Pantaloons Retail can be included under the STA
SECURITY ANALYSIS
PORTER FIVE FORCES MODEL :
Industry Competitors Rivalry among existing firms: Competition hotting up with many big corporate houses making a bee-line for foraying into the industry with real big investments. With the FDI restrictions on pure retailing expected to be removed, entry of global players will intensify the rivalry. Small size stores Kirana Stores, Speciality Stores, are experiencing a lot of competition from organized players. Not many barriers exist for entering into unorganized retailing but to make a foray into organized retailing is becoming a tough nut to crack. Organized retailing is both capital as well as labour intensive requiring big ticket investments to enter the sector. With intensifying rivalry in each vertical, brands have become the important product differentiator. Retailers have to tryout newer formats and constantly generate better ideas to maintain high footfalls. In one of the most exciting and rapidly growing sector in India, rivalry is bound to be intense with competitors adopting aggressive growth strategies and primarily eyeing the top cities. Potential Entrants Threat of new entrants: For small size retailers the entry of organized players poses a major threat to their existence.
SECURITY ANALYSIS
The economies of scale with which the major corporate houses are intending to operate intensify the threat. As the organized retailing is both capital and labour intensive entry is not that easy. Switching costs for the customer is virtually Nil, hence the rivalry and threat of new entrants in the industry is high. Retailers have to look for creating brand loyalty to ensure sustained footfalls. Supply chain management is a key area in modern retailing. With the Indian logistics sector getting better and more efficient by the day, every retailer will have access to good services and would be able to compete effectively. Technology is continuously getting cheaper and accessible. The use of sophisticated techniques will create a vast difference in the bottomlines of the companies. The current government regulation restricts the entry of global players, reducing the threat for Indian retailers and providing an opportunity to make a stronghold in the market. Substitutes Threat of substitutes: Unorganized retailing is the substitute for the organized format. As it is virtually impossible (at least at the current scenario) for the organized retailers to be present as the Kirana stores are. Due to the economies of scale, organized retailers are able to provide better quality products at lower prices than their unorganized peers. Due to the reasons like proximity, credit facility, home delivery and personal attention, buyers might still want to shop at the nearby Kirana store rather than going to a far-off supermarket. Catalogue, direct or online shopping hasnt acquired much pace in India and thus cant be treated as a threat to retailing. Suppliers Bargaining power of suppliers: In unorganized retailing, suppliers have an upper hand in the bargaining power, whereas in organized format, retailers dominate the terms primarily due to the economies of scale. The focus is rapidly changing from the brand of products to the brand of retailers and the differentiating services that they provide. Many a supplier work on an outsourcing basis, just manufacturing the product and branding it for the retailer, thus not having a brand distinction of their own. There are instances where suppliers have integrated forward by launching their own stores and the future possibilities of this nature cant be ruled out. As many a product are outsourced for manufacturing by the retailers rather than producing them in-house, the quality and service of the supplier plays an important role.
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The switching cost for suppliers is not very high. As all the verticals of retailing are growing rapidly, it is easy for suppliers to find new customers. Customers Bargaining power of customers:
Buyers do have some bargaining power in unorganized format but due to product standardization and fixed pricing, buyers virtually have no bargaining power in organized format retailing. Also the volume and ticket size for each customer is low. Buyers of the retailing industry dont pose any sort of threat pertaining to the backward or forward integration into the industry. Buyers virtually enjoy Nil switching cost and thus the role of quality and service is immense to retain the customer. Loyalty programs help in sustaining relationships.
Industry Life Cycle
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Like other living creatures, industry also has its circle of life. The industry lifecycle imitates the human lifecycle. The stages of industry lifecycle include fragmentation, shake-out, maturity and decline (Kotler 2003). These stages will be described in the followings section. FRAGMENTATIONSTAGE-OR INRODUCTION STAGE Fragmentation is the first stage of the new industry. This is the stage when the new industry develops the business. At this stage, the new industry normally arises when an entrepreneur overcomes the twin problems of innovation and invention, and works out how to bring the new products or services into the market. Looking at the growth in the Indian retail sector we can not say that retail industry comes under this stage. SHAKE-OUT STAGE OR GROWTH STAGE Shake-out is the second stage of the industry lifecycle. It is the stage at which a new industry emerges. During the shake-out stage, competitors start to realise business opportunities in the emerging industry. The value of the industry also quickly rises. Retail industry is the emerging industry in India. It contributes nearly 10% of total GDP and provides huge employment opportunities. But organised retail is still around 4% of overall retailing business that is why it is emerging. So retail industry in India comes under shake-out stage.
