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Shopper's Stop Ltd.

Board of Directors
Chandru L. Raheja – Chairman Statutory Auditors
Ravi C. Raheja – Director Deloitte Haskins & Sells
Neel C. Raheja – Director Chartered Accountants
Gulu L. Mirchandani – Director 12, Dr. Annie Besant Road,
Shahzaad S. Dalal – Director Opp. Shiv Sagar Estate,
Prof. Nitin Sanghavi – Director
Worli, Mumbai - 400 018
Deepak Ghaisas – Director
Nirvik Singh – Director Internal Auditors
B. S. Nagesh – Vice Chairman Ernst & Young Pvt. Ltd.
Govind Shrikhande – President & CEO & Jalan Mill Compound,
Executive Director
95, Ganpatrao Kadam Marg,
Audit Committee Lower Parel, Mumbai - 400 013
Deepak Ghaisas – Chairman
Bankers
Ravi C. Raheja – Member
IDBI Bank Limited
Prof. Nitin Sanghavi – Member
Shahzaad S. Dalal – Member Axis Bank Limited
Kotak Mahindra Bank Limited
Compensation/ Citibank N.A.
Remuneration Committee
HDFC Bank Limited
Gulu L. Mirchandani – Chairman
Ravi C. Raheja – Member ICICI Bank Limited
Prof. Nitin Sanghavi – Member
Shahzaad S. Dalal – Member
Solicitors
Finance Committee Wadia Ghandy & Co.
Ravi C. Raheja – Chairman
Neel C. Raheja – Member
B. S. Nagesh – Member
Govind Shrikhande – Member

Shareholders Investor Grievance
and Share Transfer Committee
Ravi C. Raheja – Chairman
Neel C. Raheja – Member
B. S. Nagesh – Member

Vice President – Legal &
Company Secretary
Prashant Mehta

Registered Office & Service Office
Eureka Towers, B Wing,
9th Floor, Mindspace,
Link Road, Malad (West),
Mumbai - 400 064
Website: www.shoppersstop.com

Annual Report 2009-10 | 28

Financial Highlights & Key Ratios Shopper's Stop Ltd.

(Rs. in lacs)
Profitability Statement 2009-10 2008-09 2007-08 2006-07 2005-06
No. of Stores 93 72 73 60 21
Income
Gross Retail Sales 154,658 138,311 119,008 88,505 66,603
Less: Value Added Tax 6,857 6,438 5,551 3,874 3,111
Gross Retail Sales (Net of taxes) 147,801 131,873 113,457 84,631 63,492
Other Operating & Miscellaneous Income 2,810 2,555 2,567 2,776 1,907
150,611 134,428 116,024 87,406 65,399
Expenditure
Cost of goods sold 98,426 88,000 75,354 56,879 43,220
Employee costs 8,759 8,588 7,826 5,850 4,029
Operating and administrative expenses 31,700 32,916 26,342 16,804 12,492
138,885 129,504 109,522 79,532 59,741
EBIDTA 11,726 4,924 6,503 7,874 5,658
Interest and finance charges 2,244 2,560 1,124 440 240
Depreciation 3,103 6,313 3,927 2,563 1,394
Profit Before Tax before exceptional items 6,379 (3,949) 1,452 4,871 4,025
Exceptional Items (188) 2,486 — — —
Profit Before Tax after exceptional items 6,567 (6,436) 1,452 4,871 4,025
Profit After Tax 5,023 (6,372) 697 2,620 2,710
Balance Sheet items
Share Capital 3,491 3,487 3,486 3,483 3,438
Optionally Convertible Warrants 3,072 — — — —
Reserve & Surplus 24,326 19,822 26,183 26,034 23,556
Loan Funds 19,141 20,776 17,293 11,314 5,855
Deferred Tax Liability — — 169 412 36
Capital Employed 50,030 44,085 47,131 41,243 32,885
Fixed Assets 29,867 25,873 24,038 15,216 12,252
Net Working Capital 7,741 8,467 15,021 21,136 17,126
Profit & Loss Ratio's
Gross Retail Sales (Chain level growth) 10.0% 15.9% 34.2% 32.7% 33.2%
Gross Retail Sales (Like to Like growth) 3.7% 1.2% 14.0% 21.0% 17.0%
Gross Profit Margin 31.9% 31.7% 32.0% 31.4% 30.4%
Operating Expenses Ratio 26.2% 30.0% 28.7% 25.4% 24.8%
Operating Margin (EBIDTA) (Before exceptional item) 7.6% 3.6% 5.5% 8.9% 8.5%
PBT Margin before exceptional item 4.1% -2.9% 1.2% 5.5% 6.0%
PAT Margin 3.2% -4.6% 0.6% 3.0% 4.1%
Interest Coverage 4.8 1.0 5.3 13.7 18.1
Balance Sheet Ratio's
Debtors No. of Days 3 3 2 3 2
Creditors No. of Days 95 94 69 55 54
Stock Turnover Ratio 3.5 4.0 3.3 3.7 3.9
Current Ratio 1.3 1.5 2.0 2.7 3.0
Assets Turnover Ratio 3.3 3.1 2.7 2.4 2.6
Debt Equity Ratio 0.6 0.9 0.6 0.4 0.2
Return to Investors
Return on Networth 31.8% -5.2% 8.7% 18.8% 23.5%
Return on Capital Employed 18.3% -3.0% 5.8% 14.3% 16.8%
Book Value Per Share (in Rs.) 88.58 66.85 85.14 85.46 80.86
EPS (taking equity share at Rs. 10/- each) (In Rs.)
Basic 14.4 (18.3) 2.0 7.58 8.12
Diluted 14.3 (18.3) 2.0 7.57 8.10
Cash EPS 23.30 (0.17) 13.27 15.00 12.41
Dividend Per Share 1.50 — 1.50 1.50 1.50
Note: Number of stores includes the Shoppers Stop Department stores and Speciality Stores (viz Home Stop, Mother Care, Crossword
Bookstores, Arcelia, Mac, Clinique, Estee Lauder & Airport Business).

Directors' Report Shopper's Stop Ltd.

