15 November 2012
Update | Sector: Retail
Pantaloon Retail
BSE SENSEX
S&P CNX
18,670
5,684
CMP: INR198
Neutral
Restructuring continues; Fashion demerged, FVRL merged
5QFY12 Core Retail PAT down 91%; maintain Neutral
Bloomberg
PF IN
Equity Shares (m)
217.1
52-Week Range (INR)
1,6,12 Rel. Perf. (%)
239/125
4/16/7
M.Cap. (INR b)
43.0
M.Cap. (USD b)
0.8
Valuation summary (INR b)
Y/E June
2010 2011 2012E*
Sales
89.3 110.1 122.5
EBITDA
8.2
9.6 11.0
NP
1.7
1.9
1.1
EPS (INR)
8.2
8.7
4.8
EPS Gr. (%)
25.8
7.1 -45.2
BV/Sh. (INR) 136.1 140.1 139.5
P/E (x)
24.3 22.7 41.3
P/BV (x)
1.5
1.4
1.4
EV/EBITDA (x) 7.4
8.1
7.9
EV/Sales (x)
0.7
0.7
0.7
RoE (%)
6.0
6.2
3.4
RoCE (%)
14.2 12.1 12.0







Prices as on 12 November 2012,
*December year ending
Shareholding pattern %
As on
Sep-12
Promoter
43.7
Dom. Inst 11.3
Foreign
22.1
Others
23.0
Jun-12 Sep-11
43.7
43.7
11.9
20.0
22.4
23.6
22.0
12.7
Stock performance (1 year)
Investors are advised to refer through
disclosures made at the end of the
Research Report.

Pantaloon Retail's results for 5QFY12 (financial year extended till Dec) were in line
with our modest expectations. Core retail PAT was down 91% YoY to INR29m.
PF's 5QFY12 sales grew 5% YoY to INR 30.6b, in line with estimates. Same store sales
(SSS) growth was 10.8% for Lifestyle division, -0.2% for Value and -3.5% for Home.
September quarter was partially impacted by shift in festive season, as per management.
Gross space addition during the quarter stood at 0.17msf; net addition was zero due
to space optimization in unviable stores.
Core Retail EBITDA increased 5% to INR 2.6b, margins remained flat YoY at 8.7%. Despite
40bp improvement in gross margins and 30bp savings in employee costs, EBITDA margins
were flat due to 80bp increase in rent and overheads.
35% YoY jump in interest cost to INR1.8b (higher rates and higher debt) and 18%
higher depreciation expenses resulted in 91% decline in Adj PAT to INR29m. Excluding
other income, which went up 67% YoY, PBT from operations reported a loss of INR88m.
PF has also restructured its core retail business. It has (a) Transferred Fashion business
from PF and Future Ventures into a newly created entity, Future Fashion (to be listed)
and transferred debt of INR12.26b to the new entity, (b) Merged its wholly owned sub
Future Value Retail back into PF. This restructuring is preceded by sale of its Pantaloon
format business to ABNL and divestment of PF's 41.6% stake in Future Capital.
We believe the restructuring is aimed at creating a separate vertical for its retail
business, and making it ready for FDI infusion post the government's clearance of 51%
FDI in multi-brand retail.
We maintain our estimates for FY12E (Dec-end) and await clarity from management
on the trajectory and financial repercussions of the recently announced initiatives
(specifically financials of Future Fashions). Given the lackluster core retail performance,
we maintain Neutral.
5QFY12 PAT down 91%; SSS in Lifestyle improves; higher capital costs
drag bottom-line
Core retail: Sales grew 5% YoY to INR30.6b; EBITDA grew in line at 5% to
INR2.6b as margins remained flat YoY at 8.7%. 35% increase in interest cost to
INR1.8b (higher rates and higher debt) and 18% higher depreciation resulted
in 91% decline in Adj PAT.
 Standalone: Standalone sales were up 15%, gross margins expanded 90bp;
EBITDA margins were flat, driven by higher rental and overheads (up 170bp
YoY). EBITDA is up 14% YoY; however, 24% increase in interest burden and
17% rise in depreciation led to INR19m loss at PBT level. Reported PAT of
INR86m is beneficially impacted by INR131.8mn gain on sale of investments.
