A PROJECT REPORT ON PIRAMYD RETAIL LTD SHOWING THE CRASHDOWN AND THE BUSSINESS PLAN TO RE-LAUNCH
PREPARED BY STUDENTS OF FUTURE INNOVERSITY SRIJITH R.NAIR BADAL PANCHOLI HIMEN THAKKAR
SUBMITTED TO IRF RISING STAR
ACKNOWLEDGEMENTS
I express sincere gratitude to Future Innoversity and IRF Rising Star for providing us this opportunity to present this unique effort making a case study on crash down of retail store and make reviving it and better understand the Retail Industry.
I also wish to take this opportunity to thank staff members of Piramyd retail limited for giving their time and sharing their experience and knowledge with us. And also thank Mr.Vikram and Ms. Asha Nambiar of future Innoversity for their support and help making this project.
FLOW OF PROJECT 1
Background
2
Vision
3
Objectives
4
Business strategy originally used
5
Tactics (could be Marketing, Financial, Operational, HR or any other, or all of them) which were used to achieve Objectives
6
Market in which the retail chain is / was operating
7
Porter’s five forces analysis for actual business model and re-structured business strategy
8
Financial projections including ROI Analysis for 5-year period
BACKGROUND OF THE PIRAMYD RETAIL GROUP
Piramyd was started by Ashok piramal group in 1998. The various companies which come under heading Ashok Piramal group, Textile sector it has brands of •
Morarjee Textile Limited
•
Integra apparel and textile private limited.
In the real estate brand it has Peninsula Land Limited •
Peninsula Facility
•
Peninsula Realty Fund
And in engineering it has •
•
PMP Auto Components Private Limited o
PMP Bakony
o
Pal International
Miranda Tools (a division of PMP)
Under the retail head the company was into mainly two formats ie:•
Lifestyle Retail – piramyd retail store
•
Supermarket – Trumart
ABOUT THE PIRAMYD RETAIL STORE
Piramyd retail store was a premium format having the best and the most exclusive brands. It had the most cream customers having a chice for enormous brands. Some of the brands that were sold at the store were:Wrangler, Lee, Levis, Allen Solly, Park Avenue, Wills Lifestyle, Aero, Van Husean, Lawman, Killer, Elizabeth Ardden, Christian Dior, Hugo Boss, Longiness, And other private brands like Venpluno, Boston Club for men and for women Rudra etc., OVERVIEW OF PIRAMYD RETAIL THROUGH THE YEARS:2005 : Overview Piramyd Retail Ltd, a part of Pirmal Group was incorporated. - The company executed a business transfer agreement and acquired lifestyle retail business of Piramyd Retail and Merchandising Pvt Ltd and food retail business of Crossroads Shoppertainment Pvt Ltd. - The company entered the capital market with its IPO of nine million equity shares of Rs 10 each for cash with a price band of Rs 120 to Rs 140 per equity share during November.
2006 :
The company had planned to open 13 additional TruMart stores during the year. - After management restructuring, company may separate lifestyle retailing and food, home and personal care (FHPC) retail into two independent business units, Piramyd Megastore and TruMart with its own business heads. 2007 – (Here the company is took over by India Bulls Ltd. The company had planned to open 24 additional TruMart stores during the year. - The company received an open offer from Indiabulls Wholesale Services Limited along with Indiabulls Real Estate Limited to acquire up to 40,32,750 fully paid-up equity shares representing 20% of post acquisition capital of Piramyd Retail Limited at a price of Rs.74.73 per fully paid-up shares.
- Indiabulls Wholesale Services, had acquired 63.92% stake in the company.
2008 – The company is planning to have 17 megastores and 69 TruMart store by the end of this fiscal. - Board of the company had accepted the resignations of Urvi Piramal, Nandan Piramal, Jaydev Mody, Harshvardhan Piramal, Rajeev Piramal, Mahesh Gupta, Homi Aibara, Berjis Desai and Ranjan Pant as directors. - Sameer Gehlaut, Rajiv Rattan, Tarun Tyagi, Ikroop Singh Kehal, Udesh Jha, Aishwarya Katoch, Shamsher Singh, Karan Singh, Prem Prakash Mirdha and Savita Singh were appointed as directors of the company. - Board of directors of the company at its meeting held on 11th April 2008, had decided to obtain the approval of the members of the company to change its name from Piramyd Retail Ltd to Indiabulls Retail Services Ltd.
