HyperCity Retail, a subsidiary of Shoppers Stop, expects to post a net profit in FY18 as it is banking on improving its online sales and adding international brands in the food and beverage segment, said chief executive officer Ramesh Menon.
In Q3FY17, the company broke even at the Ebitda level and reported earnings before interest taxes depreciation and amortisation of Rs 15.85 crore against an Ebitda loss of Rs 3.24 crore in the corresponding quarter of the previous year. The company plans to go slow on store addition and plans to open only two stores in FY18 to cut down on cost. “We are focusing on improving our online sales and we would go slow on store expansion and save cost. Turning the existing stores profitable is more important than just adding stores,” Menon said. HyperCity stores ranges from 20,000 sq ft to as much as 50,000 sq ft.
Rajesh Vig, executive director, PwC, said, “For the last three to four years the retail sector is not performing well if one sees on an overall level. However, even in that scenario HyperCity’s has performed well and like D’Mart, HyperCity too has cracked the retail space in the country. The company turned Ebitda positive in the third quarter and it is very much possible for them to turn profitable in FY18.”
Sales per square feet of HyperCity in Q3FY17 was Rs 2,431, up 11.8% from a year ago. However, HyperCity continued to report loss in Q3FY17. The company’s loss in Q3FY17 narrowed to Rs 2.24 crore against Rs 19.55 crore reported in Q3FY16. As of December 31, parent Shoppers Stop had debt of Rs 556 crore while HyperCity had debt of Rs 226 crore. The company is looking to raise around Rs 150-200 crore by selling around 10-15% in the hypermarket. If the stake sale happens at this price, the company’s valuation would be around Rs 1,500-2,000 crore.
Menon said HyperCity is in discussion with a few players but has not yet finalised a deal. “We should be able to finalise in the next two to three months,” he said.
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HyperCity has total retail space of 1.34 million sq ft and has 19 stores operational.
Shoppers Stop has a 51% stake in HyperCity, while K Raheja Corp holds the remaining 49%. Shoppers Stop had acquired the 51% stake in HyperCity in 2010.