Investment in retail is increasing and competition is also growing because many retail players want to enter the Indian market. MATURITY Maturity is the third stage in the industry lifecycle. Maturity is a stage at which the efficiencies of the dominant business model give these organisations competitive advantage over competition. The competition in the industry is rather aggressive because there are many competitors and product substitutes. Price, competition, and cooperation take on a complex form .Some companies may shift some of the production overseas in order to gain competitive advantage. Retail in India is still in its nascent stage. It does not come under maturity stage. DECLINE Decline is the final stage of the industry lifecycle. Decline is a stage during which a war of slow destruction between businesses may develop and those with heavy bureaucracies may fail. In addition, the demand in the market may be fully satisfied or suppliers may be running out. In the stage of decline, some companies may leave the industry if there is no demand for the products or services they provide, or they may develop new products or services that meet the demand in the market. In such cases, this will create a new industry. Retail nowhere falls under this stage.
SECURITY ANALYSIS
COMPANIES OVERVIEWWe have taken two companies for our analysis. The first one is Pantaloons Retail Pvt. Ltd. who is the market leader in Indian organised retail segment. The company is headed by Mr. Kishore Biyani. The other company is Shoppers Stop. PANTALOONS RETAIL PRIVATE LIMITED- Pantaloon Retail (India) Limited, is Indias leading retailer that operates multiple retail formats in both the value and lifestyle segment of the Indian consumer market. Headquartered in Mumbai (Bombay), the company operates over 12 million square feet of retail space, has over 1000 stores across 71 cities in India and employs over 30,000people. The companys leading formats include Pantaloons, a chain of fashion outlets, Big Bazaar, a uniquely Indian hypermarket chain, Food Bazaar, a supermarket chain, blends the look, touch and feel of Indian bazaars with aspects of modern retail like choice, convenience and quality and Central, a chain of seamless destination malls. Some of its other formats include Brand Factory, Blue Sky, aLL, Top 10 and Star and Sitara. The company also operates an online portal, futurebazaar.com.
A subsidiary company, Home Solutions Retail (India) Limited, operates Home Town, a large-format home solutions store, Collection i, selling home furniture products and eZone focussed on catering to the consumer electronics segment. Company Timeline 1987 Company incorporated as Manz Wear Private Limited. Launch of Pantaloons trouser, Indias first trouser brand. 1992 Initial Public Offer (IPO) was made in the month of May. 1997 Pantaloon Indias family store was launched in Kolkatta. 2001 Big Bazaar, Is se Sasta aur accha Khai Nahi Indias first hypermarket chain. Food Bazaar, the supermarket chain is launched. Future Group crosses $1 Billion turnover mark.
SHOPPERS STOP- Shoppers' Stop Limited is a chain of Retail stores in India owned
by K. Raheja Corp. The Company houses a host of many international & domestic brands across various categories such as apparel, accessories, cosmetics, home & kitchenware as also its own private brands. The foundation of Shopper's Stop was laid on October 27, 1991 by the K. Raheja Corp. It started in 1991 with its first store in Andheri, Mumbai.group of companies. Being
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amongst India's biggest hospitality and real estate players, the Group crossed yet another milestone with its lifestyle venture - Shopper's Stop. With a Gross Retail Turnover of Rs. 8996 million, Shopper's Stop has become the highest benchmark for the Indian Retail Industry. From its inception, Shopper's Stop has progressed from being a single brand shop to becoming a Fashion & Lifestyle store for the family. Today, Shopper's Stop is a household name, known for its superior quality products, services and above all, for providing a complete shopping experience. With an immense amount of expertise and credibility, Shoppers Stop has become the highest benchmark for the Indian retail industry. In fact, the companys continuing expansion plans aim to help Shoppers Stop meet the challenges of the retail industry in an even better manner than it does today. In 2007, Signed a 50:50 Joint Venture with the Nuance Group for Airport Retailing Signed an MOU with the Home Retail Group of UK to enter into a franchise arrangement for the Argos formats of catalogue & internet retailing.
COMPANY FINANCIAL ANALYSIS SHOPPERS STOP : Investor return

