A

PROJECT REPORT ON

REPORT ANALYSIS OF RETAIL BUSINESS

SUBMITTED TO

BALAJI INSTITUTE OF MODERN MANAGEMENT (BIMM), PUNE

BY

RICHA MAPUSKAR

SRI BALAJI SOCIETY’S

BALAJI INSTITUTE OF INTERNATIONAL BUSINESS (BIIB)
S No – 5/2-7, TATHAWADE, WAKAD, PUNE – 411033

1
 REPORT ANALYSIS OF RETAIL BUSINESS

A SUMMER PROJECT REPORT

Submitted By

RICHA MAPUSKAR

ROLL NO : MM1719533

in partial fulfillment of the requirement for the award of the Post Graduate
Diploma in Management

PGDM (FINANCE)

IN

Balaji Institute of Modern Management (BIMM)

S. No 55/2-7, Tathawade, Wakad, Pune - 411033

2
DECLARATION

I, hereby declare that the report entitled “ REPORT ANALYSIS OF RETAIL BUSINESS ” is
based on my learning at FUTURE GROUP, Mumbai.

I further declare that this project report is submitted as per requirement of PGDM curriculum, is
my original work and based on the findings during the project.

I further declare that the personal data and information received from any respondent during
project has not been shared with any one and is used only for academic purpose only.

This project report would not be submitted in any other institute for any award of any other
degree, diploma, fellowship or other similar title or prices.

This project report would not be submitted in any other degree in future and no other person will
be allowed to copy from this project in any other form.

If I am found to be guilty of not fulfilling the above promises, my submission can be declared
invalid and college has the right to reject this report.

Date: 8th JULY 2018 PGDM- FINANCE

RICHA MAPUSKAR
MM1719533

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ACKNOWLEDGEMENT

I express my deep sense of gratitude to Sri Balaji Society for connecting me with its
valuable connections in FUTURE GROUP, Mumbai for the completion of my study.

I am very much thankful to Mr. Dharmesh Jain, at FUTURE GROUP, for encouraging
me with the project. I personally thank Mr. Prem Tiwari for providing with needful
resources during the project. I would also like to take the opportunity to thank my
Internal Mentor from college Mr. Ajoy Nair, whose guidance and comments on my
project has helped me to understand various concepts and include the same in the project.

I express deep and sincere gratitude to Mr. Sanjay Thete, whose guidance,
encouragement, suggestion and very constructive criticism have contributed immensely
to the evolution of my ideas on the project.

RICHA MAPUSKAR

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 TABLE OF CONTENTS

S.NO CONTENTS PAGE NO

1 Company Profile 6

2 Introduction 7 - 13

3 Literature 21 - 34

4 Data Interpretations and Findings 35 - 41

5 Conclusion and Bibliography 50-51

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 Company Profile

Company Name: Future Lifestyle & Fashions Ltd. (FLFL)

Headquarter: Mumbai
Managing Director: Mr. Kishore Laxminarayan Biyani
Executive Director and CFO: Mr. C.P. Toshniwal
Non Executive Director: Mr. Rakesh Biyani
Incorporation: 30th May 2012
No. of Employees: 6,828+

Future Lifestyle Fashions (FLF) brings together the four key components in the fashion industry
– a strong portfolio of owned and licensed brands, a well established retail presence, a pan-India
reach for its brands through a strong distribution network and investments in fast growing
fashion brands – into a single entity. FLF is a unique player in the fashion industry that is primed
to gain leadership in building both fashion brands and fashion retailing in India. As an integrated
fashion company with presence across all key segments within the fashion industry, FLF benefits
from operating mature businesses that have built its presence and strengths for well over a
decade. Future Lifestyle Fashions sets the trends, styles and idiom for Indian lifestyle fashion
business through integrating some of India's most popular lifestyle retail destinations like
Central, Brand Factory and Planet Sports and over 20 domestic and global fashion brands with
talented business professionals, fashion designers and entrepreneurs.

