Modi to sell Hot Spot chain

Written by fe Bureau | Updated: Nov 30 2009, 05:53am hrs
B K Modi-led mobile handset retail chain Hot Spot will soon be up for sale. Started four years ago to sell multi-brand handsets and accessories, the chain has around 600 stores across 70 cities. It is expected to break even in four to six months, which is when the promoters are planning to exit. Sources in the know said the Modis are looking at a valuation of Rs 1,000-1,500 crore, although market sources peg it at Rs 600-700 crore.

So far, the promoters have invested around Rs 200 crore in the venture. Company officials said Hot Spot currently loses around Rs 1.5 crore every month, which is significantly down from the Rs 4.5-crore bleed six months ago. The company has managed to pare losses by around Rs 20-25 lakh every month.

Industry sources said Essar-promoted Mobile Store, which is the countrys largest mobile handset retail chain, could be the frontrunner to acquire Hot Spot. However, this could not be independently confirmed. Essars chain has around 1,300 stores nationwide.

When contacted by FE, Spice Tele-Ventures managing director Dilip Modi denied that the company was looking to exit the mobile retail business. Theres no truth to this. We are making acquisitions as we aim to position ourselves as digital lifestyle retailer, he said.

We are present in the mobile retail space, value-added space and mobile phone manufacturing business. So, retail is very core to our business strategy. We plan to grow the business being the first one to enter it, Modi added.

Sources said prior to selling Hot Spot, the promoters are looking to add around 2,000 franchises. The company has also acquired a couple of small stand-alone stores in southern and western India to ensure a balanced distribution across the country.

Currently, of its 600 stores, 230 are located in the Delhi-NCR region, giving it a very north-centric presence. The idea is to create a network, which is attractive to the buyer, and at the same time increases the companys valuation, said an official.

Though the mobile market is growing at a rapid pace with the country adding around 10 million subscribers each month, the retailing segment looks attractive but offers wafer-thin margins.

A handset costing Rs 5,000-7,000 provides a margin of roughly Rs 100-200. Last year, BK Modi had sold his GSM mobile firm Spice Telecom to Idea Cellular.