The RPG group is restructuring its entire retail portfolio. As part of this exercise all initiatives without an existing outside partner would be merged into a retail company, likely to be named RPG Retail.
Sanjiv Goenka, vice chairman RPG Enterprises, said, “We are restructuring the retail business and all initiatives without an outside partner would be merged into one company. We will come out with an announcement over the next seven days.”
Further, the merged entity would come out with a private placement to financial investors for infusion of Rs 60-70 crore into the retail business.
The RPG retail initiatives spanned across supermarket in the form of FoodWorld, hypermarket under Giant and Spencer’s, music stores under Music World and health and beauty products outlet, Health & Glow.
However, both FoodWorld and Health & Glow had an alliance with Dairy Farm International and were therefore not likely to be part of the merged RPG Retail.
The group had been toying with the option of coming out with an initial public offering (IPO) for some of the individual retail formats but, the present restructuring programme rules out individual IPOs.
In fact, the group planned to fund a part of Spencer’s aggressive expansion plans through an IPO. The group recently revived the Spencer’s brand for its hypermarket format.
The Spencer’s hypermarket venture was being operated under the Great Wholesale Club Ltd and would account for bulk of the group’s retail revenues.
The group had lined up major expansion plans for its retail venture. The retail turnover of the group was projected to be around Rs 2,500 crore by 2006-07, out of which Spencer’s would be Rs 1,300-1,500 crore. Retail as a whole would account for 25 per cent of the group’s turnover over the next few years.
At present, annual turnover from RPG retail was around Rs 528 crore, which was poised to grow to Rs 750 crore in 2004-05. Out of this, Spencer’s Hypermarket would be Rs 225 crore and Foodworld Rs 400 crore.
Investments would be made across the retail formats and the total investment over the next three years in the retail initiative would be around Rs 600 crore.