U.S. INDIA BUSINESS SUMMIT

1
PwC

• U.S. INDIA BUSINESS SUMMIT
• RETAIL, FRANCHISING AND LOGISTICS
• NOVEMBER 30, 2006

2
Contents

• Overview of the Sectors
• Players
• Policy status Expectations
• Key Enablers
• Some Challenges

3
Indian Organised Retail Industry

• The size of the organised Retail industry
  estimated at USD 7.8 bn in 2004 05 (only 3.5
  of total retail industry).
• Organised retailing is projected to grow at the
  rate of 2530 p.a. to USD 25 bn by 2010.
• Clothing, Textile Fashion accessories segments
  have a dominant share in the organised retail
  industry accounting for 39 of the market.

Source Crisinfac
Source IMAGES KSA Technopak Study
4
Indian Franchising Industry

• Sales from franchised business have grown at an
  average rate of 2030 p.a. in the past in India
  as compared to an economic growth rate of 6-8.
• Size of the franchising market estimated at USD
  2.2 bn in FY 2004 and is rapidly growing.
• New franchise development is estimated at USD 110
  mn annually.
• Estimates of the Franchising Association of India
  reveal that there are nearly 800 Franchise
  systems already operating in India.

5
Indian Logistics Industry

• The estimated size of the Indian Logistics
  Industry in 2006 is USD 73 bn which is 13 of
  the GDP.
• Of this the share of the Organised Logistics
  Outsourcing Industry is 6
• The Organised Logistics Outsourcing market is
  projected to witness 25 CAGR over the period
  FY06 FY11 and grow to USD 15 billion by 2011.
• This would increase the contribution of the
  organised logistics industry to the total
  logistics industry to 14 per cent by 2011.

6
Key Players

• Domestic Players
• Early entrants
• Pantaloon, RPG group, Shoppers Stop, Westside,
  Lifestyle, etc
• Other large business groups like Reliance,
  Bharti, Piramal establishing/expanding presence
  in retail
• Large Franchisors NIIT, Café Coffee Day, Aptech,
  etc

Existing Foreign Players Global Retail majors
through franchising model Pizza Hut, McDonalds,
Subway, KFC, etc Cash Carry formats Shoprite
and Metro Recent tie-ups Bharti-Wal Mart,
Tatas-Woolworths
Foreign Aspirants Waiting in the pipeline (also
scaling up sourcing from India) JC Penny,
Carrefour, Tesco
7
Policy Status Expectations

• FDI in retail is currently restricted in India
• FDI of up to 51 has been allowed in retail of
  single branded products
• However, cash carry format is allowed 100 FDI
  (Metro, Shoprite)
• 100 FDI allowed for development of real estate
  subject to certain conditions
• Foreign players are allowed to tap Indian market
  through franchising and strategic licensing
  agreements
• Govt. has already taken steps for the
  implementation of a universal VAT system
• There is a strong expectation that FDI
  restrictions will be gradually eased in the short
  to medium term

8
Key Enablers

• Demographics in Indias favour
• Increase in disposable incomes
• Increase in use of credit
• Better shopping experience
• Better product offerings
• Real estate space availability
• Wealth effect

9
Some Challenges

• Infrastructure
• Supply Chain Logistics
• Skilled Labour a significant challenge
• Competitive activity reduction in margins
• Rentals