A combination of slowing sales and heavy debt is the recipe for a poor show. Pantaloon Retail, once the cornerstone of organised retail in India, succumbed to both these factors — it posted an 82 per cent slide in consolidated net profits for the nine months to March 2012, on the back of a meagre 10 per cent revenue increase. Difficultly in raising equity added to troubles, and the stock has plummeted in the past year.

As inflation and high interest rates bit consumers, they turned away from some discretionary purchases. Excise duties on branded garments dealt an additional blow, since it necessitated higher product prices. Apparel makers were forced into advancing sale seasons. For instance, the December 2011 quarter for Pantaloon, usually buoyant due to festival sales, saw revenue growth of just one per cent.

Meanwhile, interest costs surged because of the high debt taken on to fund expansion. Total debt as of June last year is Rs 7,846 crore or 2.5 times the company's equity.

The company's efforts to hive off stake and raise equity did not meet with much success until it demerged flagship fashion format Pantaloon, and handed over controlling stake to Aditya Birla Nuvo. Even after the demerger, the transaction still leaves Pantaloon with Rs 6,246 crore of debt.

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