Income : Operating Income Expenses Material Consumed Manufacturing Expenses Personnel Expenses Selling Expenses Adminstrative Expenses Expenses Capitalised Cost of Sales Operating Profit Other Recurring Income Mar ' 09 1,327.51 Mar ' 08 1,146.01 Mar ' 07 838.69 Mar ' 06 619.68 Mar ' 05 510.65
811.99
696.86
510.82
376.36
343.31
14.91 87.11 111.96
12.49 78.14 99.65
10.85 58.37 67.40
6.96 39.91 50.90
5.68 28.50 28.77
121.91 0.00 1,147.87 179.64
100.28 0.00 987.42 158.59
59.75 0.00 707.18 131.51
45.62 0.00 519.73 99.95
35.68 0.00 441.94 68.71
7.95
8.36
10.95
7.20
0.43
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Adjusted PBDIT Financial Expenses Depreciation Adjusted PBT Tax Charges Adjusted PAT Non Recurring Items Other Non Cash adjustments Reported Net Profit Earnigs Before Appropriation Equity Dividend Dividend Tax Retained Earnings

187.59 155.64 63.13 -31.18 5.89 -37.07 166.94 113.11 39.27 14.56 6.28 8.28 142.46 68.01 25.63 48.82 22.52 26.30 107.14 52.94 13.94 40.27 13.14 27.13 69.14 39.50 8.98 20.66 1.71 18.95
-26.65
-0.05
-0.11
-0.02
0.08
0.00 -63.72
-1.27 6.97
0.00 26.20
0.00 27.11
0.00 19.03
-14.76 0.00 0.00 -14.76
55.42 5.23 0.89 49.31
55.88 5.22 0.89 49.77
36.92 5.16 0.72 31.04
12.91 2.74 0.36 9.81
RATIO ANALYSIS LIQUIDITY RATIOS: 1. Current Ratio

3.5 3 2.5 2 1.5 1 0.5 0 Mar ' 05 Mar ' 07 Mar ' 09
Current ratio
Interpretation: The current ratio has a decreasing trend which shows increase in liabilities of the company
2.Quick Ratio
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2.5 2 1.5 1 0.5 0 Mar ' 05 Mar ' 07 Mar ' 09
Quick ratio
Interpretation : The quick ratio has also decreasing trend which shows decrease of the cash of the firm in relation to its liabilities.
3.Inventory turnover ratio

10 8 6 4 2 0 Mar ' 05 Mar ' 07 Mar ' 09
Inventory turnover ratio
Interpretation: The inventory turnover ratio has increased in the year 2008 which shows efficiency of the firm in selling its products.
PROFITABILITY RATIOS : 1.Gross Profit Margin

15 10 5 0 Mar ' 05 Mar ' 07 Mar ' 09
Gross profit margin
Interpretation: The gross profit margin has a decreasing trend which shows decrease in sales of the firm.
2.Net Profit Margin