 Future Value Retail (difference between core retail and standalone): Value
retailing reported flat sales (down 0.2%) and 0.8% increase in EBITDA as
margins remained flat at 9.3%. 46% higher interest and 18% higher
depreciation led to 80% decline in PBT to INR63m.

Gautam Duggad ([email protected]); +9122 3982 5404
Sreekanth P V S ([email protected]); +9122 3029 5120
1
Pantaloon Retail
Muted performance continues (INR m)
1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 5QFY12
Core Retail
Sales
25,814
Gross Profit
7,416
Gross Margin (%)
28.7
EBITDA
2,127
EBITDA Margin (%) 8.2
Interest
933
Adjusted PAT
428
PAT Margin (%)
1.7
Standalone
Sales
9,915
Gross Profit
3,459
Gross Margin (%)
34.9
EBITDA
958
EBITDA Margin (%) 9.7
Interest
420
Adjusted PAT
176
PAT Margin (%)
1.8
Future Value Retail
Sales
15,899
Gross Profit
3,957
Gross Margin (%)
24.9
EBITDA
1,169
EBITDA Margin (%) 7.4
Interest
513
Adjusted PAT
252
PAT Margin (%)
1.6
27,586
7,933
28.8
2,383
8.6
1078
472
1.7
28,119
8,055
28.6
2,479
8.8
1096
505
1.8
28,604
8,445
29.5
2,585
9.0
1177
492
1.7
29,106
8,496
29.2
2,523
8.7
1305
330
1.1
28,933
8,492
29.4
2,612
9.0
1582
135
0.5
30,264
8,755
28.9
2,776
9.2
1725
120
0.4
29,627
8,701
29.4
2,763
9.3
1804
39
0.1
30,600
9,067
29.6
2,647
8.7
1761
29
0.1
10,243
3,602
35.2
1,074
10.5
462
199
1.9
9,887
3,173
32.1
683
6.9
484
201
2.0
9,996
3,311
33.1
664
6.6
524
191
1.9
10,784
3,910
36.3
1,198
11.1
657
124
1.2
11,080
4,019
36.3
1,259
11.4
736
56
0.5
11,059
3,747
33.9
993
9.0
794
54
0.5
11,176
3,916
35.0
1,043
9.3
846
26
0.2
11,921
4,132
34.7
908
7.6
814
-46
-0.4
17,343
4,332
25.0
1,310
7.6
616
273
1.6
18,232
4,882
26.8
1,795
9.8
612
304
1.7
18,608
5,134
27.6
1,921
10.3
653
301
1.6
18,322
4,585
25.0
1,325
7.2
648
206
1.1
17,854
4,473
25.1
1,353
7.6
846
79
0.4
19,205 18,451 18,679
5,009
4,784
4,936
26.1
25.9
26.4
1,783
1,721
1,739
9.3
9.3
9.3
931
958
947
66
13
75
0.3
0.1
0.4
Source: Company, MOSL
SSS growth hampered due to shift in festive season vis-à-vis previous year
and poor consumer sentiment; Lifestyle up 10.8%
SSS declined by 0.2% in Value retailing (up 0.4% in 4QFY12), first decline in last 15
quarters. Home Retail SSS declined 3.5% (down 0.9% in 4QFY12). However,
Lifestyle reported a strong 10.8% SSS (4.7% in 4QFY12).
 Management attributed the poor SSS performance to shift in festive season.

Value SSS declines 0.2%; lowest in 15 quarters
Home retailing SSS growth declines 3.5%
Source: Company, MOSL
15 November 2012
2
Pantaloon Retail
Gross area addition of ~0.17msf; net addition remains flat; total area under
operation =16.36msf

PF has added 0.17msf of gross retail space during the quarter but it rationalized
space in unviable stores resulting in flat net space addition. Total area under
operation remained flat QoQ at 16.36msf. During the quarter, it opened 2
Pantaloon, 2 Big Bazaar, 1 Brand Factory and 2 Home Town Express stores.