- They had also decided to shift the registered office of the company from Maharashtra to Delhi as well as to enhance the borrowing limits. - The company had drawn up an expansion plan to expand its presence in western and northern India. -Indiabulls Retail Services Ltd has informed that pursuant to the approval of Company Law Board, Western Region Bench, Mumbai vide its order dated July 02, 2008 approving the shifting of the Registered Office of the Company from the Stare of Maharashtra to NCT of Delhi under Section 17 of the Companies Act, 1956, the Board of Directors have approved shifting of Registered office of the Company from Peninsula Spenta, Mathuradas Mills Compound, Senapati Bapat Marg, Lower Parel (West), Mumbai - 400 013 to E-29, First Floor, Connaught Place, New Delhi - 110 001 with effect from July 11, 2008.
2008 -Company name has been changed from Piramyd Retail Ltd to Indiabulls Retail Services Ltd.
VISION OF ASHOK PIRAMAL GROUP “We will touch the lives of at least one in five people on the globe, thereby creating enormous value for all our stakeholders.”
OBJECTIVES OF PIRAMYD RETAIL LTD. The core objectives of Piramyd retail ltd are:2006 - The company had planned to open 13 additional TruMart stores during the year. 2007 - The company had planned to open 24 additional TruMart stores during the year 2008 - The company is planning to have 17 megastores and 69 TruMart store by the end of this fiscal. THUS WE CAN UNDERSTAND THAT THE MAIN OBJECTIVE WAS EXPANSION.
BUSSINESS STRATEGY
For Customers:-
•
Give world class experience with good service by the staff and Entire Store Team
•
Made PPC for Customers as a privileged card of Piramyd with beneficial plans.
•
Holding world class premium and luxurious brands to full fill all Customer need and providing high fashion wear product to customers.
•
Offering good discount up to 60% at the time of sales (offer called shopping fever, Men at work, Piramyd Family Fortune)
•
Format like True Mart, Jaimmin, take cares of customer requirement of FMCG product and as wel as entertainment; under one roof customer can fulfill their requirement of clothes, Basic ruteen product and entertainment
Operationally
•
SPF return on Brands and respective categories
•
MG on Brands
•
Margin on Product
•
Low markdown on products
•
Customer Service and CRM
•
Return on Investments
•
SOH
•
SOH on Brands for Advertise Branding Purpose to increase the awareness
•
Marketing Offers Coordinating with different industries and company
•
Share issue for Customers
OTHER STRATEGIES USED :-
•
Apart from the metro cities like Bangalore, Hyderabad and Chennai the company is also planning toexpand to Tier II and Tier III cities
•
The company will continue with mall development project in Pune,Bangalore, Chennai, Ludhiana, Jalandhar, Chandigarh and Hyderabad
•
The company is also planning to revamp its product mix to focus primarily on the women’s segment
•
Also trying to increase its share of private labels by newer categories like women’s ethnic wear andchildren wear
TACTICS USED BY PYRAMID RETAIL COMPANY:MARKETING:Loyalty program called PIRAMYD POWER CLUB – customers accumulate point ie 100rs is 2 points. They had very good data base which had regular loyalty . OPERATIONAL:They followed strict SOP s., the operations were organised and process oriented.
