1. S. No Name Roll No.
1 Nupoor Jhingan 201610105
2 Reen Simranjeet Singh 201601335
3 Divya Soin 201601349
4 Shashank Sharma 201601329
5 Kaustuv Sen 201601341
Advance Corporate Finance
Presentation
on
The Indian Retail Sector
Submitted To: Dr. Kulbir Singh
Group No. 57
Section F
2. Retail accounts for over 10 per cent of the country’s
Gross Domestic Product (GDP)
Contributes 8 per cent of the total employment.
India is the world’s fifth-largest global destination in
the retail space.
India’s retail market is expected to nearly double to
Rs.66 trillion by 2020 from Rs.39 trillion in 2015
Introduction
3. Traditional Trade v/s E-Commerce:
Sales are expected to reach Rs.7 trillion by 2020 from
Rs.1 trillion in FY2016.
It is expected to reach Rs.14 trillion in terms of gross
merchandise value (GMV) and 35 billion shoppers by
2025
India’s direct selling industry is expected to reach a
size of Rs 23,654 crore by FY2019-20
4.
5. Investment Scenario and the future
The Indian retail trading has received Foreign
Direct Investment equity inflows totalling Rs.35
billion during April 2000–March 2016
Amazon India has opened six new fulfillment
centres across India
6. Investment Scenario and the future
IKEA, the world’s largest furniture retailer, plans
to invest Rs 10,500 crore to set up 25 stores across
India
15,000 permanent employees and 37,500
temporary employees to assist in running its stores.
ABFRL will acquire exclusive online and offline
rights of Forever 21.
7. Government Initiatives
Government of India has allowed 100 per cent FDI in
online retail of goods and services.
100% FDI in single brand retail and 51% in multi brand
retail
The Ministry of Urban Development has come out with
a Smart National Common Mobility Card (NCMC)
Implementation of Goods and Services Tax
10. Road Ahead
E-commerce is expanding steadily in the
country
Bottom of the Pyramid i.e. tier 3 and tier 4
cities are being targeted
Retailers would leverage the digital retail and
marketing channels
11. MERGER & ACQUISITIONS
Merger – A merger is a corporate strategy of combining
different companies into a single company in order
to enhance the financial and operational strengths of both
organizations. It is also termed as ‘Amalgamation’
Acquisition- An acquisition is a corporate action in
which a company buys most, if not all, of another firm’s
ownership to assume control of it. Acquisition occurs
when a buying company obtains more than 50%
ownership in a target company.
14. MERGER vs ACQUISITION
Acquisition may be different in name only. Unlike all
mergers, all acquisitions involve one firm purchasing
another – there is no exchange of stock or consolidation
as a new company. Acquisitions are often congenial, and
all parties feel satisfied with the deal. Other times,
acquisitions are more hostile.
15. WAYS & TOOLS TO VALUE & ASSESS
A TARGET COMPANY
1.Comparative Ratios
- Price-earning ratio
- Enterprise –value-to sales ratio
2.Replacement cost
3.Discounted cash flow
16. Financial Distress
An individual, business, or company's inability to generate revenue when
there are too many debts.
Difficulty paying off, its financial obligations to its creditors.
Illiquid assets or revenues sensitive to economic downturns.
SIGNS:
Poor profits indicate a company is not experiencing financial health.
Struggling to break even indicates a business cannot sustain itself from
internal funds and needs to raise capital externally.
Poor sales growth or decline indicates the market.
When debtors take too much time paying their debts to the company .
17. Current ratio/Liquidity ratio:
Aditya Birla Retail Shoppers Stop Cantabil Retail Westside Future Retail
2012:1.06 - 2.71 3.29 1.29
2013:0.56 - 1.98 2.78 9.74
2014:0.71 0.54 1.42 2.50 1.31
2015:0.82 0.54 1.36 0.92 1.37
2016:0.85 0.59 1.48 0.82 1.49
Companies would aim to maintain a current ratio of at least 1 to ensure that the value
of their current assets cover at least the amount of their short term obligations.
However, a current ratio of greater than 1 provides additional cushion against
unforeseeable contingencies that may arise in the short term.
Current ratio is the primary measure of a company's liquidity. Minimum levels of
current ratio are often defined in loan covenants to protect the interest of the lenders
in the event of deteriorating financial position of the borrowers.
Current
Ratio
=
Current Assets
Current Liabilities
18. Debt to Equity Ratio:
Aditya Birla Retail Shoppers Stop Cantabil Retail Westside Future Retail
2012: 2.42 - 0.01 0.18 0.73
2013: 45.06 - 0.01 0.15 0.96
2014: 17.19 0.60 0.01 0.17 1.69
2015: 17.04 0.60 0.01 0.05 0.81
2016: 3.15 0.60 0.06 0.05 1.38
Debt-to-equity ratio which is low, say 0.1, would suggest that the company is not
fully utilizing the cheaper source of finance (i.e. debt) whereas a debt-to-equity
ratio that is high, say 0.9, would indicate that the company is facing a very high
financial risk.
19. Z= 3.3 (EBIT/ Total Assets) + 1.2 (Net Working Capital/ Total Assets) + 1.0 (Sales/ Total
Assets) + 0.6 (Market value of equity/ Book value of debt) + 1.4 (Accumulated retained
earnings/ Total Assets)
Where Z < 1.23 indicates bankruptcy prediction
1.23 <= Z <= 2.90 indicates a grey area
Z > 2.90 indicates no bankruptcy
For Example:
In Aditya Birla group
Z Score = Sum Of 5 Factors =6.4
“Hence no bankruptcy”
Z-Score
26. RECENT DEVELOPMENTS
• The share of derivatives has gone up sharply in retail trading
pie, while that of commodities has been going downwards.
Meanwhile, cash trading turnover has remained more or less
stagnant.
• The decrease in retail volumes in the commodity space has
coincided with the Rs 5,600-crore National Spot Exchange
Limited (NSEL) scam in 2013.
• Average monthly retail in 2016 is at Rs 27.8 lakh crore, double
compared to Rs 14 lakh crore in 2013, data compiled by
domestic brokerage