Key Retail Metrics
1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 5QFY12
Retail Space (m sq ft)
Big Bazaar
Central
Pantaloons
Home Town
E Zone
Food Bazaar
KB’s Fair Price
Others
Total
Store Count (x)
Big Bazaar
Central
Pantaloons
Home Town
E Zone
Food Bazaar
Net Store Addition (x)
Big Bazaar
Central
Pantaloons
Home Town
E Zone
Food Bazaar
7.0
2.2
1.3
1.1
0.5
0.5
0.1
0.7
13.4
7.4
2.4
1.5
1.1
0.5
0.5
0.2
0.7
14.2
7.6
2.5
1.5
1.2
0.5
0.5
0.2
0.8
14.8
7.6
2.6
1.7
1.2
0.5
0.6
0.2
0.9
15.2
7.6
2.8
1.8
1.2
0.4
0.5
0.2
1.1
15.7
7.9
3.0
1.9
1.2
0.4
0.5
0.2
1.2
16.3
8.0
2.9
2.0
1.3
0.4
0.5
0.2
1.2
16.33
8.1
3.2
1.9
1.3
0.4
0.5
0.0
1.1
16.36
7.9
3.2
2.0
1.2
0.4
0.5
0.0
1.2
16.35
136
27
48
11
42
55
143
29
53
11
43
54
148
30
54
12
44
56
149
32
59
12
42
56
149
35
59
14
36
49
157
38
64
15
36
47
160
37
65
17
33
44
162
41
65
17
40
46
160
42
65
14
36
44
4
2
0
0
6
2
7
2
5
0
1
-1
5
1
1
1
1
2
1
2
5
0
-2
0
0
3
0
2
-6
-7
8
3
5
1
0
-2
3
2
-2
-1
4
1
1
0
0
2
0
-3
-3
7
-4
-3
2
-2
Source: Company, MOSL
Valuation and view
Core retail operations of PF remained lackluster due to weak consumer sentiment
during the quarter and shift in festive season. However, we note that Pantaloon's
peer, Shoppers Stop (predominantly a Lifestyle retailer) reported sequential
improvement in operations. Low SSS has resulted in sharp deterioration in
operating leverage, as Core Retail EBITDA margins remain flat despite gross
margins improvement.
 High leverage servicing continues to take toll on bottomline.
 Results apart, PF continues to restructure its businesses (detailed below). Stake
sale in Pantaloon format to ABNL, divestment in Future Capital and anticipated
stake sell in its insurance verticals as well as Staples JV will help shift focus back to
Retail businesses and stop further cash burn in non-Retail adventures. While
frequent change in business structure renders like-to-like comparison difficult,
we believe emergence of simpler independent retail verticals will help PF raise
capital going forward.

15 November 2012
3
Pantaloon Retail

We await more clarify from management on financials of different verticals post
the recent business re-structuring. Maintain Neutral.
De-merger of Fashion Business into a separate entity; to be listed
Pantaloon continues to re-structure its business and has now announced de-merger
of its Fashion format business into a separate company - Future Fashion. Details of
the proposed de-merger are as follows:
 PRIL and FVIL (Future Ventures India Ltd) will de-merge their respective fashion
businesses into a new entity - Future Lifestyle Fashions (FF)- that will get listed.
PF will transfer INR12.26b of debt from its books to FF.
 Future Value Retail, 100% subsidiary of Pantaloon, will be merged into PF. We
note that management had carved this business out of PF in CY10 to better focus
on Value Retail portfolio.
Post the de-merger - Future Fashion will include fashion businesses of a) PRIL - Central, Brand Factory, aLL, Planet Sports
b) FVIL - portfolio of fashion brands being transferred to FF including Indigo Nation,
Scullers, Urbana, Urban Yoga, Jealous 21, Biba, AND, Global Desi, Turtle, Celio, Lee
Cooper, Clarks, Holii, Daniel Hechter, Manchester United, Privilege Club.
