Pantaloon may merge Home Solutions

Pantaloon Retail (India) Ltd is looking to merge its subsidiary Home Solutions Retail with itself in a deal pegged at Rs 700 crore, even as it plans to launch a new private label brand over the next one month.

“There are many options we are looking at out of which one is this (Home Solutions Retail merger). Nothing has been concluded as yet,” managing director Kishore Biyani said.

According to reports, private equity major ICICI Venture and Kotak will exit Home Solutions Retail as part of the merger process. Operating in the home and hard furnishing goods consumption space, Home Solutions Retail operates retail formats such as Home Town, E-zone, Home Bazaar, Furniture Bazaar and Electronics Bazaar.

Pantaloon Retail has 66.86% stake in Home Solutions Retail. During 2008-09, it posted a loss of Rs 5.73 crore on income of Rs 1,071 crore. Pantaloon also plans to launch a new private label which will be called ‘Ektaa’ and will be in the food segment.

“The new private label will be launched by end December and will have 40 stock-keeping units to start with,” a person close to the development said.

Retailers generally have private labels in fast moving consumer goods, apparel and non-apparel segments as margins are normally higher by 5-6% than branded products and there is more flexibility in pricing of such products.  Pantaloon Retail also expects private labels to contribute 20% to its topline from the current 18%.

In the foods category, the company currently sells products under the private labels of Tasty Treat, Premium Harvest and Fresh & Pure. In home and personal care segment, it has CareMate and CleanMate private labels.

In fact, private brands like John Miller, Lombard, Annabelle and Bare contribute as high as 80% of total sales within formats like Pantaloons.  To tap the growth opportunities in the processed foods and body care segments, Pantaloon Retail will introduce a range of new brands and products in these two areas.

“...the company is working with two companies, Capital Foods and Faces Cosmetics, in which Future Group has invested, to introduce a range of new brands and products in processed food and body care, respectively,” it said in its 2008-09 annual report.

The Kishore Biyani-owned retail major is also planning to unlock value by selling some of its non-core investments and assets.  “The company continues to believe that the businesses of the subsidiaries would create value over a long run and the company would be able to unlock value in future,” the report said.

Last month, the company had initiated a move to reorganise its various businesses.
As part of the restructuring exercise, Big Bazaar, Food Bazaar and other related formats will spun off into wholly owned subsidiaries.

Pantaloon Retail’s board has also approved transferring investment in Future Brands and assets of its non-retail businesses held through Future Knowledge Services Ltd and
Future Learning and Development Ltd for Rs 190 crore to a promoter company. Pantaloon aims to end the year to June 30 with 12.7 million square feet of space.