ASSIGNMENT ON

FUNDAMENTAL AND TECHNICAL

ANALYSIS OF PANTALOON
RETAIL

SUBMITTED TO: Prof A. DUTTA

BY

NAME : SARANGDHAR

ROLL NO : 07/MBA/56

INSTITUTION : NATIONAL INSTITUTE OF

TECHNOLOGY

DEPATMENT OF MANAGEMENT
STUDIES

(DURGAPUR)
 Pantaloon Retail (India) Limited

Pantaloon Retail (India) Limited, is India’s 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 10 million square feet of retail space, has over
1000 stores across 61 cities in India and employs over 30,000 people.

The company’s 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, Depot, Shoe Factory, Brand Factory, Blue Sky, Fashion Station,
aLL, Top 10, mBazaar 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 E-Zone focussed on caterng to the
consumer electronics segment.

Pantaloon Retail was recently awarded the International Retailer of the

Year 2007 by the US-based National Retail Federation (NRF) and the
Emerging Market Retailer of the Year 2007 at the World Retail Congress
held in Barcelona.

Pantaloon Retail is the flagship company of Future Group, a business

group catering to the entire Indian consumption space.

Future Group

Future Group is one of the country’s leading business groups present in

retail, asset management, consumer finance, insurance, retail media,
retail spaces and logistics. The group’s flagship company, Pantaloon
Retail (India) Limited operates over 10 million square feet of retail
space, has over 1,000 stores and employs over 30,000 people.
 Future Group is present in 61 cities and 65 rural locations in India. Some
of its leading retail formats include, Pantaloons, Big Bazaar, Central,
Food Bazaar, Home Town, eZone, Depot, Future Money and online retail
format, futurebazaar.com. Future Group companies includes, Future
Capital Holdings, Future Generali India Indus League Clothing and
Galaxy Entertainment that manages Sports Bar, Brew Bar and Bowling
Co. Future Capital Holdings, the group’s financial arm, focuses on asset
management and consumer credit. It manages assets worth over $1
billion that are being invested in developing retail real estate and
consumer-related brands and hotels. The group’s joint venture partners
include Italian insurance major, Generali, French retailer ETAM group,
US-based stationary products retailer, Staples Inc and UK-based Lee
Cooper and India-based Talwalkar’s, Blue Foods and Liberty Shoes.

Company profile:

Registered Office

Knowledge House, Shyam Nagar

Off Jogeshwari-Vikhroli Link Road

Jogeshwari (E), Mumbai 400 060. India

P +91 22 6644 2200 F +91 22 6644 2201

www.pantaloon.com

Board of Directors

Mr. Kishore Biyani

Managing Director

Mr. Gopikishan Biyani

Wholetime Director

Mr. Rakesh Biyani

Wholetime Director

Mr. Shailesh Haribhakti

Director
Mr. S. Doreswamy

Director

Dr. Darlie Koshy

INDUSTRY OUT LOOK

Industry Evolution

• Traditionally retailing in India can be traced to

• The emergence of the neighborhood ‘Kirana’ stores catering to the

convenience of the consumers

• Era of government support for rural retail: Indigenous franchise model

of store chains run by Khadi & Village Industries Commission

• 1980s experienced slow change as India began to open up economy.

• Textiles sector with companies like Bombay Dyeing, Raymond's, S

Kumar's and Grasim first saw the emergence of retail chains

• Later Titan successfully created an organized retailing concept and

established a series of showrooms for its premium watches

• The latter half of the 1990s saw a fresh wave of entrants with a shift
from Manufactures to Pure Retailers.

• For e.g. Food World, Subhiksha and Nilgiris in food and FMCG; Planet M
and Music World in music; Crossword and Fountainhead in books.

• Post 1995 onwards saw an emergence of shopping centers,

• mainly in urban areas, with facilities like car parking

• targeted to provide a complete destination experience for all segments

of society

• Emergence of hyper and super markets trying to provide customer

with 3 V’s - Value, Variety and Volume

• Expanding target consumer segment: The Sachet revolution - example

of reaching to the bottom of the pyramid.

