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Pantaloons Fashion & Retail Limited
Instrument
Commercial Paper
Programme
Amount
Rs. 400.0 crore (enhanced from
Rs. 200.0 crore)
Rating Action
[ICRA]A1+ assigned/ outstanding
ICRA has assigned the short-term rating of [ICRA]A1+ (pronounced ICRA A one plus) to the Rs. 400.0
crore* (enhanced from Rs. 200.0 crore) Commercial Paper Programme of Pantaloons Fashion & Retail
Limited (‘PFRL’, or the company)†. ICRA also has a rating of [ICRA]AA (pronounced ICRA double A)
with a stable outlook outstanding on the Rs. 900.0 crore term loans; the Rs. 100.0 crore, long-term,
fund-based/ non-fund based facilities; and the Rs. 600.0 crore, Non-Convertible Debenture
Programme of PFRL.
The ratings continue to reflect the strong parentage of the Aditya Birla Group (through Aditya Birla
Nuvo Limited (ABNL) holding 72.62% stake in PFRL through its wholly-owned subsidiary Indigold
Trade And Services Limited) which lends financial flexibility to PFRL. The ratings also take into
account the weak (albeit improving) operating performance of PFRL over the past few quarters due to
impact of the transition of the Pantaloons Format and weak consumer sentiments coupled with the
gestation impact of the investments being made in people, processes and stores expansion. ICRA
further notes that the company operates in the highly competitive lifestyle retail segment marked by the
presence of a few but well established players; rising competition in the segment along with intensive
clustering, at times have been impacting the same store sales growth and profitability of the company.
The ratings are constrained by the cash losses owing to the investment phase of the company.
Further, the business remains vulnerable to economic slowdown and is characterised by high working
capital intensity and seasonality in demand which poses risks of liquidation of inventory. The inventory
risks are, however, partially mitigated in case of PFRL by liquidation through Pantaloons Factory
Outlets (PFOs). Pantaloons being among the top three large format fashion retailers in the lifestyle
segment in terms of store presence in India, the scale economies are expected to reflect in improved
operating profitability going forward. Further, the extensive experience of the management team and
business building initiatives undertaken by the company are expected to facilitate superior execution
capability and drive future growth in profitability. The limited availability of retail space in terms of
desirable locations and sustainable economics may however constrain the future growth plans of the
company in the near term.
ICRA takes note of the proposed consolidation of the branded apparels business of the Aditya Birla
Group comprising business of Madura Fashion (a division of ABNL, manufacturing premium and super
premium apparel brands like Louis Philippe, Van Heusen, Allen Solly, Peter E ngland and People),
Madura Lifestyle (a division of Madura Garments Lifestyle Retail Company Limited (MGLRCL),
retailing international luxury brands under the retail format ‘The Collective’ and Madura Fashion brands
under the retail format ‘Planet Fashion’) and PFRL, under PFRL, in a bid to capitalize on its large
market presence in the branded fashion space in India. This consolidation is expected to create India’s
largest pure play fashion and lifestyle company, with a strong bouquet of leading fashion brands and
retail formats. The consolidation is expected to help synergize operations on various fronts including
sourcing, real estate and technology. ICRA notes that the combined business of Madura Fashion and
Madura Garments has been operating at modest operating margins of 11.8% (for 9m FY2015) as
against PFRL’s operating margin of 4.2% in 9m FY2015. Thus, consolidation of superior performing
Madura Garments and Madura Fashion businesses is expected to be positive for PFRL, resulting in
improvement in operating performance as well as credit metrics. This is a key rating sensitivity.
However, till the transaction gets concluded - expected within the next six to nine months - continued
support from the Aditya Birla Group would be critical to improving the credit profile of the company.
*
100 Lakh = 1 Crore = 10 Million
For complete rating scale and definitions, please refer to ICRA’s website (www.icra.in) or other ICRA
Rating Publications
†
About Pantaloons Fashion & Retail Limited (‘PFRL’)
Incorporated in 2007, PFRL is a subsidiary of Indigold Trade & Services Limited (‘ITSL’) (wholly -owned
subsidiary of Aditya Birla Nuvo Limited ('ABNL') (rated [ICRA]AA+ (Stable)/ [ICRA]A1+) and was
engaged in trading activities for ABNL till 2012. With effect from 1st July 2012, the Future Group
demerged the Pantaloons retail format business from Future Retail Limited (‘FRL’, erstwhile Pantaloon
Retail (India) Limited) into Peter England Fashions & Retail Limited (PEFRL), with ABNL acquiring a
controlling stake in the retail format through its subsidiary ITSL. Subsequently, the name of the
company was changed from Peter England Fashions & Retail Limited to Pantaloons Fashion & Retail
Limited in July 2013. Pursuant to scheme of arrangement, PFRL was automatically listed on the
National Stock Exchange and the Bombay Stock Exchange on July 17, 2013. Currently, ITSL holds
72.62% stake in PFRL.
Pantaloons format operates in the lifestyle retail segment across varied categories like casual wear,
ethnic wear, formal wear, party wear and sportswear for Men, Women and Kids. It also operates in
non-apparel segment which primarily comprises Beauty Products, Fashion Jewellery, Footwear,
Sports Division and Watches. As on March 2015, the Pantaloons format (including Pantaloons Factory
Outlets) operated close to 2.3 million square feet of area through 134 operating stores in 49 cities
across India.
Recent Results
For the nine months ended December 31, 2014, PFRL reported a net loss of Rs. 164.36 crore on an
operating income (OI) of Rs. 1,390.33 crore.
As per the audited numbers for FY 2014, PFRL reported a net loss of Rs. 187.73 crore on an OI of Rs.
1,661.21 crore, as against a net loss of Rs. 68.89 crore on an OI of Rs. 1,285.14 crore as per the
audited numbers of FY 2013.
May 2015
For further details, please contact:
Analyst Contacts:
Mr. Subrata Ray (Tel. No. +91 22 30470050)
[email protected]
Relationship Contacts:
Mr. L. Shivakumar, (Tel. No. +91-22-2433 1084)
[email protected]
© Copyright, 2015, ICRA Limited. All Rights Reserved.
Contents may be used freely with due acknowledgement to ICRA
ICRA ratings should not be treated as recommendation to buy, sell or hold the rated debt instruments. ICRA ratings
are subject to a process of surveillance, which may lead to revision in ratings. An ICRA rating is a symbolic indicator
of ICRA’s current opinion on the relative capability of the issuer concerned to timely service debts and obligations,
with reference to the instrument rated. Please visit our website www.icra.in or contact any ICRA office for the latest
information on ICRA ratings outstanding. All information contained herein has been obtained by ICRA from sources
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