Dear Members,
Your Directors are pleased to present the Thirteenth Annual Report on the business and operations of the Company together with the
Audited Statements of Accounts for the year ended March 31, 2010.
Financial Performance
(Rs. in lacs)
Year ended Year ended
Particulars March 31, 2010 March 31, 2009
Retail Turnover
Own merchandise (including concession sales) 141,583.75 128,152.70
Consignment merchandise 13,074.07 10,158.10
Other Retail operating income 2,178.93 1,759.40
156,836.75 140,070.20
Less: Value Added Tax 6,856.84 6,437.70
Less: Cost of consignment merchandise 9,429.83 7,319.40
140,550.08 126,313.10
Other income 631.17 795.10
141,181.25 127,108.20
Profit/(Loss) before Depreciation & Tax 9,669.57 (122.60)
Less: Depreciation 3,102.54 6,313.10

Profit/(Loss) before Tax 6,567.03 (6,435.70)
Less: Provision for Tax 1,543.98 (63.90)

Profit/(Loss) after Tax 5,023.05 (6,371.80)
Add/(Less): Balance brought forward from previous year (1,476.00) 4,895.80

Proposed Dividend (incl. Dividend Distribution Tax) 610.71 –
Transfer to General Reserve 251.15 –
Balance carried forward 2,685.19 (1,476.00)

Performance Review
Your Company has opened four departmental stores i.e. one at Bengaluru, two at Hyderabad and one at Amritsar, taking its chain of stores
to 34 stores (including HomeStop) spread across India.
The revenue is Rs. 141,181.25 lacs (previous year Rs. 127,108.20 lacs), registering a growth of 11.07% y-o-y basis. The net Profit
achieved was Rs. 5,023.05 lacs (previous year net loss of Rs. 6,371.80 lacs).
Dividend
Your Directors are pleased to recommend a dividend of Rs. 1.50 (previous year Nil) per equity share of Rs. 10 each.
The dividend, once approved by members in the ensuing Annual General Meeting will be paid out of the profits of the Company for the
year and will sum up to a total of Rs. 610.71 lacs, including dividend distribution tax.
Awards and Recognition
Your Company has been conferred inter-alia with the following awards and recognitions during the year under review:
• Best Distribution Centre Management System at Network Computing EDGE and PC Quest Enterprise Award - 2009.
• Best Visual Merchandising (Store Launch Category) at VMRD Retail Design Award - 2009.
• Most Admired Retailer of the Year- Consumer Relations at IRF 2009.
• Customer & Brand Loyalty in the Retail Sector at Loyalty Summit Award 2010.
• Most Admired Large Format National Fashion Retailer – Outstanding Achievement in Consumer Recognition and Loyalty at the
Images Fashion Forum.



• Most Admired Fashion Retail Professional of the year to Mr. Govind Shrikhande at the Images Fashion Forum.
• Gitanjali IFA Most Admired Large Format Retailer of the year – Partner Awards
• Gini Jony IFA Most Admired Large Format Retailer of the year – Partner Awards
• Triumph Maximum Consumer Reach – Partner Awards

Share Capital
During the year under review, the paid up equity share capital of the Company has increased by Rs. 4.85 lacs on account of allotment of
equity shares pursuant to exercise of stock options under ESOP Schemes.

Credit Rating
Fitch Ratings India Private Limited has maintained “F1(ind)” rating for commercial paper and short term debt programme of Company for
Rs. 50 crores and Rs. 30 crores respectively.

Finance
Your Company continues with various initiatives for bringing down the cost of borrowings which includes application of short term
instruments so as to have increase in cash flows.
The Company had obtained observations from Securities & Exchange Board of India in respect of its Right Issue of Rs. 500 crores
(subsequently reduced to Rs. 300 crores). The validity of the said observations had expired and accordingly the Right Issue has been
dropped.

Warrants to Promoters and Qualified Institutional Placement
As approved by members, through Postal Ballot on December 16, 2009, and in accordance with the provisions of Chapter VII of the
Securities & Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations 2009, the Company has allotted
4,000,000 warrants at a price of Rs.307.18 each to certain Promoters. Each warrant will be convertible into one equity share of Rs. 10
each.
Further, members through Postal Ballot have also approved to offer, issue and allot upto 4,000,000 Equity Shares and/ or
Securities convertible into upto 4,000,000 equity shares of the Company, in one or more tranches, by way of Qualified Institutional
Placement ("QIP").

Employees Stock Option Plan
Your Company has formulated and designed various Employees Stock Option Plan Schemes (ESOP Schemes) for employees. During the
year under review, the Company has allotted 48,521 Equity Shares of Rs. 10 each on exercise of vested options by certain employees
under the said ESOP Schemes.
During the year under review, under Employees Stock Option Plan Scheme 2008, the Company has granted 516,400 stock options at an
exercise price of Rs. 110/- on April 29, 2009 and 200,000 stock options at an exercise price of Rs. 382/- on March 24, 2010 respectively
to the specified employees.
Further, 632,931 Stock Options granted under Employees Stock Option Plan Scheme 2005 have been surrendered to the Company.
The particulars of Employees Stock Option Plan (ESOP) Schemes, as required by SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999, as amended, are appended herewith and forms part of this Report.

Subsidiaries
Ministry of Corporate Affairs, Government of India, vide order No. 47/127/2010-CL-III dated March 22, 2010, has granted approval that
the requirement to attach various documents in respect of subsidiary companies, as set out in sub-section (1) of Section 212 of the
Companies Act, 1956, shall not apply to the Company. Accordingly, the Balance Sheet, Profit and Loss Account and other documents
of the subsidiary companies are not being attached with the Balance Sheet of the Company. Financial information of the subsidiary
companies, as required by the said order, is disclosed in the Annual Report. The Annual Accounts of the subsidiary companies and
the related detailed information will be made available to any member of the Company and its subsidiaries, who may be interested in
seeking such information. The annual accounts of the subsidiary companies will also be kept open for inspection by any investor at the
Registered Office of the Company and that of the respective subsidiary companies. The Consolidated Financial Statements presented by
the Company include financial results of its subsidiary companies, which has been duly audited by the Statutory Auditors.



Crossword Bookstores Limited, a wholly owned subsidiary of the Company had appointed the Company, w.e.f. July 1, 2006, as its master
franchisee, pursuant to the Master Franchise Agreement, to carry on ‘Crossword’ business at its existing and new store premises which
may be identified by the Company from time to time. Now, the Company and Crossword, propose to terminate the said Agreement and
handover ‘Crossword’ business back to Crossword Bookstores Limited, together with its fixed assets, current assets, rights, liabilities/
obligations of all nature and kind along with its employees. The Company proposes to seek, members approval to handover ‘Crossword’
business back to Crossword Bookstores Ltd; by postal ballot under section 293(1)(a) of the Companies Act, 1956.

Human Resources
The Company takes great pride in the commitment, competence and vigour shown by its employess in all realms of business. The
Company continues to take new initiatives to further align its HR policies to meet the growing needs of its business.
People development continues to be a key focus area in the Company. Special designed training modules for the frontline employees are
being delivered from time to time to meet the training needs of the employees.
As on date of the Balance Sheet, the Company had a total of 3,851 Customer Care Associates.

Fixed Deposits
During the year under review, the Company has not accepted any deposit under Section 58A of the Companies Act, 1956, read with
Companies (Acceptance of Deposits) Rules, 1975. No amount of principal or interest was outstanding as on the Balance Sheet date.

Auditors
Your Company’s Statutory Auditors, Deloitte Haskins & Sells, Chartered Accountants, Mumbai, retire at the conclusion of the ensuing
Annual General Meeting. Deloitte Haskins & Sells have sought the re-appointment and have confirmed that their re-appointment, if made,
shall be within the limits laid down under Section 224(1B) of the Companies Act, 1956.
The Audit Committee and the Board of Directors recommends the re-appointment of Deloitte Haskins & Sells, Chartered Accountants, as
the Statutory Auditors of the Company for the financial year 2010-2011.

