Pantaloon Retail May Expand Into India's Rural Areas

Pantaloon Retail India Ltd. (PF), the country's biggest publicly traded retailer, may expand into rural areas where about three-fifths of the nation's 1.1 billion people live.

``We are in the business of selling food and it makes sense for us to look at rural areas,'' Kishore Biyani, founder and managing director of Pantaloon, said in a phone interview today. He declined to comment on an Economic Times report that Pantaloon plans to buy a 70 percent stake in Aadhaar, a rural retailer owned by the Godrej Group.

Pantaloon may start selling food and clothes in villages to tap growing consumption with India's economy forecast to grow 8.7 percent this fiscal year. Rural outlets may help the company procure vegetables and cereals at a lower cost in regions where refrigeration and logistics networks are inadequate.

``Going into the rural areas makes perfect sense if they are also looking at them as procurement centers,'' said Unmesh Sharma, an analyst at Macquarie Securities Ltd. in Mumbai. He has an ``outperform'' rating on the stock and a 12-month price target of 980 rupees a share. Pantaloon, which has declined more than 50 percent from its January record of 875, fell 6 percent to 392.05 rupees on the Bombay Stock Exchange today.

The concern that Pantaloon is expanding too fast is overdone, Sharma said.

Biyani has expanded his businesses to include consumer finance, retail broking and investment advice to get a bigger share of consumer spending in India. Pantaloon is also expanding the Big Bazaar hypermarket chain. Biyani expects the number of Big Bazaar stores at 160 by the end of the year and 260 by 2011.

`Food, Apparel'

``The consumption in products like food and apparel is doing well and will continue to do so,'' Biyani said. Same-store sales in March rose compared with last year, he added, without providing details.

The company will have as much as 11 million square feet of retail space in the year ended June and will almost double that to 20 million square feet by June 30, 2009, Biyani said.

He ruled out any change in the company's capital-raising plans because of turmoil in the stock markets. The Bombay Stock Exchange's benchmark Sensex (SENSEX) is the sixth worst-performer among major indexes tracked by Bloomberg this year. The measure has dropped 27 percent in 2008.

Future Ventures India Ltd., a Pantaloon unit which invests in startup companies, filed a draft initial share sale proposal last month with the nation's capital-market regulator. ``The plan is on target,'' Biyani said.

To contact the reporter on this story: Saikat Chatterjee in New Delhi at schatterjee4@bloomberg.net.

To contact the editor responsible for this story: Frank Longid at flongid@bloomberg.net.

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