Max Hyper Markets To Add 25 Hypermarkets By 2012

NEW DELHI: After a phase of consolidation, billionaire Micky Jagtiani-owned Max Hypermarkets, which operates Spar-branded superstores, plans to expand its presence to new geographies and open 25 hypermarkets by 2012. This will result in a 10-fold increase in the company’s retail space—from 120,000 sq ft currently to 1.2 million sq ft.

Managing director Viney Singh said the company is expecting revenues to rise proportionately, from Rs 150 crore currently, to Rs 1,250 crore by 2012.

The company, currently, operates three large-format stores—two in Bangalore and one in Hyderabad—and is set to open its flagship property, a 90,000 sq ft store, in Bangalore next week.

Mr Jagtiani, who controls the Landmark Group, one of West Asia’s largest retail chains, owns fashion retail chain LifeStyle and Max Hypermarkets in India. Max is the licencee for the Spar franchise in India. A Dutch brand, Spar International, is one of the world’s largest retailer of food, with presence in over 33 countries.

“We will now open 6-7 stores each year through 2012. These are all large-format stores with an average size of 50,000 sq ft,” Mr Singh said.

India’s organised retail industry has been treading cautiously after many players had to shelve aggressive expansion plans as poor consumer sentiment slowed sales through 2008 and 2009. At least one player—Subhiksha—went bankrupt while another—Vishal Retail—is going through a corporate debt restructuring process.

Resurgent sales in the first months of 2010 have inspired greater confidence among large retailers such as Reliance Retail, Future Group and Spencer Retail, which have variously forged joint ventures, rejigged top management and undertaken other initiatives in a sign that the $37-billion industry might be gradually gaining momentum once again.

Max’s Singh said the company is investing Rs 400 crore, of which, about Rs 250 crore will be equity and the rest debt, to fund the expansion.

Max Hypermarkets will open 6-7 stores each year till 2012. While most of the stores will be in tier-2 cities in south India, such as Mangalore, Mysore, Vishakhapatnam, Vijayawada, and Coimbatore, the company will also be opening large stores in cities such as Mumbai, Pune, Chennai and New Delhi.

In many new malls opening in these cities, Max has signed on as an anchor client. “Being a hypermarket, we are naturally an anchor client for malls,” Mr Singh said, adding that his company works on a revenue sharing basis with mall owners. “It varies obviously, but on an average, the cost of occupancy works out to be 3-4% of revenues,” Mr Singh said. Rent and salaries are typically the largest cost overheads for retail operations.