Sahara enters hypermarkets

Subroto Roy’s Sahara is charting out new paths once again. The Sahara Group which has interests

in finance, entertainment, real estate and media is all set to launch a chain of retail stores across the country. This time the conglomerate plans to launch hypermarkets in carefully selected locations across the country under the brand name Sahara Q. The hypermarkets will sell consumer products, including Sahara’s own range of packaged goods such as detergents and soaps, as well as insurance and mutual fund products.

According to reports India’s retail sector is estimated at $350 billion and is growing at 30-40 per cent a year. Out of which the organized retail penetration in India is estimated at 5-8 per cent. Companies in India’s hypermarket format include Aditya Birla Retail, which runs around nine hypermarkets, Reliance Retail, Tata’s Trent, which operates the Star Bazaar stores, Shoppers Stop’s subsidiary HyperCity Retail, and Kishore Biyani’s Pantaloon Retail which runs Big Bazaar. Many of these hypermarkets are not really raking in profits as the format demands heavy investment and are slow to show returns. For one, they have yet to get the basics right. Profit margins are hardly impressive. Often the product mix is heavily biased toward one or the other category. On an average, these stores require a capital expenditure of Rs 1,800 per sq. ft. and about 12 to 18 months to start generating cash at the store level. And during this gestation period many things can go wrong.

Sahara had tried hard to hit the retail sector in the past as well. In 2009, Sahara Prime City, the realty arm of the Group, had said in its regulatory application for selling shares to the public that the company planned to build 88 integrated townships across the country with retail outlets. Its plans hit a roadblock when the Securities and Exchange Board of India (SEBI) began a probe into two Sahara firms for raising money from retail investors through housing bonds allegedly without regulatory approval. Sahara is contesting the case in the Supreme Court, which has directed SEBI to examine the financial instruments used by the two companies to raise money from the public.