Retail Evolution, Trends & Business Opportunities in India

India: An Emerging Economic Power

Evaluating New Business Opportunities

Indian Retail: Potential and trends

The Bharti Story

The India Story

• Socialist policies – minimal private sector role

• Bureaucratic

• Protected market

• Small consumer markets

• Underdeveloped infrastructure

• One of the fastest growing economies ; 9%+ growth rate for 5 years prior to current crisis

• Resilient Economy – 5-6% growth at the peak of the global crisis

• Opening up sectors for investment

• Promising consumer markets

• Significant investment in infrastructure development

YESTERDAY

TODAY

• Largest democracy; Stable government.

• Dominant private sector; Increasing

withdrawal of government from business

• Robust banking sector; Capital markets

• World class IT & telecom infrastructure

• A ‘connected economy’; Economic efficiency &

quality of governance

An Enabling Environment

Demographic Dividend

• 2nd largest urban population: 29% of the total (2007)

• Projected to reach 37.8% by 2025.

• To register the largest addition to the working age population in the world by 2010.

• Largest working age population worldwide by 2050.

25

34 37 38

44

0

10

20

30

40

50

Ind

ia

Ch

ina

US

Russia

Jap

an

0-19 yrs41.8%20-59 yrs

50.7%

60yrs & above7.5%

• Enormous consumption force: Large youth population

• Global production force in service:

• Large pool of professionals and technocrats

• Largest pool of English speaking manpower after the US

• Manufacturing force: Labour costs, as a % of value added - one of the lowest among Asian countries.

Growing urban & Working population

Powerful production & consumption forceDemographic Profile

Population Median Age (In Years): 2008E

Present global crisis: An opportunity for India

Indian economy coped with the crisis better; Clear signs of

recovery

• Revised government growth projection for 09-10 at 6.9%; Q2 GDP

growth at 7.9%

• GDP forecast for 2010-11 is 7.9%

• 2010-11 to be a year of consolidation; launch into the high growth

mode

India’s long term strengths still valid

• Growth primarily driven by the strong domestic market.

• Domestic savings rate at more than 35%

• India projected to be the 5th largest consumer market by 2025, worth

over USD 1,500 Bn – CAGR of 7.3% (McKinsey Institute)

Macro Economic Environment Driving the unfinished agenda

Fiscal Balance

Driven by stimulus packages fiscaldeficit currently at 6.8% of GDP.

To be brought down to 3% over 5years

Tax Reforms

Indirect tax: GST roll out by FY11 To overcome the dual tax regime; simplified structure; creating a unified market.

Direct tax: Proposed Direct Tax code aiming at substantial increase in income tax limit

Disinvestment

Plans to dilute 10% in many profit making PSUs

A source of spending in social infrastructure

Social Programs

72% of population in rural areas

35% of govt. spending is towards rural schemes; spend has grown by 45% annually during last 2 yrs.

India: An Emerging Economic Power

Evaluating New Business Opportunities

Indian Retail: Potential and trends

The Bharti Story

Founded in 1976 with an initial capital of $ 1000. Started with small scale manufacturing units

Started manufacturing telephones in technical collaboration with Siemens AGTie-up with Takacom corp., Japan for answering machines in 1986, LG, South Korea for cordless phones & Systema for telephone terminals in 1988

1985

Import of portable power generators from Japan for distribution in India

Formed a Consortium with Vivendi and others to bid for Cellular Licences

1976

Bharti Airtel – First mobile service operator in Delhi Best in class Global partners since beginning - Singapore Telecom, E M Warburg Pincus, USA, British Telecom, UK, Telia, Sweden, New York Life International, Asian Infrastructure Fund(AIF)