Directors
In appreciation of Mr. B. S. Nagesh's farsighted vision, wisdom and guidance, which have been invaluable to the Company’s growth, he
was elevated as Non-Executive Vice Chairman with effect from August 18, 2009, after his successful association for more than eighteen
years with the Company. He played a key role in the phenomenal growth and success of the Company.
Apart from his extraordinary entrepreneurial acumen, Mr. Nagesh is a great visionary. His affectionate care for the well-being of the
employees, his belief in human values and business principles & ethics are some of the principles upon which the Company stands today.
They have enabled the Company to build a successful and sustainable business model.
Your directors would like to place on record their sincere gratitude towards the guidance and contribution made by Mr. B. S. Nagesh and
welcomes him as the Vice Chairman of the Company.
Mr. Govind Shrikhande has been entrusted with the responsibility of the day to day management of the affairs of the Company, as the
President & CEO & Executive Director of the Company with effect from August 18, 2009.
In accordance with the provision of the Companies Act, 1956 and Articles of Association of the Company, Mr. G. L. Mirchandani and
Mr. Deepak Ghaisas, Directors of the Company, retire by rotation at the ensuing Annual General Meeting and being eligible, offer
themselves for re-appointment. A brief resume, expertise and details of other directorship and committee membership thereof of these
directors are given in the explanatory statement annexed to the Notice convening the Thirteenth Annual General Meeting.

Corporate Governance
The Company has been pro-active in following the principles and practices of good Corporate Governance. The Company has taken
adequate steps to ensure that the conditions of Corporate Governance as stipulated in clause 49 of the listing agreement with the Stock
Exchanges are complied with.
A separate section on Corporate Governance and Auditors Certificate is annexed hereto and forms part of this Report.

Compliance with the Code of Conduct
The Company had evolved and adopted a Code of Conduct for its Board of Directors and its management personnel based on the
principles of good corporate governance and best management practices. The declaration of compliance with the Code of Conduct has
been received from them. The Code is available on the website of the Company.



A certificate to this effect from Mr. Govind Shrikhande, President & Chief Executive Officer & Executive Director forms part of
this Report.

Demat Suspense Account Unclaimed Shares
There are 315 Equity Shares of the Company which were allotted in Initial Public Offering of 2005, were lying in the escrow account due
to non- availability of shareholders correct particulars. Despite various reminders to them, by Karvy Computershare Private Limited our
Registrar and Share Transfer Agent, no response has been received. As a result, the said unclaimed shares are credited to ‘Shopper’s
Stop Ltd - Unclaimed Shares Demat Suspense Account; in view of compliance of Clause 5A of the Listing Agreement. Such shareholders
may approach the Company with their correct particulars and proof of their identity for crediting requisite shares from the Demat
Suspense Account to their individual demat Account. The voting rights on these shares shall remain frozen till the rightful owner of such
shares claims the shares.

Postal Ballot
The Company proposes to seek approval of members on June 21, 2010, through postal ballot in respect of the following:
1. Making investment in securities by subscription/ purchase or otherwise / loans or advances/ guarantee/ security(ies) etc. in Hypercity
Retail (India) Ltd; upto an extent of Rs. 200 Crores under Section 372A of the Companies Act, 1956.
2. To handover ‘Crossword’ business to Crossword Bookstores Limited, a wholly owned subsidiary of the Company under Section
293(1)(a) of the Companies Act, 1956.
3. To delete the existing Article 150 – ‘Common Seal’ of the Articles of Association of the Company and substituting it with a new
Article under Section 31 of the Companies Act, 1956.

Conservation of Energy, Technology absorption and Foreign Exchange earnings & outgo.
The Company is engaged in the continuous process of energy conservation through improved operational and maintenance practices. The
brief of the particulars in respect of various steps and initiatives taken regarding conservation of energy and technology absorption and its
disclosure as stipulated by the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is as under.
• Daily maintenance of power consumption in every store.
• Adoption of Variable Frequency Drives (VFD’s) for Air handling units with temperature sensors.
• Adoption of new LED lighting to reduce the energy consumption.
• Installation of lighting energy saving devices (Step down transformer) for Energy conservation.
• Controlled the energy consumption of HVAC system by optimizing the temperature inside the stores.
• Optimized lighting by making necessary changes in the circuits and installing the sensors.
• Installed capacitor Banks to Maintain the Power factor and reduce the losses.
• DSM initiatives to reduce the excess unutilized demand there by reducing the fixed energy cost.
• All above efforts resulted in the conservation of 4,043,638 units of electricity across the chain during the year which amounts to
appx. Rs. 309.74 lacs.
The Company also proposes to commence energy auditing, improvement in pumping system, reduction in energy cost in due course
of time.
The Company earns Foreign Exchange on sale of its merchandise to its customers. Foreign Exchange outgo during the year included
purchase of computer software and purchase of merchandise, professional fees etc. The foreign exchange earnings during the year was
Rs. 4,224.40 lacs (previous year Rs. 4,392.57 lacs), where as Foreign Exchange outgo was Rs. 3,387.03 lacs (previous year Rs. 3,745.49 lacs).

Particulars of Employees
The particulars of employees’ as required under Section 217(2A) of the Companies Act, 1956, read with Companies (Particulars of
Employees) Rules 1975, as amended, forms part of this Report. However, in pursuance of Section 219(1)(b)(iv) of the Companies Act,
1956, the report and accounts are being sent to all shareholders of the Company, excluding the Statement of Particulars of Employees,
which is available for inspection at the Registered Office of the Company during its working hours. Any shareholder interested in such
particulars may inspect the same.



Directors’ Responsibility Statement
Pursuant to Section 217 (2AA) of the Companies Act, 1956, the Board of Directors confirm that:
1. In the preparation of Annual Accounts, the applicable accounting standards had been followed along with proper explanation
relating to material departures;
2. they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable
and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2010 and of the profit of the
Company for the year ended on that date;
3. they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions
of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting frauds and other
irregularities;
4. they have prepared the annual accounts on a ‘going concern’ basis.

Auditors Report
The Board has duly examined the Statutory Auditors report to accounts and the clarifications, wherever necessary, have been included in
the Notes to Accounts, section of Annual Report.

Acknowledgement
Your Directors wish to convey their appreciation to all customers, business partners, suppliers, banks and financial institutions for their
invaluable support and look forward to continued support in the future.
Your Directors would also like to place on record their sincere appreciation to the employees of the company for the total commitment,
dedication and hard work at all levels. To them goes the credit for the Company’s achievements.
And to you our shareholders, we are deeply grateful for the confidence and faith that you have always reposed in us.