6 4 2 0 -2 -4 -6 Mar ' 05 Mar ' 07 Mar ' 09
Net profit margin
Intrepretation: The Net profit margin is decreasing continuously and it has become negative also in the year 2008 which shows increase in fixed cost of the firm and the downfall in the sales of the company.
3.Earning Per Share
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10 5 0 -5 -10 -15 Mar ' 05 Mar ' 07 Mar ' 09
Adjusted EPS (Rs)
Interpretation: The earning per

share is decreasing and it has also become negative in the year 2009 which shows downfall in profit of the firm.
LEVERAGE RATIOS :1.Total debt/equity

1 0.8 0.6 0.4 0.2 0 Mar ' 05 Mar ' 07 Mar ' 09
Total debt/equity
Interpretation: The total debt/equity has an increasing trend which shows increase in total debt of the company with relation to the equity of the company.
2.Fixed Assets Turnover Ratio

5 4 3 2 1 0 Mar ' 05 Mar ' 07 Mar ' 09
Fixed assets turnover ratio
Interpretation: The fixed assets turnover ration has increasing trend till the year 2007 and after that it has a decreasing trend which shows deficiency of the firm in using its fixed assets to generate sales.
Pantaloon Retail : Balance SHEET

Income : Operating Income Expenses Material Consumed Manufacturing Expenses Personnel Expenses Selling Expenses Jun ' 08 5,295.88 Jun ' 07 3,393.47 Jun ' 06 1,960.86 Jun ' 05 1,084.11 Jun ' 04 655.00
3,556.21
2,239.53
1,268.15
716.49
445.67
100.66 275.78 372.54
78.15 207.74 291.72
58.96 112.72 170.07
37.48 50.75 90.71
19.19 27.61 52.09
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Adminstrative Expenses Expenses Capitalised Cost of Sales Operating Profit Other Recurring Income Adjusted PBDIT Financial Expenses Depreciation Other Write offs Adjusted PBT Tax Charges Adjusted PAT Non Recurring Items Other Non Cash adjustments Reported Net Profit Earnigs Before Appropriation Equity Dividend Preference Dividend Dividend Tax Retained Earnings 527.28 0.00 4,832.47 463.41 358.38 0.00 3,175.52 217.95

198.69 0.00 1,808.58 152.28 104.20 0.00 999.63 84.48 57.30 0.00 601.86 53.14
30.93 494.34 201.45 83.39 0.00 209.50 69.68 139.82
4.36 222.31 95.93 36.86 0.00 89.52 60.96 28.56
3.93 156.21 43.22 20.82 0.00 92.18 27.67 64.52
3.31 87.78 26.08 13.33 0.12 48.24 14.54 33.71
1.44 54.58 20.03 8.79 0.13 25.63 4.56 21.07
-13.88
91.49
-0.25
4.79
-0.73
0.03 125.97
-0.06 119.99
-0.11 64.16
0.05 38.55
-0.56 19.78
341.73 10.67 0.00 1.81 329.25
236.58 7.54 0.00 1.28 227.76
130.66 6.72 0.00 0.94 123.00
76.63 5.50 0.00 0.77 70.36
54.03 2.87 0.00 0.38 50.78
RATIO ANALYSIS
LIQUITIDY RATIOS: 1. Current Ratio
Page 26
SECURITY ANALYSIS
5 4 3 2 1 0 Jun ' 04 Jun ' 05 Jun ' 06 Jun ' 07 Jun ' 08
Curre
Interpretation: The current ratio is increasing till the year 2007 but it has started decreasing in the year 2008 which shows the increasing liability of the company.
2.Quick Ratio
2.5 2 1.5 1 0.5 0 Jun ' 04 Jun ' 06 Jun ' 08
Quick ratio
Intrepretation:The quick ratio is also increasing till the year 2007 and it has started decreasing in the year 2008 which shows decrease of the cash of the firm in relation to its liabilities.
3.Inventory Turnover Ratio

4.2 4 3.8 3.6 3.4 Jun ' 04 Jun ' 06 Jun ' 08
Inventory turnover ratio
Interpretation: The inventory turnover ratio is decreasing continuously from the year 2004 to 2008 that shows deficiency of the firm in selling its product
PROFITABILITY RATIOS :1.Gross Profit Margin

