The Economic Times, Chaitali Chakravarty & Bhanu Pande

19 October 2006, NEW DELHI

CALL it the Reliance effect! The retail boom has sent the aspirations of small regional retailers soaring. Delhi-based pharmacy chains, Guardian and 98.4, garment retailer Ritu Wears and Bombay Selections, department store Big Jo's , VMart , Gokul Mart and SRS, South Indian durables retail chain Viveks are all engaged in talks with banks, high networth individuals (HNIs) and private equity funds to raise money for expansion. Not surprisingly, scores of terms sheets and investment seeking proposals are floating in the market.

For instance, Guardian Life Care is looking to raise $20m and is in talks with a few PE firms. "We want to put in place 2,000 - 3,000 outlets in the next five years and the fund we are raising will help implement our first phase of expansion (600-700 outlets)," says Ashutosh Garg, CMD, Guardian Life Care. Similarly, South Indian durables retail chain, Viveks, wants to raise around Rs 150 crore to complete its expansion in the South . Subsequently, it has plans to go for an IPO to fund its pan-India expansion. Gokul Mart and Bombay Selection are looking for funds to open 10 new stores.

Small retailers have sought the help of financial consultants who can devise innovative ways to raise funds. Says Jyoti Gadia , director of Resurgent India, a management and financial consultancy, which has the mandate from six retailers to tie-up funds, "Banks put forth too many conditions on small players. Under such circumstances , we have to look at new ways of raising funds. Credit card securitisation is one of them.'' According to him, many HNIs have also shown interest in the retail sector. "Some of the retailers want only Rs 25-30 crore to help them open the first few stores and that's not much for an NRI,'' says an industry source.

"Even private equity players find the sector interesting as most retailers are no longer single store entities. As they show reasonable scalability, PE firms see a clear exit prospect," says Devangshu Dutta, CEO, Third Eyesight, a retail consultancy. "On the other hand, small retailers are finally showing appetite for external investors and willingness to share ownership."

For instance, last month PE fund Actis invested $65m in the Nilgiri's group, a South Indian food brand. GIC Special investments from Singapore has joined Actis in making this investment. The funding provided by Actis will be used to expand the company's South Indian franchise network and strengthen its supply chain and distribution capacity as well as to expand the group's food manufacturing operations.

RELIANCE BOOKS PRIME SPACE IN ANSAL MALLS

New Delhi: With the fight for retail space heating up, Reliance Industries, which has major plans for this sector, has reached an understanding with Ansal Properties and Infrastructure (APIL) for taking up the anchor space in the real estate major's upcoming mall projects, report Mayur Shekar Jha & Joji Thomas Philip. According to sources, the first of the deals has already been signed, under which Reliance Retail will be the anchor tenant in the upcoming Ansal Plaza malls in Greater
Noida and Palam Vihar, Gurgaon. Even as sources confirmed the development , this comes as a blow to Shoppers' Stop, which is currently the anchor tenant in most of the Ansal Plazas. This move also assumes importance considering that APIL has already outlined plans to build about 18 new malls, most of which would be located in tier II and III cities. "With Reliance Retail too actively targeting these cities, the company can now ride on the APIL's infrastructure," sources added.

When contacted, an Ansal Properties and Infrastructure (APIL) spokesperson said, "We are hopeful of a long lasting relationship with Reliance, but there is no formal agreement as such."