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Monday, March 20, 2006

RPG retail arm may tap capital market next year

Great Wholesale Club, a little known RPG outfit that owns the Spencer's brand and runs the retail business, is likely to go in for a public issue next year after a rechristening exercise, reports The Hindu Business Line.

According to Sumantra Banerjee, President & Chief Executive of RPG Enterprises, the retail business of the group is all set to witness major activities in the next 12 months.

From the existing level of 2 lakh square feet of retailing space the group is adding another 8 lakh square feet and it would be spread all across India. The corporate headquarters of RPG Retail is also being shifted from Chennai to Kolkata. The process would start from April 1.

"We are galloping at a rapid pace. The size of our locked up properties, which is now 20 lakh square feet would jump to 40 lakh square feet by the end of the next fiscal," Banerjee said.

Regarding investments, he said, all properties are on rent. According to him, the group would be spending approximately Rs 200 crore (Rs 2 billion) on the retail business. He said it would be funded through internal accruals, debt and a public issue. However, he was not sure of the size of the equity offering, as it would solely depend on the need of the liquidity.

The name of the holding company, Great Wholesale Club, would be changed too. "That name does not mean anything. Whenever we go public we would have to make that necessary change," he said.

For the year ended March 31, 2006, RPG Retail would be registering a turnover of Rs 450 crore (Rs 4.50 billion). However, it would not breakeven. According to Banerjee, this is not a deterrent for an IPO.

"The total business might not be recording profits but all our stores are making money. Our earnings will increase with the opening of the new shops but the overhead expenses remain constant. So, profits would start coming in," he said.

He went on to clarify that at present RPG Retail is recording a turnover of Rs 30-35 crore (Rs 300-350 million) a month.

It is expected to increase to Rs 80-90 crore (Rs 800-900 million) a month by December 2007.


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