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Larger landscape on the anvil for retail sector
Buzzing:
The listed space in the Indian retail sector is expected to undergo a metamorphosis with the listing of large retail companies like Reliance Retail, Flipkart among others, which would significantly enhance the share of market capitalisation of the retail sector.
Context:
Overall, the retail sector contributes mere ~ 3% of Indian listed companies market cap vs. ~ 11% for the US market. Also, market cap distribution of Indian retail sector is disproportionate with top three listed companies contributing large chunk (two-third) of the overall sector market cap while the remaining are predominantly midcap, small cap companies.
Our Perspective:
We believe that listing of larger retail players could lead to a re-rating of valuation multiples for the companies operating in the retail sector. The pandemic has enabled companies with strong b/s to capture emerging demand trends and accelerate the pace of market share gains due to their ability to invest in store expansion, technology & logistic solutions to widen their customer base and improvement in customer order fulfilment capabilities. We expect retail companies in our coverage universe to add ~16 million incremental square feet store space in FY21-24E vs. ~8 million added in FY18-21 (~2x). On the back of healthy square feet addition pipeline coupled with higher focus on omni channel play (physical + online) we expect revenue for our retail coverage universe to grow at CAGR of ~30% in FY21-24E (CAGR of ~17% from pre-Covid market in FY20). We believe major retailers such as Trent, Avenue Supermarts, ABFRL, Titan and Bata to be the key beneficiaries.
Disclaimer – I ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is acting as a distributor to solicit bond related products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.
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