Sanjiv Goenka in Calcutta on Thursday. Picture by Rashbehari Das
Calcutta, Nov. 1: RP-Sanjiv Goenka Group has kicked off the process of listing retail arm Spencer’s, buoyed by the opening up of foreign direct investment in multi-brand retail.
Sanjiv Goenka, chairman of the group, said a consultant, most likely KPMG, would be appointed to provide a road map for the listing.
“We have in-principle decided to list the company. It’s a good time to list Spencer’s as the firm is steadily moving towards profitability and investors’ interest in the retail sector is high following FDI in multi-brand retail,” Goenka said.
Spencer’s is a wholly owned subsidiary of power generator and distributor CESC Ltd, the flagship firm of the group.
Goenka said there were two options to list the firm, besides an initial public offer. “We could do a mirror image demerger or induct a strategic investor,” he said.
In a mirror image demerger, the shareholding of Spencer’s will be exactly that of holding firm CESC. An IPO or the demerger will take longer than a strategic investment since the two firms will be subjected to regulatory and court clearances.
However, the induction of a strategic partner, especially foreign, is unlikely as the group is not keen to sell the firm built over the last 10 years.
“I am confident of the business of Spencer’s. I am seeing consistent growth in the last 24 months. There is a strong possibility it will earn a positive EBIDTA (earnings before interest, depreciation, tax and amortisation) by the second quarter of the next fiscal,” he added.
In 2011-12, Spencer’s pruned its losses to Rs 220 crore from Rs 253 crore in the previous fiscal.
Spencer’s will increase general merchandising and apparel in its stores, having a margin of at least 35 per cent. Food items offer a 16 per cent margin.
The company will open seven stores, increasing the trading area from 9.5 million square feet to 11.1 million square feet.
Goenka defended the acquisition of BPO major Firstsource and said the purchase would not strain the balance sheet. He also said CESC was “hungry” for more acquisitions in power.