TARGET MARKET IN WHICH PIRAMYD STORE OPERATED:At the time of opening; we can say the begging of retails and the Piramyd called is one of the Best lifestyle retail store holding premium brand and world class shopping experience; at the time of the Piramyd opening; only the Pantaloon was competitor and found major impact on pantaloons sales and customer entry; after 1 year Lifestyle, Marks n Spencer join in to the competition
Take over Indiabulls Wholesale Services, the retail arm of Indiabulls Real Estate, has acquired Piramyd Retail, a company owned by the Ashok Piramal Group which runs 35 neighbourhood retail stores and seven lifestyle stores. Indiabulls Wholesale has acquired 63.92 per cent stake in Piramyd Retail at an enterprise value of around Rs 208 crore, said sources close to the deal. It will be making an open offer over the weekend to acquire an additional 20 per cent of the fully diluted paid-up capital of Piramyd Retail, at Rs 74.73 per share. Thus, it would shell out Rs 174.55 crore for 84 per cent stake in the company. Piramyd runs a lifestyle retail (Piramyd Megastore) and convenience store chain (Trumart) with 42 stores spread over 10 lakh square foot of retail space in states like Maharashtra, Gujarat, Rajasthan, Delhi, Punjab and Madhya Pradesh. Indiabulls Wholesale, which is setting up 30 hypermarkets in as many tier-II cities at a cost of Rs 1,500 crore, plans to expand Piramyd’s existing network of 42 stores to over 150 stores by the end of next year. With this acquisition, Indiabulls will have a presence across different formats –hypermarkets, lifestyle and convenience store formats. The acquisition provides Indiabulls 1,300 trained people and 10 lakh square foot of prime retail space. Pyramid Retail had reported a net loss of Rs 47.81 crore on gross sales of Rs 162.01 crore, taking up its accumulated losses to Rs 55.28 crore. Retailers have been bogged down by high real estate prices and supply chain issues. .
Source- retailangle.com
Failure in Figures Quarter Ending
Dec 07
Dec 08
Var %
Sales Income
49.20
13.22
-73.13%
Other Income
0.06
0.11
83.33%
Total Income
49.26
13.34
-72.92%
Expenditure
-68.60
-23.34
-65.98%
Gross Profit
-19.34
-10.01
-48.24%
Operating Profit
-19.40
-10.12
-47.84%
Interest
-1.87
-3.06
63.64%
Net Profit
-23.25
-22.36
-3.83%
GPM(%)
-39.31%
-75.72%
92.62%
OPM (%)
-39.43%
-76.55%
94.14%
NPM (%)
-47.26%
-169.14%
257.92%
Interest as % of Net Sales
3.80%
23.15%
508.99%
Employee Cost
-8.73
-2.85
-67.35%
Employee Cost as % of Net Sales
17.74%
21.56%
21.50%
Source – www.retailangle.com Sales: Rs 13.22 crores, down 73.1% from last year same quarter • Net Loss: Rs 22.36 crores i.e. 169.1% of sales • Interest Cost: 23.2% of sales • Employee Cost: Rs 2.85 crores i.e. 21.6% of sales
CAUSES OF THE CRASH INDIABULLS TAKEOVER LEAD TO CRASH At the earlier times when the company was run by the Piramal group Piramyd store, was doing very good, but due to some problems within the family the company sold it to Indiabulls ltd., and they started doing major expansion which then lead to over expansion and lead to a crash. And the strength of the Piramyd was the vendor mgmt. which was also damaged by the Indiabulls Mgmt. Indiabulls Retail withholding vendor payments Retailer Indiabulls Retail Services Ltd is facing complaints of non-payment of dues from vendors in several cities across India. Indiabulls acknowledges the problem terming them as “legacy issues” from the late 2007 acquisition of Piramyd Retail Ltd, which Indiabulls bought from the Ashok Piramal group for Rs 208 crore. Piramyd has since been renamed Indiabulls Retail Services. While Indiabulls did buy Piramyd and all its liabilities, it is now claiming that a lot of claims are unrecorded and hence, payments are on hold. There are other vendors who have not been paid because their supplies have not got sold for reasons such as inferior quality of products or designs claims the company. Vendors are therefore an unhappy lot. The new Indiabulls CEO, Anil Lepps, has promised to sort out old payment issues in the coming months and in the meantime is seeking vendor cooperation to get the business back on track.
Source- retailangle.com
STAFF ATTRITAION MAJOR CAUSE. One more major issue that destroyed the company was the staff attrition as the India bulls did not pay salary for 2 months and the DM were also not able to adjust the mgmt. style and the senior mgmt., and also the senior mgmt including the Managing directors also left the organisation due to the India Bulls Mgmt style. Gradually all this lead to the crash of Piramyd Retail Ltd.