• At year end of 2000 the size of the Indian organized retail industry is
estimated at Rs. 13,000 crore
Retailing formats in India
o Malls:

 The largest form of organized retailing today. Located

mainly in metro cities, in proximity to urban outskirts.
Ranges from 60,000 sq ft to 7, 00,000 sq ft and above.
They lend an ideal shopping experience with an
amalgamation of product, service and entertainment; all
under a common roof. Examples include Shoppers Stop,
Pyramid, Pantaloon.

o Specialty Stores:

Chains such as the Bangalore based Kids Kemp, the Mumbai

books retailer Crossword, RPG's Music World and the Times
Group's music chain Planet M, are focusing on specific market
segments and have established themselves strongly in their
sectors.

o Discount Stores:

 As the name suggests, discount stores or factory outlets,

offer discounts on the MRP through selling in bulk
reaching economies z

Recent Trends
 • Retailing in India is witnessing a huge revamping exercise as can be
seen in the graph

• India is rated the fifth most attractive emerging retail market: a

potential goldmine.

• Estimated to be US$ 200 billion, of which organized retailing (i.e.

modern trade) makes up 3 percent or US$ 6.4 billion

• As per a report by KPMG the annual growth of department stores is

estimated at 24%

• Ranked second in a Global Retail Development Index of 30 developing

countries drawn up by AT Kearney.

Major Retailers

• India’s top retailers are largely lifestyle, clothing and apparel stores

• This is followed by grocery stores

• Following the past trends and business models in the west retail giants
such as Pantaloon, Shoppers’ Stop and Lifestyle are likely to target
metros and small cities almost doubling their current number of stores

• These Walmart wannabes have the economy of scale to be low –

medium cost retailers pocketing narrow margin
India vs. World

• Indian retail is fragmented with over 12 million outlets operating in the

country. This is in comparison to 0.9 million outlets in USA, catering to
more than 13 times of the total retail market size as compared to India

• India has the highest number of outlets per capita in the world - widely
spread retail network but with the lowest per capita retail space (@ 2
sq. ft. per person)

• Annual turnover of Wal-Mart (Sales in 2001 were $219 billion) is higher

than the size of Indian retail industry. Almost 100 times more than the
turnover of HLL (India's largest FMCG company).

• Wal-Mart - over 4,800 stores (over 47 million square meters) where as

none of India's large format store (Shoppers' Stop, Westside, Lifestyle)
can compare.

• The sales per hour of $22 million are incomparable to any retailer in
the world. Number of employees in Wal-Mart are about 1.3 million
where as the entire Indian retail industry employs about three million
people.

• One-day sales record at Wal-Mart (11/23/01) $1.25 billion - roughly

two third of HLL's annual turnover.

• Developed economies like the U.S. employ between 10 and 11 percent

of their workforce in retailing (against 7 percent employed in India
today).

• 60% of retailers in India feel that the multiple format approach will be
successful here whereas in US 34 of the fastest-growing 50 retailers
have just one format

• Inventory turns ratio: measures efficiency of operations. The U.S. retail

sector has an average inventory turns ratio of about 18. Many Indian
retailers KPMG surveyed have inventory turns levels between 4 and 10.

• Global best-practice retailers can achieve more than 95 percent

availability of all SKUs on the retail shelves (translating into a stock-out
level of less than 5 %).The stock-out levels among Indian retailers
surveyed ranged from 5 to 15 percent.

Future direction: Positives

• AT Kearney has estimated India’s total retail market at US$ 202.6
billion which is expected to grow at a compounded 30 per cent over
the next five years.

• With the organised retail segment growing at the rate of 25-30 per
cent per annum, revenues from the sector are expected to triple from
the current US$ 7.7 billion to US$ 24 billion by 2010.

• The share of modern retail is likely to grow from its current 2 per cent
to 15-20 percent over the next decade

• Over next two years India will see several Indian retail businesses
attaining a critical mass as growth in the industry picks up momentum
driven by two key factors:

• Availability of quality real estate and mall management practices

• Consumer preference for shopping in new environments

• Wal-Mart : huge plans for India. Moving a senior official from its
headquarters in Bentonville, Arkansas, to head its market research and
business development functions pertaining to its retail plans in India.

• New York-based high-end fashion retailer Saks Fifth Avenue has tied up
with realty major DLF Properties to set up shop in a mall in New Delhi.

• Tommy Hilfiger, retailer of apparels, expects to open one store each in

Delhi, Ahmadabad, Lucknow and Bangalore in the next four months.

Future direction: Concerns

• 68 million square feet of mall space is expected to be available by end
of 2007, which might lead to over-capacity of malls

• Lack of differentiation among the malls that are coming up. One option
may be to look at specialization.