Swap Ratio
 1 equity share in Future Fashion for every 3 shares held in Pantaloon Retail (India)
Limited.
 1 equity share in Future Fashion for every 31 shares held in Future Venture (India)
Limited.
 Post the realignment, PRIL shareholders will hold 49.8% in Future Fashion, FVIL
shareholders 30.5%, and PRIL (as a corporate entity) 19.7%.
15 November 2012
4
Pantaloon Retail
Proposed restructuring
Source: Company
On completion of the proposed de-merger scheme Future group will have three
separately listed companies focusing on specific verticals.
1. Pantaloon - Hypermarket (Big Bazaar), Supermarket (Food Bazaar), Home Retailing
(Home Town) and electronics (E-Zone). It will continue to own the investments
made in various retail support subsidiaries (supply chain solutions, sourcing, ecommerce, office supplies), JVs in insurance, and textile mills in Mumbai. It will
operate 11msf of space.
2. Future Fashion - Central, Brand Factory, aLL and Planet Sports along with various
brands being transferred from FVIL. It will operate 3.5msf of space.
3. Future Ventures - Portfolio of various FMCG private label brands, rural distribution
chain (Aadhar) and convenience store chains, KB's Fairprice & Big Apple. The FMCG
brands portfolio includes Fresh & Pure, Premium Harvest, Tasty Treat, Clean Mate,
Care Mate, Poonya, Ekta, Sangi's Kitchen along with Smith & Jones and Ching's
Secret (owned through a 43.7% stake in Capital Foods).
Estimated revenues for CY13 (Pro-forma) for the listed entities of group
15 November 2012
Listed company
Retail space
(M sqft)
Pantaloon (PF)
Future Fashion
FVIL
11
3.5
NA
No of
stores
315
142
NA
Pro forma CY13 est
revenue(INR B)
98
31
13.5
Source: Company, MOSL
5
Pantaloon Retail
Future group structure post the de-merger of Fashion business
Source: Company
Comments on de-merger
The proposed de-merger, in our view is aimed at creating a simplified structure so
as to facilitate capital raising for different verticals.
 Pantaloon, as a part of its strategy to reduce non-core exposure, has recently
divested its stake in Future Capital (41.58%). It is also reportedly in talks to sell its
stake in insurance verticals.
 We await better clarity on financials of Fashions verticals as well as the overall
impact of recent restructuring initiatives on PF's financials.

15 November 2012
6
Pantaloon Retail
Financials and Valuation
Income Statement
Y/E June
Net Sales
Change (%)
Total expenditure
EBIDTA
Change (%)
Margin (%)
Depreciation
Interest
Other Income - recurring
Profit Before tax
Change (%)
Margin (%)
Tax
Tax Rate (%)
Profit After Tax
Change (%)
Margin (%)
Extraordinary Items
Reported PAT
(INR Million)
2008
50,489
56.0
45,884
4,605
113.6
9.1
834
1,853
38
1,956
112.4
3.9
697
35.6
1,260
107.5
2.5
0
1,260
2009
63,417
25.6
56,904
6,513
41.4
10.3
1,401
3,182
61
1,991
1.8
3.1
757
38.0
1,235
-2.0
1.9
0
1,235
2010
89,264
40.8
81,070
8,194
25.8
9.2
2,123
3,913
106
2,264
13.7
2.5
582
25.7
1,683
36.3
1.9
622
2,304
2011
110,122
23.4
100,522
9,600
17.2
8.7
2,676
4,288
209
2,845
25.7
2.6
948
33.3
1,897
12.8
1.7
0
1,897
2011
434
635
29,343
30,412
