August 29, 2006

MUMBAI: The Rs 39,000-crore Aditya Birla Group has appointed global consulting firm, McKinsey & Co to chalk out the company’s retail rollout plans. Sources suggest that McKinsey has been given the responsibility to strategise on the entry strategy for the group. McKinsey is to study the opportunities in the sector and advise on plans to launch a chain of fashion-led outlets and hypermarkets.

The Aditya Birla Group recently became the third major business house to announce its foray into organised retail. Mukesh Ambani’s RIL and Sunil Mittal’s Bharti Enterprises have also joined the bandwagon to enter this lucrative and fast-growing sector.

Analysts suggest that new and existing Indian companies are planning to scale up at a fast pace before the imminent entry of foreign players is allowed in the sector.

McKinsey has already built a strong retail practice and is also working with Future Group (formerly Pantaloon Group), while KSA Technopak is working closely with Reliance. Other consultants like, AT Kearney, Ernst & Young, PwC and Third Eyesight are also said to be working with new and incumbent players.

Aditya Birla Group has also formed a senior management team that is exploring these opportunities. Sources suggest that the group plans to invest more than $1bn in the sector and Group CFO, Sumant Sinha has been given the responsibility to raise funds for this foray.

The company is also actively hiring people from sectors like retail and FMCG. Apart from recruiting some key people from ITC and Godrej, the company is said to have roped in Shoppers Stop’s head of HR, Vijay Kashyap and head of operations, Sanjay Badhe. The company spokesperson however declined to comment on anything related to its retail plans.

Sources said that the group’s retail plans will be led through the company’s apparels and textile subsidiary, Madura Garments. The Rs 620-crore Madura Garments owns and markets Louis Philippe, Van Heusen, Allen Solly and Peter England through company franchisees and third-party outlets.

It also runs an exclusive chain of stores selling products of German fashion major Esprit. It is expected that these operations will be further scaled up in the first phase. Madura Garments also supplies to international brands like Marks & Spencer’s, Tommy Hilfiger, Polo and Ralph Lauren.

It has recently passed a shareholder resolution to transfer this export contract business out of the company.

“The group is already present in telecom, IT and IteS and the entry into organised retail is part of the group’s strategy to further expand into sunrise sectors. Historically, the group business portfolio has been loaded in favour of the commodities businesses,” said an industry analyst.

By Shuchi Vyas, The Economic Times – August 29, 2006