• Poor inventory turns and stock availability measures - retailers clearly

need to augment their operations.

• 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.

Indian Retail: Past Vs Present

It is widely accepted that the retail industry has undergone a drastic change
in last five years and there is yet more to come. Comparing the image of
Indian retailing in 2004-05 to that of its status in 2007-08 in the following
table:

Magnification of the Indian Retail Industry

Yardstick Situation in 04-05 Situation in 07-

08

Value of retail sales Rs. 10,20,000 crore Rs 12,00,000 crore

Annual growth rate 5% 5.7%

Value of organized Rs 35,000 crore Rs 55,000 crore

market

Share of organized 3.4% 4.6%

market in the sector
Forecasts (after 5 Over Rs. 1,00,000 crore Rs. 2,00,000 crore
years) about size of
organized retail market

Forecasts about growth Around 30% Around 40%

rate of organized retail
market

The above table clearly shows that the retail market as well as the mindset
required for it has experienced a thorough revisal in the last three years. This
is just the beginning and Indians are sanguine that the sector will see rosy
days in the future. This confidence has helped India acquire the No.1 position
among 30 most attractive retailing destinations in the world according to the
Global Retail Development Index of 2005 (by AT Kearney, India). Among
emerging markets, India holds the second position after China in the list of
most favored retail destinations.

COMPANY OUT LOOK

 ENVIRMENTAL

Foreign
entrants
Infrastructure
etc.

POLITICAL SOCIAL

Opposition Change in
from political
the buying
parties ,for
unorganised
pattern
,disposable
PANTALOON

RETAIL

TECHNOLO –
LEGAL
GICAL
Acquisition
SAP has
of land etc.
been
implimented

PESTLE ANALYSIS OF PANTALOON RETAIL

Pantaloon was mentioned in SAP’s annual report as one of its most important
implementations in 2006, worldwide.

The economy is slow down after the bankruptcy Lehman brother’s and
instability of Merill lynch ,now all the companies is facing decrease in its
growth in every sector ,not in India but all over the world is facing the heat.

This time it is not possible for any one to predict any thing in near future,
but we assume that in about 2 years market will recover and condition will be
almost same as it was before slow down of economy. World is facing
systematic risk which is not in the control of any one. And when we take
Pantaloon retail it is depended on FMCG to consumer durables product so it
does not effect drastically but, we still assume that in 2 years it will have the
same condition as it was before slowdown of economy.

Company strength

The Company looking at capturing a significant portion of the entire

Opportunity that the Indian economy provides. These are being done through
multiple initiatives in existing businesses and also by building new businesses
on the peripheries of the retail business. The Company has significantly
strengthened its existing mature businesses and is expanding established
retail formats into new geographies and cities. At the same time, to capture
new consumption trends, the Company has rolled out a large number of new
initiatives and retail formats in segments like home improvement,
consumer durables, communication products, books, music and
entertainment, health, beauty and wellness among others. These specialty
retail formats are in many cases the first in India and are expected to garner
a significant portion of consumption expenditure goin into new categories.

During the period under review, the Company opened 11 Pantaloons, 27 Big
Bazaar, 13 stand-alone Food Bazaar, 1 Central and 5 Brand Factory.
Subsidiary Company, Home Solutions Retail India Limited rolled out 2 Home
Town, very-large format stores along with other retail formats. New stores
covering around 2 million square feet of retail space were rolled out taking
the total retail space under operation to around 5.2 million square feet as on
June 2007.

The Company plans to increase its retail space by nearly 4.5 million to 5.5
million square feet in the coming year. In order to further leverage its reach
and ability to attract increasing number of customers within its stores, the
Company has rolled out new businesses and subsidiaries in the areas of
consumer finance,capital, insurance, real estate funds, retail media, brand
development and logistics. Each of these new initiatives is a step towards
driving more value from its existing retail businesses and at the same time.
Ratios

Profitability Jun-05 Jun-06 Jun-

07 Jun-08

PBDIT/Total Income 8.89% 7.99%

9.24% 9.19%

PBDT/Total Income 6.29%

100
6.02% 6.54%
80
5.52%
60 East
West
40
North
100
20
80
0
Net Profit/Total
1st Qtr Income
2ndQtr 3rdQtr 4thQtr 3.65% 3.43%
60 East
3.60% 2.49%
West
40
RONW (Average Networth) 24.42% 17.15% North
20
14.82% 8.57%
0
ROCE (Average Capital employed) 22.41% 18.30% 1st Qtr 2ndQtr 3rdQtr 4thQtr
17.48% 14.44%

