Retail in Asia

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Pantaloon’s woes: High debt, slow sales

Pantaloon Retail’s problems could escalate, if it fails to raise resources quickly to pare debt, say analysts tracking the company. Amid slowing sales and sagging cash flows, tackling the mounting debt burden is paramount among its string of problems.

While India’s largest retailer’s market capitalisation stands at INR3,600 crore (INR36 billion, USD705.20 million) and equity base at INR3,141 crore, its consolidated debt is much higher. Aggressive expansion, which entails high capital costs, has led to the rise in consolidated debt from INR3,858.26 crore in 2008-09 to INR7,846.14 crore in 2010-11. Even at the stand-alone level, debt has risen sharply (by INR654 crore) since the June 2011 quarter to INR2,897 crore at the end of the December 2011 quarter. In comparison, its peers, Shoppers Stop and Trent, are at much more comfortable levels, with debt-to-equity ratios of 0.8 and 0.4 times, respectively.