For and on behalf of the Board of Directors

Mumbai, Chandru L. Raheja
April 28, 2010 Chairman

Certificate of Compliance with the code of conduct for the financial year 2009-10
I, Govind Shrikhande, President & Chief Executive Officer & Executive Director of the Company, hereby declare that the Company has
adopted a Code of Conduct for its Board Members and its management personnel and they have affirmed compliance with the said Code
of Conduct.

For Shopper's Stop Ltd.

Govind Shrikhande
Mumbai, President & Chief Executive Officer &
April 28, 2010 Executive Director


Annexure to the Directors' Report Shopper's Stop Ltd.

Information required to be disclosed under SEBI(ESOS and ESPS) Guidelines, 1999 as on March 31, 2010
Description ESOP III ESOP IV ESOP V - 1 ESOP 2008 - 1 ESOP 2008 - 2
Options Granted 155,640 122,340 100,151 516,400 200,000
Date of Grant 01.05.2004 01.02.2005 28.12.2005 29.04.2009 24.03.2010
The pricing formula Rs.150/- Rs.240/- The options granted The options The options
to eligible employees granted to eligible granted to eligible
are granted at the employees are employees are
average of the granted at the granted at the
daily closing price closing price of closing price of
of Equity Shares the Equity Shares the Equity Shares
of the Company of the Company at of the Company at
at BSE during the BSE on the working BSE on the working
period of 6 months day immediately day immediately
immediately preceding the date preceding the date
preceding the of grant. The options of grant. The options
date on which were granted at an were granted at an
the options were exercise price of Rs. exercise price of Rs.
granted. The Options 110/- 382/-
were granted at an
exercise price of Rs.
384/-
Options vested 113,517 81,249 65,573 — —
Options exercised and 109,638 66,517 16,781 — —
total number of equity
Shares arising as a result
of exercise of Options
Options lapsed/Cancelled 42,810 45,889 42,166 3,700 —
Variation of terms of — — — — —
options
Money realised by 16,445,700 15,964,080 6,443,904 — —
exercise of options
Total number of Options 3,192 9,934 41,204 512,700 200,000
in force
Options granted to Senior Management personnels
B S Nagesh 22,560 13,980 11,353 50,000 —
Govind Shrikhande 9,230 7,270 5,306 130,000 12,000
C B Navalkar 7,140 4,470 3,469 50,000 8,000
Salil Nair 5,610 3,810 2,952 50,000 8,000
Arun Gupta — — — 20,000 6,000
Vivek Mathur — 2,310 1,302 10,000 4,000


Annexure to the Directors' Report Shopper's Stop Ltd.

Options granted to any employee during the year amounting to 5% or more of options granted during the year
B. S. Nagesh 22,560 13,980 11,353 50,000 —
Govind Shrikhande 9,230 7,270 5,306 130,000 12,000
C. B. Navalkar — — — 50,000 —
Salil Nair — — — 50,000 —
Options granted to any — — — — —
employee equal to or
exceeding 1% of the
issued capital of the
company at the time of
grant
Diluted Earnings Per Share (EPS) pursuant to issue of shares on The diluted EPS of the Company calculated after considering the
exercise of option calculated in accordance with (AS) 20 Earnings effect of potential equity shares arising on account of exercise of
Per Share. options is Rs. 14.40 per share.
Where the Company has calculated the employee compensation Had the Company followed fair value method for accounting
cost using the intrinsic value of the stock option, the difference the stock option compensation, the compensation expenses
between employee compensation cost so computed and the would have been lower by Rs. 1,088.39 lacs. Consequently profit
employee compensation cost that shall have been recognised after tax would have been higher by Rs.1,088.39 lacs and the
if it had used the fair value of the option, shall be disclosed. The basic EPS of the Company would have been Rs. 17.53 per share
impact of this difference on profits and on EPS of the Company (higher by Rs. 3.13 per share) and the diluted EPS would have
shall also be disclosed. been Rs. 17.43 per share (higher by Rs. 3.11 per share).
Weighted average exercise prices and weighted average fair Weighted average exercise price is Rs. 185.94 and weighted
value of the options shall be disclosed seperately for options average fair value is Rs.78.12.
whose exercise price either equals or is less than the market price
of the stock.
A description of the method and significant assumption used Black Scholes Option Pricing model using Volatility of 49.43%, risk
during the year to estimate the fair values of options. free rate of 6.06%, expected life of 3.28 years, dividend yield of
0.30% and stock price of Rs.186.29.
The Employee Stock ESOP 2005 No. of Options Date of Grant Grant Price Vesting Schedule
Options granted to Scheme
employees under these
ESOP V - 2 * 157,931 29.07.2006 Rs. 540/- 30% - 29.07.2007
ESOP 2005 Schemes have
been surrended to the 30% - 29.07.2008
Company. 40% - 29.07.2009
ESOP V - 3 145,000 29.07.2006 Rs. 540/- 100% - 29.07.2009
ESOP V - 5 330,000 23.08.2007 Rs. 485/- 35% - 29.07.2010
35% - 29.07.2011
30% - 29.07.2012
Total 632,931
* 2,568 options granted under ESOP V-2 are not being surrendered by resigned employees.


Certification by CEO & CFO Shopper's Stop Ltd.

To,
The Board of Directors
Shopper’s Stop Limited
Eureka Towers,
B Wing, 9th Floor,
Mindspace, Link Road,
Malad (West),
Mumbai – 400 064

Dear Sirs,

We hereby certify that:

(a) We have reviewed the financial statements and the cash flow statement for the year and that to the best of our knowledge
and belief:

i. these statements do not contain any materially untrue statement or omit any material fact or contain statement that might
be misleading;
ii. these statements together present a true and a fair view of the Company’s affair and are in compliance with existing accounting
standards, applicable laws and regulation.
(b) There are, to the best of our knowledge and belief, no transaction entered into by the Company during the year which are fraudulent,
illegal or violative of the Company’s code of conduct.

(c) We accept responsibility for establishing and maintaining internal controls for financial reporting and that we have evaluated the
effectiveness of the internal control systems of the Company pertaining to financial reporting and we have disclosed to the auditors
and the Audit Committee, deficiencies in the design or operation of such internal controls, if any, of which we are aware and the
steps we have taken or propose to take to rectify these deficiencies.

(d) We have indicated to the auditors and the Audit Committee:

i. significant changes in internal control over the financial reporting during the year;
ii. significant changes in accounting policies during the year and that the same have been disclosed in the notes to the financial
statements; and
iii. instances of significant fraud of which we have become aware and the involvement therein, if any, of the management or an
employee having a significant role in the company’s internal control system over financial reporting.

For Shopper's Stop Limited

Govind Shrikhande C. B. Navalkar
President & Chief Executive Officer & Executive Director Group Chief Financial Officer

April 28, 2010


Management Discussion and Analysis Report Shopper's Stop Ltd.