8 6 4 2 0 Jun ' 04 Jun ' 06 Jun ' 08
Gross profit margin
Intrepretation:The gross profit margin is almost constant for continuous three years, then it decreased in the year 2007 and again it increased in the year 2008 which shows the increasing sales of the firm.
Page 27
SECURITY ANALYSIS
2.Net Profit Margin

4 3 2 1 0 Jun ' 04 Jun ' 06 Jun ' 08
Net profit margin
Intrepretation:The net profit margin has a increasing and decreasing trend. It has decreased in the year 2008 which shows increase in fixed costs in relation with sales of the firm.
LEVERAGE RATIOS :1.Total debt/equity

2.5 2 1.5 1 0.5 0 Jun ' 04 Jun ' 06 Jun ' 08
Total debt/equity
Intrepretation:The debt/equity has a decreasing trend which shows decrease in debt of the company
2.Fixed assets turnover ratio

6 5 4 3 2 1 0 Jun ' 04 Jun ' 06 Jun ' 08
Fixed assets turnover ratio
Intrepretation :The fixed assets turnover ration has increasing trend till the year 2006 and after that it has a decreasing trend which shows deficiency of the firm in using its fixed assets to generate sales
Page 28
SECURITY ANALYSIS
TECHNICAL ANALYSIS
The technical analysis involves a study of market generated data like prices and volumes to determine the future direction of price movement. A technical analysis involves majorly following theories and tools1. Head and Shoulders Pattern 2. Dow Theory 3. Elliott Wave Theory Head and Shoulders Pattern: What does it say?
It is a technical analysis term used to describe a chart formation in which a stock's price: 1. Rises to a peak and subsequently declines. 2. Then, the price rises above the former peak and again declines. 3. And finally, rises again, but not to the second peak, and declines once more.
As we took Pantaloons Retail and Shoppers Stop for our analysis, we will try to see if they are following Head and Shoulders Pattern or not.
Page 29
SECURITY ANALYSIS
Pantaloons Retail- We will try to analyse Head and Shoulders Pattern of Pantaloons Retail by taking the closing price of its stock in last 07 years (on a daily basis). We have taken the data from January 2002 to February 2009. The chart shows following pattern-
Close
2500
2000
1500
1000
Close
500
0 Jan 21, 2002 Apr 25, 2002 Jul 29, 2002 Nov 4, 2002 Feb 7, 2003 May 19, 2003 Aug 20, 2003 Nov 20, 2003 Feb 26, 2004 Jun 2, 2004 Sep 2, 2004 Dec 8, 2004 Mar 14, 2005 Jun 15, 2005 Sep 21, 2005 Dec 29, 2005 Apr 7, 2006 Jul 13, 2006 Oct 17, 2006 Jan 22, 2007 May 3, 2007 Aug 6, 2007 Nov 8, 2007 Feb 12, 2008 May 23, 2008 Aug 26, 2008 Dec 4, 2008
Above chart is showing daily closing price of Pantaloons Retail for last 7 years. It is clearly showing Head and Shoulders Pattern. As seen in the chart price is increasing then falling, it is again increasing to the peak and again falling and then again increasing but not to the peak. It went up to the level of 1869.20 on September 13, 2005 then declined to the level of 1018.86 on 24 July 2006. After that it attained the peak of 2133.9 on 05 December, 2006 then again declined to the level of just 382.4 a sharp decline- on 20 December, 2006 and then again rising to the level of 752.72 on 28 December, 2007. So the share price trend of Pantaloons Retail is showing Head and Shoulders Pattern.
Page 30
SECURITY ANALYSIS
RELATIONSHIP OF CLOSING PRICE AND VOLUME TRADED IN THE MARKET-(in last 7 years on daily basis)
2500 2000 1500 1000 500 0 Jan 21, 2002 May 21, 2002 Sep 17, 2002 Jan 17, 2003 May 21, 2003 Sep 17, 2003 Jan 13, 2004 May 14, 2004 Sep 8, 2004 Jan 6, 2005 May 9, 2005 Sep 5, 2005 Jan 6, 2006 May 12, 2006 Sep 8, 2006 Jan 9, 2007 May 15, 2007 Sep 11, 2007 Jan 9, 2008 May 13, 2008 Sep 10, 2008 Jan 15, 2009 26-May-09 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 Close Volume
The above chart shows the relationship between the closing share price of the company and volume traded in the market in last 7 years on daily basis. It does not show any direct or indirect relationship between share price and volume traded in the market as shown in the chart. For example when share prices of the company were on the peak of 2133.9 on 5 December, 2006, that day the volume traded was 17494. SHOPPERS STOP- Now we will try to see the same pattern in the case of Shoppers Stop.
close
800 700 600 500 400 300 200 100 0 24/May/05 24/May/06 24/May/07 24/May/08 24/May/09 close
Page 31
SECURITY ANALYSIS
The above chart shows the closing price pattern of the Shoppers Stop. Here it is also following HSP. Prices are increasing first then decreasing; again increasing and attaining peak then declining and then again rising. Prices went up to the level of 675.1 on 17 May, 2006 and then declined to the level of 415 on 08 June, 2006. Thereafter it attained peak of 730 on 06 December, 2006 and then again declining to the level of 95.65 on 22 January, 2009 and was again on increasing path at the level of 262.4 on 27 August, 2009. Now the following chart shows share price relation with volume traded in the market1800000 1600000 1400000 1200000 1000000 800000 600000 400000 200000 0
