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Calcutta, April 15: RPG Enterprises has kicked off a consolidation drive. It has proposed the merger of its retail business with flagship company CESC Ltd.
The move is aimed at turning CESC into a conglomerate with a presence in retail, real estate and power. This is expected to raise the topline of CESC to over Rs 7,000 crore in the next two-and-a-half years from around Rs 2,500 crore.
The retail business of RPG is under Spencer’s Retail Ltd, which has an annual turnover of Rs 750 crore. This is expected to touch Rs 5,000 crore in three years. CESC has informed the bourses that the board would consider the merger of the Spencer’s holding company on Tuesday.
However, no RPG official was available for comment.
Observers feel the merger of the retail business is the first of many more consolidations within the group.
RPG Enterprises operates in seven segments — power, tyre, transmission, retail, entertainment, technology and specialities — through listed and unlisted entities. One of the options could be fewer companies having robust balance sheets and possessing economies of scale.
Experts feel the merger of the retail business will be useful to CESC in the medium term. The company is pursuing three power projects, but none of them will commence operations in the next three to four years. In that period, its topline would have stagnated and bottomline grown marginally.
In February, the company has floated a subsidiary — CESC Properties — for real estate.
Initially, the company will develop the idle land under its possession.
The retail business, on the other hand, started about a decade back but has only gathered momentum now. There are many formats such as agri-retail, book retail and hypermarts under Spencer’s. By merging Spencer’s parent Pathik Retail, Spencer’s will become a subsidiary of CESC.
Spencer’s plans to set up 4,000 stores in the next three years. Around 200 will be opened in the next three months. It will require an investment of Rs 1,200 crore, to be funded by debt and equity in the ratio of 1:1.