Indian Retail – The Story So Far
The Indian retail market – the fifth-largest retail destination in the world – was ranked the most attractive emerging market for investment
in the retail sector in management consultancy firm A.T. Kearney’s eighth annual Global Retail Development Index (GRDI) in 2009.

The modern retail industry today stands at a size of US$ 25 bn. The attractiveness quotient of India as a retail destination is clearly borne
out by the fact that as of July 2009, FDI inflows in single-brand retail trading stood at approximately US$46.60 mn, according to the
Department of Industrial Policy and Promotion (DIPP).

The availability of quality real estate for modern retail has undergone a sea change. In 1999, India had three shopping malls, collectively
measuring less than 1mn square feet. By the end of 2006, the country had 137 shopping malls, occupying 28 mn square feet. By the end
of 2008, it is estimated that there were more than 450 malls in India, accounting for at least 120 mn square feet.

Modern Retail Today
The modern retail sector, which currently accounts for around 5 per cent of the Indian retail market, is all set to witness maximum number
of large format malls and branded retail stores in South India, followed by North, West and the East in the next two years. Tier II cities like
Noida, Amritsar, Kochi and Gurgaon, are emerging as the favoured destinations for the retail sector with their huge growth potential.

Further, this sector is expected to invest around US$ 503.2 million in retail technology service solutions in the current financial year. This
could go further up to US$ 1.26 billion in the next four to five years, at a CAGR of 40 per cent. Moreover, many new international apparel
brands are preparing to open outlets in India.

From mandis to malls, Indian retailing has come a long way. The transformation of Indian retailing is to be noticed, especially with the
Indian economy playing a crucial role globally. Differentiation, branding, compelling customer experience, exploring commoditization,
share of purchasing power, and continuous innovation has now become the key retail strategies which the modern retail players are
focusing on. Out of the Indian GDP of about US$1036 bn in 2007, retail was about US$295 bn. Some key trends have now emerged in the
Indian retail industry in real estate (rental partnerships, revenue share model, rental holidays for property delays), in innovation of retail
formats and consolidation and collaboration between competing players to synergise costs and scale.

The slowdown in the past year and a half has taken a certain toll on the modern retail in India.

A study has pointed out that organised retail penetration, which was expected to touch 16% by 2012 from the current 5 %, is likely
to reach only around 10.4%. However, along with the slowdown came lessons for the modern retail players. Cost control, focus on
profitability and sustainable growth rather than exponential growth, have become the new mantras in the industry which augur very
well for its future. Modern retailers have taken strategic measures like store rationalisation, changes in supply chain, consolidation of
operations and improvement in IT infrastructure. These will be beneficial in the long-run. In the current scenario, Indian retailers are also
looking for opportunities to partner with foreign players as it could bring in the much needed capital and expertise.

The next big wave is expected to be internet retailing, already an accepted mode of shopping in the more mature western markets.
The benefits of internet retailing are unanimously accepted and acknowledged by most manufacturers, retailers and consumers alike.
From manufacturers and retailers’ perspective, internet retailing offers benefits in the form of cost-effectiveness, profitability and easy
accessibility and can be utilized across diverse products and services in grocery as well as non-grocery items.

Internet retailing allows greater access to products, enabling second tier cities and suburbs to acquire a wider variety of goods. At the
same time, the internet allows consumers to compare and contrast price points and product benefits and thus make informed decisions
on purchases. While internet surfing, emailing and other web-enabled services gained vast popularity, internet retailing and actual
purchases are currently confined to a very niche consumer base. Unlike other developed countries, Indians are not overly enthusiastic
about non-store retailing. Indian consumers’ prefer to touch and feel items before making their purchasing decisions and prefer to go to a



physical store instead. Also the products are not standardized and there could be tremendous amount of variability in products, sizes etc.
This has proved to be the key challenge for internet retailing and it therefore enjoyed only a restricted appeal for Indian consumers.

Besides pure play internet retailers, modern retailers in India have decided to adopt a mix of online and offline retailing. Whilst sales over
the internet for Indian modern retailers are very miniscule today, it is expected to become larger in the coming years.

Modern Retail Growth Outlook
After the turbulence of 08-09, the modern retail industry has bounced back in 09-10 on the back of improved customer sentiment and
astute cost management.

Strong underlying economic growth, population expansion, the increasing wealth of individuals and the rapid construction of organised
retail infrastructure are key factors behind the forecast explosive growth in India’s retail sales. Economic growth should create an
expanding middle and upper class consumer base. There will also be increasing penetration of India’s second and third tier cities, such
as Pune, Chandigarh etc. The greater availability of personal credit and a growing vehicle population that provides improved mobility also
contribute to a trend that is likely to see the value of the retail segment grow from an estimated US$427.25 bn in 2009 to US$755.47
bn by 2014.

The growth in the overall retail market is expected to be driven, largely by the explosion in the modern retail market. According to
Investment Commission of India (ICI) data, this segment accounted for US$12.10 bn of sales in 2006, 4.6% of the total retail segment.
As per study by Business Monitor International Ltd., Modern retail sales will reach US$99.09 bn by 2014, 13.1% of the total retail sales
in the country. Retail sales of Asian countries in 2009 were an estimated US$2.29 trn. China and India alone accounted for almost 93%
of regional retail sales in 2009, and by 2014 their share of the regional market is expected to be close to 94%.

The key Growth drivers of modern retail in India remain unchanged and actually substantiate the business model. The main drivers
of Indian modern retail growth can broadly be defined as economic growth, favourable population demographics and increased
industry investment.

• Economic growth: Though Asia, and consequently India was initially badly hit by late 2008’s sharp global economic slowdown, but
its recovery has been remarkable. The Indian domestic demand is showing clear and robust signs of growth. A positive five-year
economic forecast, ignoring the threat of a renewed slowdown on the back of unwinding fiscal stimulus should contribute to healthy
wage growth and sustained middle class expansion, which are major contributors to retail sales growth.

• Population growth: India has favourable age demographics, with a large young population that has the ability and keenness to spend.
This trend has in fact been a telling reason for return to health of the economy and the modern retail industry.

• Urbanisation: Economic growth has fuelled urbanisation region-wide as rural dwellers have moved to the city in search of higher
paid employment. This has been a major fillip for the urban-centric modern retail sector, dramatically lifting its potential audience
size. Such favourable geographic demographics have led urban real estate prices to soar but the benefits of a captive, high-spending
urban audience have outweighed the downsides for now.

• Westernisation: Increased exposure to Western consumption habits has fuelled consumerism not only in India but also in developed
and emerging Asia. Westernisation has helped in stimulating interest in a wider range of modern retail concepts.

• Industry investment: With modern retail model intact and the potential for serious players clearly being beyond doubt, modern
retailers in India have lined up impressive plans for growth and expansion. The investments, therefore made by these players will
go along way in increasing penetration and growth of modern retail. Furthermore, increased multinational interest & involvement in
the Indian modern retail will further fuel investments and growth. This will also result in the introduction of retail best practices that
support sales.



