The Great Indian Retail Story

Slide 1: 1

Slide 2: Retailers belong to a place called… 2 1

Slide 3: … a population of mastodons … always ready for cannibalism … invading green pastures worldwide … healthier than ever 3 2

Slide 4: Retailers – A population of mastodons Global Nine retailers belong to Fortune 100 1 220 Wal- 24 Mart 35 62 Carref. 38 60 Ahold 46 54 Home 55 Depot Retailers 56 50 Kroger 68 72 44 Metro 83 41 Sears 89 40 Target 93 4 3 100 38 Albertson's

Slide 5: Retailers: Always ready for cannibalism Reliance Fresh Adani Superstores Wal-Mart ASDA Carrefour Promodés Comptoirs Modernes 5 4

Slide 6: Retailers: Invading green pastures worldwide International presence of top 20 retailers 6 5

Slide 7: Retailers – Always healthier than ever Company Market Cap P/E CAGR Returns Rs Mn 3 Year or On listing (appox) Pantaloon 3,561 60.2 89% Retail Shopper’s 1,727 63.7 29% Stop (Since Listing May 2005) Trent 991 40 54% 7 Source: IL & FS Investment Managers Limited 6

Slide 8: Global Retail Scenario 8 #1 Global Retail industry is of size USD 8 Trillion Fortune #1 “Wal-Mart” is a Retailer 50 Over 50 of the Fortune 500 25 companies are retailers 25 of the Asian Top 200 companies, are retailers 8 7

Slide 9: Indian Retail Scenario • India’s increasingly affluent middle class - 300 million • Increasing proportion - higher disposable income 83,000 millionaires, India to be the fastest wealth creator by 2010 • The New Age Indian Youth – modern, well-informed, but still entrenched in • Indian value system - Price sensitive 9 8

Slide 10: Indian Retail Scenario … Cont’d • Market Growth: 8 - 10% annual growth with 30% + growth rate for modern format retail. • Strong Economy: Fourth largest economy on Purchasing Parity Basis. • Market Opportunities: Growing consumer aspirations together with very low penetration of modern format retailing. • Infrastructure: Large amount of quality retail space being added. 10 9

Slide 11: Evolution of Indian Retail His to ric /Rural Traditional/Pe rvas ive Gove rnme nt Mode rn Formats / Re ac h Re ac h Supporte d Inte rnational Exc lus ive Brand Outle ts Hype r/Supe r Marke ts PDS Outle ts De partme nt Store s Khadi S tore s Shopping Malls Cooperative s Co nve nie nc e Sto res Mo m and Po p/ Kiranas We e kly Marke ts Village Fairs Me las Availability/ Low Shopping Ne ighborhood Cos ts / So urc e o f Expe rie nc e /Effic ie nc y Store s /Conve nie nc e Dis tribution Ente rtainme nt 11 10

Slide 12: India: #1 Emerging Retail Growth Market Source: A.T Kearny GRDI 12 11

Slide 13: Over 12 M illion Outlets in India Unorgan ized Organize Retail d Retail < 3% Set to gro w to 8-10% by 2010 Organized Retail exp ected to b Rs.110,00 e around 0 Cr (USD 25 b) by 2 010 13 12

Slide 14: Consumer Expenditure in Organized Retail Pharma Durable 2% Entertainment 10% 1% Home 3% Clothing and Textile 36% Food & Grocery 14% Health & Beauty 1% Books, Music & Gifts 3% Footwear Watch & Jewellery 13% 17% 14 Source: Marketing Whitebook, 2006, Businessworld 13

Slide 15: Retailing Formats • Hyper marts • Large supermarkets, typically (3,500 - 5,000 sq. ft) • Mini supermarkets, typically (1,000 - 2,000 sq. ft) • Convenience store, typically (7,50 - 1,000 sq. ft) • Discount/shopping list grocer • Traditional retailers trying to reinvent by introducing self-service formats as well as value-added services such as credit, free home delivery etc. 15 Source: CII Report/Retail Scenario in India ~ Unlimited Opportunity 14

Slide 16: Indian Retailers Hypermarket Department store Entertainment •Big Bazaar •Lifestyle •Fame •Giants •Pantaloons Adlabs •Shoprite •Pyramids •Fun •Star Bazaar •Shoppers Republic •Inox Stop •Trent •PVR 16 15

Slide 17: Entrance of Private Equity Company Investor Amount Pantaloon Retail ICICI Ventures,Bennett & Rs 750 mn Coleman Shoppers Stop IIML, ICICI Ventures and Zodiac Rs 752 mn Clothing Subiksha ICICI Ventures Rs 350mn Trinethra and GW Capital Rs 450 mn Fabmall Vishal Retail Bennett & Coleman NA Crossword ICICI Ventures NA 17 16

Slide 18: FDI in Indian Retailing •Franchise - Nike, Pizza Hut, Tommy Hilfiger, Marks and Spencer, Mango •Manufacturing – Bata India •Distribution - Swarovski, Hugo Boss •Wholesale Trading – Metro Cash & Carry •Food Outlets – McDonald’s, KFC, Pizza Hut, Dominos 18 17

Slide 19: Benefits of FDI Greater Consum er Greater Per Spending due to Capita Incom e economic boom GDP Grow th Em ploy Benefits Greater m ent Exports to Govt. Increasing Greater Tax Paying Sourcing Increased Tax Population From India Revenues Reduced Tax Evasion 19 18

Slide 20: The Changing Indian Consumer The urban consumer •Getting exposed to international lifestyles •Inclined to acquiring asset •More discerning and demanding than ever No longer need-based shopping •Shopping is a family experience Changing Mindset •Increasing tendency to spend •Post Liberalization children coming of age •100 mn 17-21 year olds*. Tend to spend freely. Greater levels of education 20 19

Slide 21: Challenges of Retailing in India • Automatic approval is not allowed for foreign investment in retail. • Regulations restricting real estate purchases, and cumbersome local laws. • Taxation, which favors small retail businesses. • Absence of developed supply chain and integrated IT management. • Lack of trained work force. • Low skill level for retailing management. 21 20 Source: CII Report/Retail Scenario in India ~ Unlimited Opportunity

Slide 22: Recommendations •Grant full industry status to retail •Permit FDI in Retail in phases •Invest in supply chain infrastructure •Ease distribution – infrastructure creation, octroi •Ensure single window clearance for retail chains •Organize market for real estate Ensure proper rent laws Enforce zoning laws and city development plan Increase land supply •Ensure flexibility of labor laws 22 21 Source: ICICI Bank

Slide 23: Implications for India •Be ready! •Be realistic! •Be resilient! 23 22

Slide 24: And Don’t Forget….. … dinosaurs sometimes disappear !! 24 23