Balance sheet showing the crash of company after India Bulls took over Mar '10
Mar '09
Mar '08
Mar '07
Mar '06
12 mths
12 mths
12 mths
12 mths
12 mths
Total Share Capital
20.00
20.00
20.00
20.00
20.00
Equity Share Capital
20.00
20.00
20.00
20.00
20.00
Share Application Money
0.00
0.00
0.00
0.00
0.00
Preference Share Capital
0.00
0.00
0.00
0.00
0.00
-219.50
-168.30
-77.84
51.25
99.18
0.00
0.00
0.00
0.00
0.00
-199.50
-148.30
-57.84
71.25
119.18
0.00
0.00
17.21
52.27
48.48
Unsecured Loans
237.13
205.41
159.08
38.66
0.00
Total Debt
237.13
205.41
176.29
90.93
48.48
37.63
57.11
118.45
162.18
167.66
Mar '10
Mar '09
Mar '08
Mar '07
Mar '06
12 mths
12 mths
12 mths
12 mths
12 mths
Gross Block
67.35
76.54
102.16
81.28
80.66
Less: Accum. Depreciation
25.27
17.83
13.34
6.58
2.06
Net Block
42.08
58.71
88.82
74.70
78.60
Sources Of Funds
Reserves Revaluation Reserves Networth Secured Loans
Total Liabilities
Application Of Funds
Capital Work in Progress
0.00
0.00
15.13
18.15
20.75
Investments
0.00
1.55
0.00
0.00
1.67
11.94
16.70
64.27
54.46
42.43
Sundry Debtors
0.05
0.31
1.92
3.81
1.74
Cash and Bank Balance
0.06
0.17
0.93
1.87
0.99
Total Current Assets
12.05
17.18
67.12
60.14
45.16
Loans and Advances
13.90
30.71
39.17
68.22
28.66
1.11
0.44
0.00
0.00
32.00
27.06
48.33
106.29
128.36
105.82
0.00
0.00
0.00
0.00
0.00
31.36
33.29
78.43
57.60
37.50
0.13
18.20
13.36
1.43
1.68
Total CL & Provisions
31.49
51.49
91.79
59.03
39.18
Net Current Assets
-4.43
-3.16
14.50
69.33
66.64
0.00
0.00
0.00
0.00
0.00
37.65
57.10
118.45
162.18
167.66
0.63
0.06
7.96
6.34
5.61
-99.75
-74.15
-28.92
35.63
59.59
Inventories
Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions
Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs)
NOTE :- Here we can see that when the company was run by Ashok Piramal group it was doing good business which is highlighted by Yellow and after India Bulls took over company run into loses which is highlighted by Red.
PORTER’S FIVE FORCES MODEL:-
1.FOR THE ACTUAL PIRAMYD STORE:THREAT OF NEW ENTRANTS - At that time (2005-2008) the main threat was from Shoppers Stop as they were also expanding at the same time. THREAT OF SUBSTITUTE – The merchandise which they were selling in the cities were of very high value and had very less comptetion as their core was to sell out brands than in brands. Eg., Lee, Levis, Hugo Boss etc. BARGAINING POWER OF BUYERS – At this format most of the customers were product conscious on quality, and PIRAMYD was able to achieve the expected quality and thus the customers were happy. BARGAINING POWER OF SUPPLIERS – The Piramyd had a good bargaing power with the suppliers as the cash flow was good when the store was run by Piramal Group as the credit period was 30 days, but it lost its advantage when the mgmt changed to India Bulls Ltd., when credit period was extended to 180 days.
2. FOR THE RESTUCTURED BUSSINESS STRATEGY:-
THREAT OF NEW ENTRANTS – By the time the store will be reopened we will have competition from Shoppers Stop, Globus , Central, and the potential completion will come from International brands as Prada, Tommy Hilfiger FDI is opening on multi brand retailing. THREAT OF SUBSTITUTE – PIRAMYD stores are going to sell exclusive brands as core competency but there is a threat from the other single store of luxury retail., but the advantage being multiple brands under roof.
BARGAINING POWER OF BUYERS – The store will give importance on premium brands, and try to get multiple exclusive brands so that customers cannot doubt on quality. BARGAINING POWER OF SUPPLIERS – As there is a lot of competition in the lifestyle market so we will have good cash flow so there is smooth relation with the suppliers and there is good flow of stock. RIVALRY AMONG EXISTING FIRMS – The competition we have from the existing players would be from Shoppers Stop, Central, Globus etc., but the strategic advantage over competitions would be personalized service.