Strengths:

• First Citizens: Our First Citizens Club has continued to be the main stay of our business. With a total membership exceeding 1.6
million, the company strongly believes that its loyalty program is not only a source of substantial competitive advantage, but is
also a very strong strategic tool. Your company believes that its First Citizens will continue to drive its growth by increased average
expenditure in our stores which will be aided by targeted promotional activities.

• Strong focus on Systems & Processes: We continue to invest in our front and back end processes and systems. The company believes
that continuous investment in people, process and technology will drive sustainable and profitable growth for the company.

• Strong distribution and logistics network and supply chain: We have created a strong distribution and logistics network, with our four
Distribution Centers covering more than 400,000 square feet handling over 400,000 SKUs per year, and working 24x7.

• Enhancing our Human capital: We periodically assess our Customer Care Associates (CCAs) across all levels through assessment
centers to identify competency gaps and use development inputs (i.e. training, job rotation etc.) to bridge them. We benchmark our
compensation and benefits through consultants, with the best in the industry to pay our associates accordingly.

• Strong understanding of the real estate business: We benefit from our Promoters’ association with the real estate business and their
relationships with developers, which have helped us acquire preferred properties at competitive rates.

• Shopping Experience: The Company pioneered the departmental store format in the Indian market when the Indian consumer was
deprived of choice. Customers were drawn by the shopping experience. This is the differentiation that the Company continues to
bank on. Price is not essentially a differentiator for the Company, shopping experience is. The Company imparts special training to its
employees to ensure that service is not compromised on.

• Management Strength & Corporate Governance: The Company has a professional and well-established management team, headed
by Mr. Govind Shrikhande. Furthermore, the Company’s unwavering focus on good corporate governance has been a beacon for the
industry. Our internal and external auditors are amongst the Big 4 audit firms of the globe. The Board has 5 independent Directors.

• Strong bargaining strength: Having been in existence for so many years and due to its strong brand image, the Company believes
that it is well placed in negotiations / re-negotiations of property rentals, better commercials terms with merchandise suppliers etc.
The Company has successfully grown gross margins year on year.

Risks and Concerns:
• Execution: We believe the key risk to our growth is execution risk. The next wave of expansion is expected to happen over the next
30 months and the timely execution of this expansion will be critical. The Company has a strong execution team and we believe it
has the capability to execute varied retail formats.

• Employee retention: With the Indian economy back on a growth path the Company believes that employee satisfaction and retention
will become very important. The demand for reasonably experienced personnel in modern retail will only increase in the near term
and long term. Your Company believes that this problem will persist until the industry reaches a steady growth phase.

• Delay in store delivery: Majority of the new stores planned are in malls and any delays in the construction of the malls will delay the
company’s retail expansion plan. However, the Company has built up a robust pipeline of future stores and believes that delays will
not materially affect expansion.

• Pressure on retail lease rentals: Rent is one of the largest components in a retail business’ fixed costs, and the case is no different
for the Company. Rentals are expected to harden once again in the near term.



• Government levies: Retail is currently not viewed as an industry in India. Hence there are certain levies / cascading effect of taxes on
the business which are proving to be a very large burden as there are no modes for the industry to recover or pass on these levies.
Delay in the roll out of the GST regime is also a matter of concern.

• Investee Companies: The company has invested in other entities and in the current economic scenario, it is expected that the returns
from these will have a delayed gestation period than what was originally envisaged.

Opportunities:

• Geographical reach: Your Company continues to increase its Pan-India footprint and is expecting to launch into its next expansion
phase in the next 30 months. The Company strategy to increase the number of departmental stores, improve city wise penetration
and increase market share in cities where it’s stores already exists remains unchanged.

• Hypercity – Leveraging the potential in mixed retail: The Company has entered the hypermarket segment, which is a high growth
segment by acquiring a 19% stake in Hypercity. We believe that the scope for hypermarkets in India is immense. The stores run by
Hypercity have shown very impressive performance in the year gone by.

• Format diversification: Your Company, in it’s constant endeavour to capture wallet share, has diversified into multiple formats viz,
HomeStop which retails hard and soft furnishings, Crossword for books, music and stationery, M.A.C. which retails high end cosmetic
products, Clinique which retails skin care products, Mothercare which retails infant and kids merchandise and airport retailing, by
tying up with the Nuance Group of Switzerland. The Company has also made a successful foray into internet retailing through its
e-retailing portal.

• Preferred partner for foreign players: Your Company believes that by virtue of it’s presence across all lifestyle categories in the
departmental format, it’s strong brand value and it’s presence in the books and music segment, it is best placed to bring in
international brands into the country, there by enriching the product bouquet for it’s customers and in turn increasing opportunities
for product diversification and profit enhancement.

Threats:

• Economic recovery: A slower than expected economic recovery remains the biggest risk to the Indian retail outlook. However
economic data of the last 3 quarters suggest that the recovery is well underway.

• Threat of new entrants: With India becoming an attractive retail market and the gradual increase in foreign participation in the sector,
the Company expects many new entrants thus increasing competition.

• Competitive rivalry in the industry: There is intense rivalry among leading national retailers for new locations and quality real estate.
This will further sharpen in the coming 2 years as the established players will focus on growth.

• Price wars: Although it stimulates the sector in general, the rise of discounting and its extension beyond grocery retail could pose
a threat to retail sales values, if not to retail volumes. Price wars became a mainstay of the mainstream grocery retail sector
throughout the economic downturn and the extension of this trend into homeware or apparel could undermine retail profit margins.

• Terrorism: Due to the sheer volume of people visiting retails outlets coupled with easy access, retail is considered as a soft target
and hence more prone to terror attacks as compared to others.



Customer Entry:
Retailers measure entry as footfalls, which is the number of people entering the stores. This is computed through manual count in all
stores during trading hours.
Customer Entry
Departmental Store
30

25 24.9
22.8 22.9

20 19.9
Customer entry (in mn.)

18.3

15 14.6

10

5

0
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Year
(Source: Company MIS)
Conversion Ratio:
Conversion is the ratio of the number of transactions (Cash Memo) versus the total customer entry into the stores. Tracking conversion
helps the retailer understand the productivity of his front-end store employees and the attractiveness of the merchandise and services.

Conversion Ratio %
Departmental Store

29%

28%
28%

27% 27% 27% 27%
27%
Conversion Ratio (%)

26%

25%
25%

24%

23%
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Year



Sales:
Gross Sales both at chain level and for Like-To-Like stores showed an improvement as compared to last year. The growth was 10% in
gross retail turnover. The sales per sq.ft have been computed on built-up area.