Product:
 Formal Wears (Men & Women)
 Casual Wears (Men & Women)
 Sports Wears (Men & Women)
 Ethnic Wears (Women)
 Footwear (Men & Women)
 Accessories (Men & Women)

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 INTRODUCTION

About the Industry:

The Indian retail industry has emerged as one of the most dynamic and fast-paced industries due
to the entry of several new players. It accounts for over 10 per cent of the country’s Gross
Domestic Product (GDP) and around 8 per cent of the employment. India is the world’s fifth-
largest global destination in the retail space.
Indian Retail Industry has immense potential as India has the second largest population with
affluent middle class, rapid urbanisation and solid growth of internet.

Market Size
India’s retail market is expected to increase by 60 per cent to reach US$ 1.1 trillion by 2020, on
the back of factors like rising incomes and lifestyle changes by middle class and increased digital
connectivity. While the overall retail market is expected to grow at 12 per cent per annum,
modern trade would expand twice as fast at 20 per cent per annum and traditional trade at 10 per
cent# . Indian retail market is divided into “Organised Retail Market contributes 93 per cent of
the total sector and “Unorganised Retail Market contributes the rest 7 per cent of the sector.
India’s Business to Business (B2B) e-commerce market is expected to reach US$ 700 billion by
2020##. Online retail is expected to be at par with the physical stores in the next five years and
has grown 23 per cent to $17.8 billion in 2017.

India is expected to become the world’s fastest growing e-commerce market, driven by robust
investment in the sector and rapid increase in the number of internet users. Various agencies
have high expectations about growth of Indian e-commerce markets. Indian e-commerce sales
are expected to reach US$ 120 billion! by 2020 from US$ 30 billion in FY2017. Further, India's
e-commerce market is expected to reach US$ 220 billion in terms of gross merchandise value
(GMV) and 530 million shoppers by 2025, led by faster speeds on reliable telecom networks,
faster adoption of online services and better variety as well as convenience@.

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India’s direct selling industry is expected to reach Rs 159.3 billion (US$ 2.5 billion) by 2021, if
provided with a conducive environment through reforms and regulation.
India is expected to become the world's third-largest consumer economy, reaching US$ 400
billion in consumption by 2025.

Luxury market of India is expected to grow to US$ 30 billion by the end of 2018 from US$ 23.8
billion 2017 supported by growing exposure of international brands amongst Indian youth and
higher purchasing power of the upper class in tier 2 and 3 cities, according to Assocham.
The size of modern retail in India is expected to reach US$ 11.25 billion in 2019 from US$ 70.45
billion in 2017

Investment Scenario

The Indian retail trading has received Foreign Direct Investment (FDI) equity inflows totalling
US$ 1.14 billion during April 2000–December 2017, according to the Department of Industrial
Policies and Promotion (DIPP).
With the rising need for consumer goods in different sectors including consumer electronics and
home appliances, many companies have invested in the Indian retail space in the past few
months.

 Department of Industrial Policy and Promotion (DIPP) approved three foreign direct
investments (FDI), Mountain Trail Food, Kohler India Corporation, and Merlin
Entertainments India in the single brand retail sector and two FDI proposals of over Rs
400 crore (US$ 62.45 million) within the retail sector.  
 With 2017 being a successful year for herbal-ayurvedic brands, new Indian organic labels
in hair care, cosmetics, food and apparel are belting up to carve an organic niche in the
growing herbal segment.
 Investments by private equity firms and wealth firms in Indian retail sector reached US$
800 million in 2017

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  India’s retail sector attracted Rs 9.5 billion (US$ 147.40 million) investments in FY18, at
a growth rate of 35 per cent year-on-year from Rs 7 billion (US$ 104.34 million) in
FY17.

