RPG Enterprises has worked out a plan for its retail activities using the brand Spencer. It will start off with the launching of Spencer's Hypermarket at Visakhapatnam next month.
The group has decided to set up approximately 20 such hypermarkets all over India during the next two years. The total cost will be around Rs 300 crore, which will be generated through internal accruals, debt and equity.
Spencer's Hypermarkets will be managed by Great Wholesale Club Ltd (GWCL), which is currently a wholly owned subsidiary of Spencer. RPG Enterprises has decided to float the initial public offering (IPO) of GWCL.
Addressing a press conference here, Mr Sanjiv Goenka, Vice-Chairman of RPG Enterprises, said that property had already been identified for 13 such stores and the cities are Chennai, Hyderabad, Bangalore, Mumbai, Delhi, Vijaywada, Kolkata and Mangalore. Some of these cities will have more than one store.
"All these will be ready by June 2006. We are re-launching the brand Spencer because through several surveys we have found that it has a high brand recall value among customers," Mr Goenka said.
The group has also identified cities such as Kochi, Pune, Ahmedabad, Chandigarh, Coimbatore and Nasik for the hypermarkets but the associated property is yet to be finalised.
Talking about the expansion plan, Mr Goenka said the thumb rule was that each store would cost approximately Rs 20 crore. The funds would be raised through internal accruals and debt.
"We have decided to go for the IPO and dilute some of our stake in GWCL. However, other details of the IPO, like the timing or the size, are yet to be decided," he added.
The company has also decided to change the names of its two existing hypermarkets from Giant to Spencer. At present, the annualised turnover of these two stores is around Rs 90.75 crore. By the end of 2004-05, the figure is expected to touch Rs 225 crore.
It may be noted that apart from hypermarkets owned GWCL, the RPG Group is engaged in other retailing activities through the FoodWorld, Health & Glow and MusicWorld chains.
"In fact, our total turnover from retail activities is approximately Rs 550 crore. By the end of 2004-05 it will be around Rs 750 crore. And in two and half years from now it will be around Rs 2,500 crore," Mr Goenka said.
At present, the total shopping space of the RPG Group's retail business is 6.40 lakh square feet. By the end of the expansion plan, it will be around 15 lakh sq.ft., of which 7.5 lakh sq.ft will be occupied by Spencer's Hypermarkets.
The share of retail business within RPG Enterprises will jump from a meagre 7 per cent in 2003-04 to around 25 per cent after three years from now, according to Mr Sanjiv Goenka, Vice-Chairman of RPG Enterprises.
In 2003-04, total turnover of RPG Enterprises was Rs 7,500 crore, of which retail business contributed only Rs 550 crore. In 2004-05, the group turnover is expected to rise to Rs 8,200 crore, then to Rs 9,000 crore in 2005-06, and Rs 10,000 crore in 2006-07.
"Then retail activities will contribute 25 per cent, followed by power with a 30 per cent share. Our tyre and its raw material businesses will generate approximately 35 per cent revenue and the rest 10 per cent will come other businesses," Mr Goenka added.