Sales (like-to-like growth %) Sales Per Square Feet
(Departmental Stores)
25 10500
21 9000 8671

Sales Per Square Feet (in Rs.)
8218
Sales (like-to-like growth %)

20 7576 7973 7883
17 7500 6903
15 14 6000

4500
10 9
3000
5 4 1500
1
0 0
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Year Year
(Source: Company MIS) (Source: Company MIS)
Apparel:
The Apparel contribution to total sales of the company was 59% in 2009-10 as compared to 60% in 2008-09. There has been growth in
Non-Apparel segment which has resulted in Non-Apparel sales percentage growing. This is primarily due to customer buying life style
products.
Non-Apparel:
This category includes Cosmetics, Personal Accessories, Jewellery, Leather Goods, Home Wares, Electronics, Books and Music. These
lifestyle products have high aspiration value, and as the consuming class increases, there will be a big surge in the demand for this
category. The Non-Apparel contribution to total sales of the Company was 41% in 2009-10.

Sales Mix (Departmental Stores)

Non-Apparels Apparels

100%

35.3% 39.0% 41.1% 38.8% 39.6% 40.9%
80%

60%
Sales Mix (%)

64.7% 61.0% 58.9% 61.2% 60.4% 59.1%
40%

20%

0%
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Year



Private Label & Private Brands:
Your Company aims to provide a differentiated and unique offering to the customer through its own private labels as well as through
exclusive private brands. The contribution of private label is at 18.1% of sales as compared to 19.9% last year and private label sales
remained constant. Your company has got an exclusive arrangement for departmental store business with MUSTANG JEANS, a German
Brand, for their Men’s and Women’s Wear. Our Austin Reed U.K exclusive agreement to retail men’s & women’s wear has posted a
healthy growth. As a part of it’s strategy to provide a wide range of merchandise to customers, your Company aims to fill in the gaps in
the national brand offering through its private labels & exclusive arrangements with private & international brands.
Average Selling Price (ASP):
Average Selling Price is the Gross Retail Sales divided by the number of units sold. Tracking ASP helps the retailer to align the offering as
per the customer segment as well as improve the productivity of the floor space.
Average Selling Price
(Departmental Stores)
900
855
821
800
759
Average Selling Price (Rs.)

704
700
647
605
600

500

400
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Year
Transaction Size (Rs.):
Transaction size represents the amount spent by each customer on his buying. This is computed by the total sales divided by the number
of cash memos.
Transaction Size (Rs.)
Departmental Store

2400

2100 2030
1843
1800
1713
1562
Transaction Size (Rs.)

1500
1366
1278
1200

900

600

300

0
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Year



Merchandise Purchase:
Your company’s ability to present on the shelves correct merchandise assortments in the right mix, style, colour & fashion is one of its
most critical success factors. A team of Buyers & Merchandisers continuously ensure that the pricing strategy and value proposition are
completely in tune with the customers’ expectations. We regularly monitor sales trends to optimize inventory levels.
Our well established systems and processes in Buying & Merchandising & Logistics enables us to efficiently manage the flow of inventory
to stores, provide prompt replenishments and manage pricing.
Your company believes in a broad distribution of risk with no high dependency on any single supplier and has a diversified supplier base.
Suppliers are selected after evaluation based on fairly stringent parameters which ensure the quality & reliability of supply. Alternate
distribution channels for inventory have also been put in place as a contingency, should the need arise.
Supplier Risks:
Our broadly varied offering necessitates alliances with a large number of suppliers from various business sectors. In order to mitigate the
risk involved, we enter into arrangements with vendors in various business formats such as Outrights Buy/Sale or return, Consignment &
Concessionaire/Conducting arrangement.
Shrinkage:
Shrinkage in the retail business is defined as the loss in inventory through a combination of shop lifting, pilferage, and errors in
documentation and transaction processing that go unnoticed. We have focus on inventory control and have set up a separate
department called profit enhancement, which not only monitors Shrinkage on a regular basis but also looks at various factors that
could lead to Shrinkage at stores and distribution centers. The profit enhancement department, Store Operations along with the Supply
Chain team have worked together and monitored the Shrinkage level on a month on month basis which has resulted in the Shrinkage
percentage being controlled at 0.40% of the Turnover and our endeavour will always be to lower this ratio through proper monitoring
and continuously reviewing Inventory management processes and systems.
Shrinkage
(as a % of Sales)
0.70%

0.65%

0.60%

0.55%
0.52%

0.50%
0.47%
0.46%
0.45%
0.41%
0.40% 0.41%
0.40%

0.35%
2004-05 2005-06 2006-07 1007-08 2008-09 2009-10
Year
Sustaining high Gross Margin:
The gross margin has shown improvement and has increased during the year to 31.9% from 31.7% as compared to the last year. The
Company believes that an increasing share of revenue from private labels, improved sales mix with higher contribution from lifestyle



products (i.e. watches, leather, jewellery, perfumes and cosmetics), and shrinkage control have helped improve gross margins. Vendor
management as also sourcing ability has improved with scale and would accrue more economies and higher gross margins going
forward.
Operating Profit:
Operating Profit (without exceptional items) has increased by 138% to Rs. 11,726 lacs from Rs. 4,924 lacs in the previous year.
The Operating Profit Margin has grown to 7.6% from 3.6% due to improved gross margins, improvement in like to like sales growth,
rationalization of costs, right sizing of some departmental stores / new business formats.

EBIDTA

14000

12000 7.6%

10000
EBIDTA (Rs. in millions)

8.9%
8000
5.5%
6000 8.5%
3.6% 11,726
4000 6.7%
5,660 7,874 6,503
4,924
2000
3,360

0
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Year

Operating Profit (without exceptional items) % to Gross Retail Sales

Interest:
Interest cost has reduced to Rs. 2,244 lacs as against Rs. 2,560 lacs mainly due to reduction in cost of funds and reduced borrowings.
Depreciation:
As a result of the review of the useful lives of fixed assets, the depreciation rates were revised from 1st April, 2009. Consequently the
depreciation charge for the year is lower by Rs. 3,190 lacs.
Profit after Tax:
The Company has achieved post tax profit of Rs. 5,023 lacs, as against a loss of Rs. 6,372 lacs, which is an increase by 179% over the
last year.
Dividend:
The Company has proposed a dividend of 15% amounting to Rs. 611 lacs (Including Corporate Dividend Tax).
Inventory:
The inventory as at the end of current year is Rs. 14,989 lacs as against Rs.14,498 lacs as at the end of the last year. Inventory holding
period is higher at 105 days during the current fiscal against 92 days last year due to opening of four new stores during the year. The
inventory has been valued at lower of cost and net realizable value.