Financial Performance Jun-05 Jun-06 Jun-

07 Jun-08

Cost of goods sold / Net Sales 66.52% 66.53%

68.26% 69.56%

Manpower costs / Total Income 4.80% 5.99%

6.19% 5.42%

Advertising and selling cost / 2.34%

Total Income 3.08% 2.72%

2.80%

Interest/Total Income 2.60% 1.97%

2.70% 3.67%

PBDIT/Interest (Debt-Service Ratio) 3.42 4.05

3.43 3.19

Balance Sheet Jun-05 Jun-06

Jun-07 Jun-08

Debt-equity ratio 0.89 0.50

0.79 1.19

Debtors turnover(days) 4 3
7 100 8
80 turnover(days)
Inventory 94 98
99 60 102 East
West
40 Ratio
Current 1.73 1.44
North
2.19 20 1.71

Quick Ratio
0 0.55 0.58
1st Qtr 2ndQtr 3rdQtr 4thQtr
1.08 0.78
 FINANCIAL RATO OF PANTALOON RETAIL

KEY CONCERNS

• PAT is continuosly increasing year by year it was 38.55 in 2005,64.16

in 06,119.99 in 07 and 125.97 in 2008. It is therefore has profit % of
66% in 2006, 87% in 2007 ,but it decreases drastically to just 4.5% in
2008, it is due to slow down of economy.

• cash profit is increasing by good % this shows it has sufficient money

to run it business and expand .it was 85 % in year 2007 and it become
33.47 % in 2008 .

• It income from sales and other was1868.97 9n year 2006, 3236.74 in

yr 07 and 5048.91 in yr 08 .so it has growth of 73 % in 207 but it
decreased to 55.98%.

• It can be observed in the table company’ s performance year by year

was increasing at almost const rate , but in this recession time when
whole economy is slow it is also feeling the heat as the other
 companies have same effect.it is assumed that 2 years will be needed
to recover the market.

• Disposable income of Indian is increasing ,which may be effected few

year ,but huge population ,and strong base of Indian companies gives
hope it recover in 2 yrs.

• Government sectors pay revision , PSUs still in the process will have
,little but some effect on increase in disposable income of people.

VALUATION OF SHARE.

Share price of pantaloon on 31 st Oct 2008 was Rs 203

52 week high price 31 st Oct 2008 was Rs 795

52 week low price 31 st oct 2008 was Rs 177

SENSEX return and pantaloon return

Year % growth in % growth in

share price sensex

2003 1.827000964 0.130798978

2004 1.314162914 0.423348665

2005 -0.76336192
9 0.467015609

2006 1.076865579 0.471467501 SLOPE = 0.9437

2007 -0.58514786 -0.58342711

2 3
INTERCEPT = 0.402
2008

average 0.863666882
without
recession( 0.373157688
excluding
year 2008)
PANTALOON RETAIL RETURN = 0.9437 + 0.402 X MARKET RETURN

Market return will depends on different conditions of economy.

Here we assume the systematic risk arisen in the market will have it effect on
the Indian economy due to bankruptcy of Lehman bro. ,unstability of Merill
Lynch .whole world is feeling the heat and for 2 years market will more or
less will be of same condition after that it will have almost same conditions as
it was before slow down of economy. So market return will be approx. little
more than risk free rate i.e 10%. Then after it will have return of 37%

Year Target price of

share

2008- 223
09

2009- 245
10

2010- 365
11

TECHNICAL ANALYSIS OF PANTALOON RETAIL

Overview

Technical Analysis (Versus Fundamental Analysis)

Technical analysis is a method of forecasting price movements by looking at

purely market-generated data. A trader who uses technical analysis
(sometimes called a technician or chartist) is essentially concerned with two
things;

1) what is the current price?

2) What is the history of price movement?

Most will also keep a close watch on technical indicators, which provide
feedback on both the price and market (e.g. moving average, volume,
momentum, volatility, open interest, etc). Ultimately, technical analysis
utilizes the information captured by the price to interpret what the market is
saying with the purpose of forming a view on the future.

