"We have created a vast retail knowledge base over the last few years. This will be shifted to the IT venture. Some employees from the flagship are also being shifted to the new company," said Pantaloon Retail (India) managing director Kishore Biyani. The new venture will have an initial investment outlay of Rs 1 crore.

The company has also bagged its first export order from a leading American firm which will be executed some time this month. The order is to the tune of Rs 1 crore. A lot of domestic as well as overseas companies have evinced keen interest in the company's retail systems, Biyani said.

A team of IT professionals have been roped in to manage the affairs of the company. All the employees of the IT venture will be entitled to a stock option scheme, he added.

KPMG is still working on the investments to be brought in from the group companies and this is part of the overall restructuring plan. It is believed that an overseas partner will be roped in for the IT venture at a later date.

The group, as part of the broad recast plan, is in the process of valuing its entire range of brands and knowledge base. This is being done to aid the transfer of the knowledge base to the new IT outfit.

The group had estimated a Rs 30 crore value for its brands three years ago and has decided to do it again due to a thinking that balance sheets are not reflecting the inherent strengths. It is believed that the group opted for change of name to Pantaloon Industries Ltd because of the additional functions created by the merger. Post merger, Pantaloon Industries Ltd will be responsible for the marketing and distribution of brands.

The entire recast exercise will be completed in two month. Once the recast is over, the group will be split into different companies with each having focus on a specialised area.

right time to set up venture
Having implemented an enterprise-wide Baan system, Pantaloon Retail has gained some expertise in ERP implementation for retailing companies. The idea of floating an IT venture appears to have emerged as a result of this new-found competence. One would normally have expected the new company to be a wholly-owned subsidiary of Pantaloon Retail as it is basically this company's IT division that has been hived off.

Raising a crore of rupees for this venture would not really have been a problem for the company. The fact that the Biyanis have chosen to float the IT company as a joint venture of Pantaloon Retail and Pantaloon Industries reflects that they are keen to prop up the valuations of the latter company as well. Considering that IT companies have begun to get extraordinarily high valuations on the bourses, the timing of the venture couldn't have been more appropriate.

Sarad Saraf