48,753
1,651
80,816
2012E*
447
0
30,719
31,166
60,188
1,699
93,053
Balance Sheet
15 November 2012
2012E*
122,526
11.3
111,568
10,958
14.1
8.9
3,518
6,097
238
1,581
-44.4
1.3
510
32.3
1,071
-43.6
0.9
0
1,071
(INR Million)
Y/E June
Share Capital
Pref Shares
Reserves
Networth
Loans
Deffered Tax
Capital Employed
2008
319
2009
381
18,148
18,466
21,918
678
41,063
22,343
22,724
28,504
1,161
52,389
2010
412
647
26,999
28,058
29,152
1,294
58,504
Gross Block
Less: Acc Depre
Net Fixed Asssets
CWIP
Investments
Lease Deposits
13,688
1,706
11,982
3,306
5,865
7,152
18,765
3,077
15,688
3,452
9,540
8,163
26,740
3,449
23,292
2,837
10,244
7,072
36,418
5,808
30,610
3,384
12,869
8,226
44,761
9,326
35,434
3,971
14,869
9,153
Current Asst L&A
Inventory
Receiveables
Cash and Bank B
Others
Curr Lia & Prov
Current Liabilities
Provisions
Net Current Assets
App of Funds
E: MOSL Estimates; *December
19,134
14,298
1,132
1,211
2,493
6,377
6,201
176
12,757
41,063
year ending
24,664
17,878
1,773
1,093
3,920
9,119
8,914
205
15,546
52,389
31,606
24,037
2,716
1,635
3,218
16,546
16,114
432
15,060
58,504
47,087
35,852
3,819
1,267
6,150
21,360
20,851
510
25,727
80,815
52,921
40,493
3,799
2,014
6,615
23,296
22,713
582
29,625
93,053
7
Pantaloon Retail
Financials and Valuation
Income Statement
Y/E June
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout %
(INR Million)
2008
2009
2010
2011
2012E*
7.9
13.1
115.9
0.7
8.5
6.5
13.8
119.4
0.7
10.2
8.2
18.5
136.1
0.8
9.8
8.7
21.1
140.1
0.9
10.3
4.8
20.5
139.5
1.2
25.0
24.3
10.7
0.7
7.4
1.5
0.4
22.7
9.4
0.7
8.1
1.4
0.5
41.3
9.6
0.7
7.9
1.4
0.6
Valuation (x)
P/E
Cash P/E
EV/Sales
EV/EBIDTA
P/BV
Dividend Yield (%)
Return Ratios (%)
RoE
Core RoCE
RoCE
6.8
13.7
11.3
5.4
14.9
12.5
6.0
16.1
14.2
6.2
13.5
12.1
3.4
13.3
12.0
Working Capital ratios
Debtors Days
Inventory Turn
8
4.4
10
3.9
11
4.3
13
3.7
11
3.2
Leverage Ratio
Debt/Equity (x)
1.2
1.3
1.0
1.6
1.9
2008
1,919
38
834
1,853
577
2,976
1,015
8,012
3,453
3,345
-14,811
2009
1,931
61
1,401
3,182
274
2,906
3,273
5,223
1,011
3,675
-9,909
2010
2,158
106
2,123
3,913
448
-1,028
8,667
7,360
-1,091
704
-6,351
2011
2,636
209
2,676
4,288
592
11,036
-2,236
10,225
1,154
2,625
-14,004
2012E*
1,343
238
3,518
6,097
462
3,152
7,106
8,930
927
2,000
-11,858
6,410
8,922
125
1,853
-22
13,376
-419
1,630
1,211
3,158
6,586
135
3,182
-92
6,519
-118
1,211
1,093
3,230
648
181
3,913
1,558
-1,774
542
1,093
1,636
692
19,601
214
4,288
-80
15,872
-368
1,635
1,267
-1
11,435
295
6,097
-456
5,498
746
1,267
2,013
Cash Flow Statement
Y/E June
OP/(loss) before Tax
Int./Div. Received
Depreciation and Amort.
Interest Paid
Direct Taxes Paid
(Incr)/Decr in WC
CF from Operations
(Incr)/Decr in FA
Lease Deposits
(Pur)/Sale of Investments
CF from Invest.
Issue of Shares
(Incr)/Decr in Debt
Dividend Paid
Interest Paid
Others
CF from Fin. Activity
Incr/Decr of Cash
Add: Opening Balance
Closing Balance
E: MOSL Estimates
15 November 2012
(INR Million)
8
Pantaloon Retail
N O T E S
15 November 2012
9
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Pantaloon Retail
No
No
No
No
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