Almost every trader uses some form of technical analysis. Even the most
reverent follower of market fundamentals is likely to glance at price charts
before executing a trade. At their most basic level, these charts help traders
determine ideal entry and exit points for a trade. They also provide a visual
representation of the historical price action of whatever is being studied. As
such, traders can look at a chart and know if they are buying at a fair price
(based on the price history of a particular market), selling at a cyclical top, or
perhaps throwing their capital into a choppy, sideways market. These are just
a few market conditions that charts identify for a trader. Depending on their
level of sophistication, charts can also help much more advanced
interpretation of the markets.

On the surface, it might appear that technicians ignore the fundamentals of

the market while focusing only on charts. However, a technical trader will tell
you that all of the fundamentals are already represented in the price. They
are not so much concerned that a natural disaster or an awful inflation
number caused a recent spike in prices as much as how that price action fits
into a pattern or trend. And much more to the point, how that pattern can be
used to predict future prices.

The “WHAT” Is More Important Than the “WHY”

Ultimately, price is the end result of the battle between the forces of supply
and demand. The objective of analysis is to forecast the direction of the
future price. By focusing on price and only price, technical analysis
represents a direct approach. Fundamentalists are concerned with why the
price is what it is. For technicians, the why portion of the equation is too
broad and many times the fundamental reasons given are highly suspect.
Technicians believe it is best to concentrate on what and never mind why.
Why did the price go up? It is simple, more buyers (demand) than sellers
(supply). After all, the value of any asset is only what someone is willing to
pay for it. Who needs to know why?

Technical Analysis Is Based On Three Major Conclusions About The

Market:

1. Price Discounts Everything:

The price is a sum reflection of all the market forces and participants (“The
market knows everything”), including commercial banks, investment banks,
central banks, portfolio managers, buy-side analysts, sell-side analysts,
market strategist, traders, investors, technical analysts, fundamental analysts
and many others. Since all market fundamentals are depicted in the actual
market data, the actual market fundamentals and various factors, such as the
differing opinions, hopes, fears, and moods of market participants, need not
be studied.

2. Price Moves In Trends.

 Technicians typically do not believe that price
fluctuations are random and unpredictable.
However, most technicians also acknowledge
that there are periods when prices do not
trend. If prices were always random, it would
be extremely difficult to make money using
technical analysis. A technician believes that
it is possible to identify a trend, invest or trade based on the trend and make
money as the trend unfolds. Because technical analysis can be applied to
many different timeframes, it is possible to spot both short-term and long-
term trends.

3. Price Movements Are Historically Repetitive.

This result’s in periodical emerging of the similar price patterns and technical
indicators (based on price patterns). These patterns, generated by price
movement, often signify what type of movement is to come in the near
future. The goal in technical analysis is to identify and use these price
patterns in the current market to predict what will happen in the future by
examining and quantifying their regular effects in the past.

DOWN WARD

TREND ,SUPPORT
LINE
 Share price from Jan –oct 2008

SIDEWAYS CHANNEL

LONG UP TREND

LONG DOWN

TREND

Months closing price from 2003-2008

 stick chart of share price july-oct 2008

UP TREND CHANNEL SIDEWAYS

CHANNEL

DOWN TREND
CHANNELCHANNEL
SELL BUY
 SELL

BUY

share price with 3 day moving average from July –oct 2008 series 1 –
pantaloon close price
 SELL

SELL

Share price with 3 day moving average for sept –oct 2008
 SELL
BUY

Share price with 5 days moving average for sept –oct 2008
series 1- pantaloon price
 SELL BUY

pantaloon price with sensex price form sept –oct 2008 series 1- sensex
price growth

Seri es 2- pantaloon
price growth
the period of mar 2003- oct 2008

SELL

BUY
For the period sept –oct 2008 (stochagtic chart)

% K line = (today’ s close – lowest low)/(highest high -lowest low) x 100

% D line = average of K line (say 3 days)

CONCLUSION:

As we study the whole trends of graph we find little variation with

economic condition or market conditions and before economy slow
down it was giving a steady growth over the years. This sector has
tremendous scope to expand due to changing Indian economic
condition, changing culture trends and habits’ .pantaloon retail under
the umbrella of Future groups have strong base to utilise this economic
conditions.

Though we find that for short term it is giving average return, but for
long term investment it is really a good option available in market, it is
new booming sector after IT.