close volume
THE DOW THEORY
The Dow Theory was proposed by Charles H. Dow, the founder and first editor of The Wall Street Journal and co-founder of Dow Jones and Company in the late nineteenth century. This theory is perhaps the oldest and best know theory of technical analysis. It says that market has always following three movements1. Daily Fluctuations- They are random day-to-days fluctuations. They are also called short swing or minor movement. It can vary hours-to-hours or day-to-day. In the case of Pantaloons, there are daily fluctuations in its share prices ranging from one or two rupees or sometimes less than one rupee. These are minor movements. In case of Shoppers Stop also there have been daily movements ranging from two, three and five rupees.
SECURITY ANALYSIS
Sensex is also showing daily fluctuations as short swings. 2. Secondary Movements- These movements are corrections that may last for a few weeks to some months. More specifically it may range from 10 days to three months. It is called medium swing, secondary reaction or intermediate reaction. Secondary movement is also there in the case of Pantaloons. For example its share price was Rs. 27.59 on 21 January, 2002. After one month i.e. on 21 February, 2002 it was Rs. 37.31. And after three months i.e. on 22 April, 2002 it was Rs. 44.95. Same is the case of Shoppers Stop. On 24 May 2005, share price of the company was Rs. 349.7 and it went up to Rs. 390.05 after 15 days (10 June, 2005). After three months i.e. on 24 August, 2005 it declined to Rs. 363. So it is depicting the secondary movements in stock prices. 3. Primary Movements- it represents bull and bear phases of the market. It may last from less than one year to several years. It is also called main movement, primary movement or major trend. It is the long term phenomenon. For the Pantaloons Retail as stated earlier the share price was Rs. 27.50 on 21st January 2002 and after four years it rises to the level of 2133.9 on 05 December, 2006. That was the primary movement. And after three more years i.e. on 3 rd September, 2009, it was again Rs. 312.1. so this is representing long-term movement in the share prices. Shoppers Stop is also following the same trend. On 24 th May 2005, the price of its shares was Rs. 349.7. After one year (25th May 2006), it was Rs. 600. And after three more years the share price was Rs. 182.05 on 25th May 2009. So it is depicting long term primary movements in the price of the share of both the companies.
Page 33
SECURITY ANALYSIS
Recommendation
Political issues Unavailability of inadequate infrastructure Price band strategies Awareness in rural market FDI cap should be increased. Poor inventory turns and stock availability measures - retailers clearly need to augment their operations. Govt. Policies not favourable. Operations of retailers and suppliers are not integrated. Efficient replenishment practices practiced in the Indian auto and auto-component industry can be leveraged to implement efficient supply chain management techniques. Supplier maturity, in terms of adherence to delivery schedules and delivering the quantity ordered, is an issue Sales tax laws - lead to retailers having state-level procurement and storage leads to Indian retailers having higher inventories. VAT has helped alleviate this a bit. Increased adoption of IT and shrinkage management will be a critical area. Supply chain and customer relations followed by merchandising, facilities management and vendor development are areas which have significant gaps and proactive training is a key imperative for overcoming these.
Page 34
SECURITY ANALYSIS
Conclusion
India retail industry in India which have become modern can be seen from the fact that there are multi- stored malls, huge shopping centres, and sprawling complexes which offer food, shopping, and entertainment all under the same roof. India retail industry is expanding itself most aggressively, as a result a great demand for real estate is being created. Indian retailers preferred means of expansion is to expand to other regions and to increase the number of their outlets in a city India retail industry is progressing well and for this to continue retailers as well as the Indian government will have to make a combined effort.
Page 35
SECURITY ANALYSIS
sBibliography
www.yahoofinance.com www.googlefinance.com www.moneycontrol.com www.bseindia.com www.nseindia.com www.religareonline.com
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SECURITY ANALYSIS

FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY

FUNDAMETAL ANALYSIS AND TECHNICAL ANALYSIS

NEW DELHI INSTITUTE OF MANAGEMENT

FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY

MUKESH AGARWAL (211)

PROJECT GUIDE: Prof. Kumar Bijoy

FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY

NEW DEHLI INSTITUTE OF MANAGEMENT

FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY

NEW DEHLI INSTITUTE OF MANAGEMENT

FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY

NEW DEHLI INSTITUTE OF MANAGEMENT

FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY

NEW DEHLI INSTITUTE OF MANAGEMENT

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INDIAN RETAIL INDUSTRY: AN OVERVIEW

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NEW DEHLI INSTITUTE OF MANAGEMENT

FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY

FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY

NEW DEHLI INSTITUTE OF MANAGEMENT

FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY

FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY

NEW DEHLI INSTITUTE OF MANAGEMENT

FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY

NEW DEHLI INSTITUTE OF MANAGEMENT

FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY

NEW DEHLI INSTITUTE OF MANAGEMENT

FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY

NEW DEHLI INSTITUTE OF MANAGEMENT

FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY

WHERE RETAIL PLAYERS STAND IN BCG MATRIX

FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY

PORTER FIVE FORCES MODEL :

FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY

NEW DEHLI INSTITUTE OF MANAGEMENT

FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY

Industry Life Cycle

NEW DEHLI INSTITUTE OF MANAGEMENT

FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY

FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY

FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY

COMPANY FINANCIAL ANALYSIS SHOPPERS STOP : Investor return

14.91 87.11 111.96

12.49 78.14 99.65

10.85 58.37 67.40

6.96 39.91 50.90

5.68 28.50 28.77

121.91 0.00 1,147.87 179.64

100.28 0.00 987.42 158.59

59.75 0.00 707.18 131.51

45.62 0.00 519.73 99.95

35.68 0.00 441.94 68.71

NEW DEHLI INSTITUTE OF MANAGEMENT

FUNDAMENTAL & TECHNICAL ANALYSIS OF RETAIL INDUSTRY

-14.76 0.00 0.00 -14.76

55.42 5.23 0.89 49.31

55.88 5.22 0.89 49.77

36.92 5.16 0.72 31.04

12.91 2.74 0.36 9.81

RATIO ANALYSIS LIQUIDITY RATIOS: 1. Current Ratio