1995

1992

1982

Our Beginnings

Bharti AirtelIndia & SAARC Region

Telecom

SeychellesSeychelles IslandsJersey AirtelChannel Islands

Comviva

TechnologiesTelecom software

Bharti AXA Life InsLife Insurance

Bharti RealtyReal Estate

Indus TowersPassive Infra Sharing

Bharti TeletechComm. & Media Devices

Bharti RetailRetail

Guernsey AirtelChannel Islands

Bharti Wal-MartWholesale Cash & Carry

Bharti AXA Gen InsGeneral Insurance

Bharti InfratelPassive Infra

Bharti AXA

Investment

ManagersAsset Management

FieldFresh FoodsAgri Exports

Centum Learning

LtdTraining & Dev

TELECOM

SERVICESFINANCIAL

SERVICES

RETAIL /

WHOLESALE

EMERGING

BUSINESSES

Bharti Foundation CSR activities

Bharti Foundation CSR activities

Our Businesses

TELECOM

SERVICESFINANCIAL

SERVICES

RETAIL /

WHOLESALE

EMERGING

BUSINESSES

Our Partners

Bharti Group: Our Key Differentiators

Transformation• Significant impact on the lives of

people

• Attract and nurture top talent

Innovation• Business model

• Market offering

Focus on

Core

Competence•Outsourcing

•Scalability

Operating

Principles

Partnership•World-class

partnerships

India: An Emerging Economic Power

Evaluating New Business Opportunities

Indian Retail: Potential and trends

The Bharti Story

Rising index of global investor confidence

Rising FDI flow despite conservative global market condition:

Increased to $27.3 Bn in 08-09 from $24.5 Bn. in 2007-08

World Investment Report placed India in top 5 most attractive locations for FDI for 2009-11 alongside China, the US, Brazil, and Russia.

The Top 5 sectors attracting FDI inflows (Apr 2000 – Oct 2009) are: Services ($22 billion) Computer Hardware & Software ($9.4 billion) Telecom ($8.4 billion) Housing & Real Estate ($7.5 billion) Construction ($6.7 billion)

Enabling environment: 100% foreign investment allowed except for sensitive sectors like retail and

insurance

Key emerging sectors in India

InfrastructureStepping up spending; 5% in 2006-07 to 9% of the GDP by end of 2012.

Total investment projected - USD514 billion (2007-2012).

Increasing share of private sector:

• From 20% in total spend in 2002-07 to 30% by 2012

• Successful execution in the PPP mode

• Over 60% private sector contribution in ports, airports and telecom

EducationLargest capitalized space in India with $30 Bn of government spend (3.7% of GDP).

Private education is currently estimated at $50 Bn (14%CAGR over FY08-FY12E); expected to reach $115 Bn in he next 10 years

100% FDI allowed through the automatic route,

Future potential:

• Massive shortfall

• Emerging segments

Health CareGrowth of 9.3% between 2000-2009

Current size is USD 35 billion; Projected to grow 23% per annum to touch $77 billion by 2012

Healthcare facilities to contribute to 70% of the total sector touching a figure of $54.7 billion by 2012.

Investment of $14.4 Bn needed by 2025 to increase its bed density to at least two per thousand population.

Insurance 4th largest insurance market in Asia excluding

Japan.

Rapid growth over years; Life Insurance at 31% CAGR over the last six years, General Insurance at 16% over the last six years

Low penetration with huge potential:

Life insurance was 4% of GDP in 2009 up from 1.7% in 2000

General Insurance was 0.6% of GDP in 2009

Large untapped rural market

India: An Emerging Economic Power

Evaluating New Business Opportunities

Indian Retail: Potential and trends

The Bharti Story

Retail Sector poised for phenomenal growth

Source:India Shopping Trends, 2008 - Technopak

ORGANISED RETAIL EXPECTED TO GROW 35-40% CAGR

The Indian

Retail Sector,

currently the

Fifth largest in

the world, is

poised for

phenomenal

growth in the

coming years

Size & Position in the current Scenario

Current Size & Future growth of Organized Retail in India

The Indian Retail Landscape

Organized retail has grown from USD 2 Bn in 2002 to USD 37 Bn today in a total of USD 350 Bn

Impact on the consumer; low price and assured quality through supply chain efficiency

Impact on producers, farmers; direct sourcing from SME’s and farmers; providing critical connect to market place

Investments in the range of USD 30+ Billion expected by 2011 in Retail and Supply Chain

Scale: Size of organized retail likely to touch USD 70 billion by 2011

Employment: Over 850K direct jobs to be created in Retail in the next 5 years.

Source: India retail report 2009 by Images Retail, CII BCG report on India’s demographic dilemma Dec’08

Key Challenges

Immense ethnic diversity

Absence of Infrastructure and good retail space

Workforce Management (talent crunch)

IT Infrastructure

Supply Chain

Legal

Key Opportunities

Supply Chain Investments

• Setting up logistics and supply chain infrastructure

• Import of know how and logistics techniques from developed retail countries

IT Infrastructure

• IT is the enabler behind communication, collaboration with suppliers, and an efficient supply chain

Manpower

• Potential tie-ups with universities and setting up dedicated retail institutes

• Utilize experience of international retailers to train local talent

Large Rural market

Thank You