Liquidity:
The cash generated from operations was Rs. 8,224 lacs.
Productivity / Operating efficiency parameters:
We look at our Gross Margin with reference to our Space, Inventory and Labour to monitor our efficiency with the help of 3 indicators i.e.
Gross Margin on Inventory (GMROI), Gross Margin Return on Floor Space (GMROF) and Gross Margin Return on Labour (GMROL).
GMROI helps to optimize inventory levels, GMROF helps to maximize the cash margins and GMROL helps to increase labour
productivity.
GMROI
GMROI

4.5
4.17

4.0

3.62
GMROI (Rs. Inventory)

3.5

3.29
3.0
2.75

2.5 2.35
2.23

2.0
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Year

GMROF
GMROF

2900
2735
2700
GMROF (Rs. per unit of retail space)

2576

2500
2520
2353 2471
2330
2300

2100

1900

1700
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Year



GMROL
GMROL

1,500,000
1,417,992
1,400,000

1,300,000

1,200,000 1,270,014
GMROL (Rs. per employee)

1,198,593
1,100,000 1,046,768

1,000,000 1,032,609
900,000
899,045
800,000

700,000

600,000

500,000
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Year

Partner Satisfaction Index (PSI):

The performance of any company depends on the association and relationship it builds with various vendors/partners over a period of
time. To evaluate this satisfaction and expectation, your company has appointed CSMM (Customer Satisfaction Measurement and
Management), a part of IMRB (Indian Marketing and Research Bureau) to do an impartial evaluation of our relationship with various
stakeholders. This helps your organization understand the expectations of various business partners, current strengths and concern areas
thereby help set a clear roadmap for improvement and better performance.

Our PSI scores for the five years are as below:

Year 2005 2006 2007 2008 2009

Scores 3.98 3.80 4.00 4.06 3.89

Partnership for Progress:

Partnership for Progress (PFP) is a vendor meet which your company conducts annually. During this event, your company gets and gives
opportunity to the top retail vendors/brands to discuss and strengthen the association, apart from exploring various business possibilities
with each other. The summit also becomes a platform for your company as well as its partners to share their experiences with each
other. Your company also invites well known international and national speakers to share learning and experience which is closely related
to Retail, Brand, Customer, Logistics, etc.

Your company also recognizes the performance of top partners who are rewarded with “SHOPPER’S STOP PINNACLE AWARDS” during
this summit.

This is an activity with more than 100 vendors/partners attending the summit.



Human Resources:

The global meltdown and recession, consumer spending and demands decreasing was a phase that was to pass by. We stood strong,
planning and calculating our future move, retaining our staff without going in for layoff. The phase took its turn to bring us to a grand
turnaround making each and every effort, correction and consolidation worthwhile.

In an ongoing process to increase the growth and development for our associates we have been looking at various levels of developmental
interactions. For the year under review we have provided the Baby Kangaroo program (BK), to identify potential associates, develop, train
and groom them for the next level and provide an opportunity for career progression.

The Managerial & Supervisory Training program (M.A.S.T) was conducted for 37 days with an exhaustive content through various internal
and external trainers. The objective was to ensure that the associates would be well versed with Technical Skills and Soft skills. The
assessments were conducted online through Reliance Web World. The objective of going online was to ensure efficiency and fairness to
the entire selection process.

The focus on Learning & Development has been an ongoing an integral part of the organization where there has been a 46.05% growth in
trainings hours extended to associates across all levels.

Training Hours 08-09 Training Hours 09-10 Growth Over Last Year %

6867.45 12728.94 46.05

The Gross Margin Return on Labour at 12%, has improved during the year.

Our company has conducted 76 assessment centers in the F.Y. 2009- 2010 covering 486 associates in order to provide growth opportunities,
ensuring a fair and transparent growth process.

The Associate Satisfaction Index (ASI) is conducted through an online survey yearly to understand the level of satisfaction associates
have towards their work, job satisfaction, loyalty index, helps us understand the strength and weakness of the organization to take
immediate corrective measures.

This year the ASI score is at 3.95 and the overall satisfaction levels were more or less the same across different levels.

Year 2006 2007 2008 2009 2010

Overall Loyalty Index 4.11 4.05 4.01 3.95 3.95

Marketing:

Carrying forward our new brand philosophy of ‘Start Something New’, was the central theme of all our advertising, promotions and events
this year. At Shoppers Stop, we have been always looking at providing our esteemed customers with exclusive merchandise. This has
propelled us to bring alive the effervescence of mega starrer films such as Love Aaj Kal, Chance Pe Dance and Karthik Calling Karthik.
Their immense popularity and success is a clear indication of the deep permeation of Bollywood in Indian fashion and the growing desire
of Indians to emulate their icons.

We have also set a Retail precedent through an exclusive retail arrangement with Vodafone-Essar for merchandising (in specific
categories) of their brand mascot - Zoozoo. This is a first-of-its-kind arrangement in the history of India’s advertising that a Brand mascot
is being licensed for merchandising. Character merchandising is a new emerging trend in India targeted at the Youth, and we have added
a whole new dimension to this. Given the increasing size of the Youth Audience at Shoppers Stop, this merchandising line fits well in our
merchandise offering.



This year also saw our focus shift from experienced based promotions to category based promotions. There were many category based
promotions that were well received by our customers – Watch Out festival, Foot fair, Stares & Glares, Glitter & Glamour to name a few.
These festivals focused on offers that were available across all brand available in our store for the particular category.

Customer Satisfaction:

At Shoppers Stop we strive to provide our customers with the best overall experience of shopping with us. To measure the customer
experience we conduct customer satisfaction surveys to evaluate a range of parameters including merchandise range and quality, store
environment, staff, transaction efficiency, loyalty programme, schemes and promotions to name a few and undertake improvements in
various areas.

We also include select competition stores in our surveys in order to measure experience in our stores as compared to competition.

Overall Customer Satisfaction Index:

January 2006 August 2006 November 2007 February 2009

60 63 63 81

Loyalty Programme:

Your Company has pioneered India’s first retail loyalty program - “First Citizens”. The First Citizens base grew by 26% from 12,77,109 to
over 16,11,578 customers in this year. During the current year, the First Citizens contributed 75% of the Company’s annual sales. The
First Citizen programme has 3 tiers - Classic Moments (entry level), Silver Edge and Golden Glow. Members fall into the various tiers on
the basis of their spends with us.

First Citizens also earn differential reward basis on their current tier of membership. First Citizens receive:-

• Reward points on their spends. These reward points can be redeemed for a wide variety of merchandise at your
Company’s stores.

• Exclusive schemes, benefits and promotions.

• Extended and exclusive shopping hours - especially during the festive season. Special previews before the sale periods.

• Invitations to exclusive events - both in-store as well as those organised outside the stores.

• Home delivery of altered merchandise.

• Exclusive First Citizens lounge at select stores to relax after hectic shopping.

First Citizens always stay updated with all details pertaining to their membership as well as the best of offers and privileges available,
through a unique service - First Citizens First. Through this service First Citizens get all the information that they want on their mobile
phones simply by sending an SMS.

This year, the company initiated an exclusive promotion only for First Citizens – First Citizens’ Fiesta. Under this promotion the member
earned 3 times the reward points besides lots of other special offers and deals. The promotion was very well received and it helped us
further reinforce our strong relationship with this member community.

Co-branded Credit/Debit card programme with Citibank:

Your Company in association with Citibank has offered its First Citizens an option to add on a credit card to their existing loyalty cards.


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