Biggest India Department Store Expects Record Growth for Year

(Bloomberg) -- Future Group, which runs India’s largest chain of department stores, expects record growth in the current financial year as a favorable monsoon boosts agricultural output and rural incomes.

The group, which controls four listed entities including Future Retail Ltd., is expecting to register 25 percent to 28 percent growth, Chief Executive Officer Kishore Biyani said in an interview Wednesday. Consumption will also be driven by the Indian government’s pay revisions and this week’s central bank interest-rate cut, he said.

“The Indian economy is gaining momentum,” said Biyani, who incorporated the company under the name Manz Wear Private Ltd. in 1987 and has since grown it to include food, fashion and electronics stores across the country. “As inflation is under control, I am not expecting increase in raw material prices and, hence, margins will be good,” he said, without disclosing details.

In recent years, retail chains have struggled as high real estate costs, increasing e-commerce competition and tepid demand eroded profits and forced them to change store formats, shrink hypermarkets and shut hundreds of outlets. The Indian market for fast-moving consumer goods is projected to more than double to $104 billion by 2020 from $49 billion currently, according to an Oct. 5 report by lobby group The Associated Chambers of Commerce of India and market research firm TechSci Research Pvt. Ltd.

Expansion Plans

Biyani is unfazed by the challenges and said he aims to add 2.5 million square feet of retail store space in the next one year, accounting for half of the industry’s total expansion plans. The group, which runs hypermarket chain Big Bazaar in India, wants to reach 1 trillion rupees ($15 billion) in revenue by 2021 from current sales of 180 billion rupees, he said.

Future Retail runs the nation’s biggest chain of stores, by market value.

Government pay revisions that implement recommendations of the Seventh Pay Commission are helping the Indian economy, said the first-generation entrepreneur, who also controls retail chains Easyday and Food Bazaar. The changes suggested by the commission will benefit as many as 4.7 million workers and about 5.2 million pensioners and began taking effect Jan. 1.

To contact the reporter on this story: P R Sanjai in Mumbai at psanjai@bloomberg.net. To contact the editors responsible for this story: K. Oanh Ha at oha3@bloomberg.net, Candice Zachariahs, Sunil Jagtiani