If the FDI in Retail reform is cleared, this could be sentiment-positive for existing retailers such as Pantaloon Retail, Shoppers Stop (for Hypercity format) and Trent, which could be potential beneficiaries. Prima facie, FDI in multi-brand retail would likely benefit capital-constrained retailers such as Pantaloon Retail, accelerating the pace of investment in the supply chain to meet demands of increasing scale and enhancing efficiencies, besides expertise of foreign retailers. However, given state level discretion involved here and other riders, actual deals may take time to crystallise.
Specific to Pantaloon Retail, it has been facing many challenges like soft consumer demand, geared balance sheet and negative free cash flows
which has forced the company to divest some of its profitable formats. Pantaloon’s stock price has risen sharply in recent trading sessions in
anticipation of this decision. We think while it could be a potential target for alliance with a foreign retailer, it could be a long wait before any
such deal materialises.