RESTRUCTURED BUSSINESS PLAN The company will reenter the market with a new store format called “SPHINX” lifestyle retail store The reason the name is put because as the old name was Piramyd the new name Sphinx both gives u the picture of Egypt. The logo of the store would be:-
As we can see that the logo shows the present Sphinx taking over old Piramyd.
LOCATION OF THE STORE:-
Property Address: Venus Atlantis, Prahlad Nagar, SG Highway – 380054
The store is planned to open at the Anandnagar Road ,Prahladnagar in Ahmedabad, in the mall named Venus Atlantis, The area of the store would be 25000 sqft. Spread on two floors of 12500 each.
Source- 99acres.com The area Anandnagar is selected because it is the most happening area in Ahmedabad and has a posh location and there are a lot of high end appt and major restaurant chain and also has 5 star hotels like Marriott Courtyard and Ramada, has a lot of offices around , thus targeting our target customers who are high middle class and high society who like wearing brand.
SCOPE OF SUCCESS There is high scope of the success for the store because there is no competition nearby and the potential customers locality around are brand conscious and the store is meant for Brand loving customers.
COST INVOLVED:The rent is calculated at 40Rs. per square feet a month so the rent will come around (25000*40)= 10,00,000 rs. Per month OPERATIONAL AND BUSSINESS PLAN:The business plan is that we would offer space to the premium brands like Levis, Crocodile, Polo Club, Buffalo, Tommy Hilfiger, Van Heusean, Peter England, Allen Solly, Turtle, Scullers Versace, Deisal, Fossil, Edhardy, United colours of Benetton etc. The strategic advantage for the brand is that they will get an opportunity to sell their brands without appointing the Franchisee which leads to high cost and can reach their target customers without worrying about the space and cost. We will a contract based on the system of M.G.( Minimum Guarantee) which has to paid on the basis of the brand at the range of 30% on the space allotted or there is good sales then 30% on margin whichever is higher.
View 9 photos Property photos (3) , Prahlad Nagar (6) View on Map
BUSSINESS PLAN:LAYOUT:AREA
AREA IN SQFT.
WARE HOUSE
500
WASHROOM
400
C.S.D
50
JUST CHILL STAFF ROOM
150
BAGGAGE COUNTER
70
CASHERING
100
CASH CABIN
40
S.M. CABIN
80
D.M. CABIN
80
A.H.U. ROOM
50
ALTERATION ROOM
80
TRAIL ROOM
240
TOTAL
1840 SQFT.
TOTAL SELLING AREA- 25000-1840SQFT= 21060 SQFT
OPERATING EXPENSES:DESIGNATION
TOTAL SALARY
SM(1)
50,000
D.M.(2*30000)
60,000
V.M.STAFF(1)
18,000
MAINTAINANCE(2*7000)
14,000
SECURITY GAURDS(5*5000)
25,000
WAREHOUSE INCHARGE(1)
12,000
OPS MANAGER(1)
35,000
HOUSEKEEPING STAFF(4*4000)
16,000
BUSSINESS RELATION TEAM(30000+20000+30000)(3
70,000
MEMBERS) RENT
10,00,000
FIXED COSTS:CAUSE OF COST
AMT.(IN RS.)
ADVERTISING
1,00,00,000
COMPUTERS(6)
1,50,000
POINT OF SALE(POS)(4)
4,00,000
SERVER
1,00,000
FURNITURE AND FIXTURE
5,00,00,000
DOWN PAYMENT OF RENT
20,00,0000
PAYBACK
TOTAL INVESTMENT- 15,00,00,000(7,50,00,000{safety deposit}) + (7,50,00,000{fixed cost}) NET PROFIT – 1,31,00,000(with initial start up of 80 brands.)for a month period. PAYBACK PERIOD.- 15,00,00,000 1,31,00,000 = 11.45 months ie 1 year (ROI WILL BE ACHIVED IN ONE YEAR)
BIBILOGRAPHY
Sources of information are:-
www.moneytcontrol.com www.retailangle.com www.ashokpiramal.com www.wikipedia.com www.ministryofcommerce.com