Government Initiatives

The Government of India has taken various initiatives to improve the retail industry in India.
Some of them are listed below:

 The Government of India may change the Foreign Direct Investment (FDI) rules in food
processing, in a bid to permit e-commerce companies and foreign retailers to sell Made in
India consumer products.
 Government of India has allowed 100 per cent Foreign Direct Investment (FDI) in online
retail of goods and services through the automatic route, thereby providing clarity on the
existing businesses of e-commerce companies operating in India.

Road Ahead

E-commerce is expanding steadily in the country. Customers have the ever increasing choice of
products at the lowest rates. E-commerce is probably creating the biggest revolution in the retail
industry, and this trend would continue in the years to come. Retailers should leverage the digital
retail channels (e-commerce), which would enable them to spend less money on real estate while
reaching out to more customers in tier-2 and tier-3 cities.

Both organised and unorganised retail companies have to work together to ensure better
prospects for the overall retail industry, while generating new benefits for their customers.
Nevertheless, the long-term outlook for the industry is positive, supported by rising incomes,
favourable demographics, entry of foreign players, and increasing urbanization.

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 India has occupied a remarkable position in global retail rankings; the country has high market
potential, low economic risk and moderate political risk

 India is expected to become the world's third-largest consumer economy, reaching US$ 400
billion in consumption by 2025, according to a study by Boston Consulting Group

 India is ranked first in the Global Retail Development Index 2017, backed by rising middle class
and rapidly growing consumer spending

 India’s retail market witnessed investments worth US$800 million by Private Equity (PE) firms
and wealth funds in 2017.

 Department of Industrial Policy and Promotion (DIPP) approved three foreign direct investments
(FDI), Mountain Trail Food, Kohler India Corporation, and Merlin Entertainments India in the
single brand retail sector.

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About the Company:

Future Group is an Indian private conglomerate, headquartered in Mumbai. The company is

known for having a significant prominence in Indian retail and fashion sectors, with popular
supermarket chains like Big Bazaar and Food Bazaar, lifestyle stores like Brand Factory, Central
etc. and also for having notable presence in integrated foods and FMCG manufacturing
sectors. Future Retail (initially Pantaloons Retail India Ltd (PRIL)) and Future Lifestyle
Fashions, two operating companies of Future Group, are among the top retail companies listed
in BSE with respect to assets and in NSE with respect to market capitalization.

On May 2012, Future Group announced 50.1% stake sale of its fashion
chain Pantaloons to Aditya Birla Group in order to reduce its debt of around INR 8000 crores. To
do so, Pantaloons fashion segment was demerged from Pantaloons Retail India Ltd; the latter
was then merged to another subsidiary—Future Value Retail Ltd—and rechristened Future
Retail Ltd.

RETAIL FORMATS IN INDIA:

Hypermarket:

It is the largest format in Indian retail so far is a one stop shop for the modern Indian
shopper.Merchandise: food grocery to clothing to spots goods to books to stationery. Space
occupied: 50000 Sq .ft. and above. SKUs: 20000-30000.Example: Pantaloon retail’s Big Bazaar,
RPG’s Spencer’s (Giant).

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Supermarket:

A subdued version of a hypermarket. Merchandise: Almost similar to that of a hypermarket but

in relatively smaller proposition. Space occupied: 5000 Sq. ft. or more. SKUs: Around
10000.Example: Nilgiris, Apna Bazaar, Trinethra.

Convenience store:

A subdued version of a supermarket.Merchandise: Groceries are predominantly sold.Space

occupied: Around 500 Sq. ft. to 3000 Sq. ft.Example: stores located at the corners of the streets,
Reliance Retail’sfresh and select. 

Department store:

A retail establishment which specializes in selling a wide range of products without a single
prominent merchandise line and is usually a part of a retail chain. Merchandise: Apparel,
household accessories, cosmetics, gifts etc. Space occupied: Around 10000 Sq. ft. – 30000 Sq. ft.
Example: Landmark Group’s Lifestyle, Trent India Ltd.’s Westside.

Discount store:

Standard merchandise sold at lower prices with lower margins and higher volumes.
Merchandise: A variety of perishable/ non perishable
goods.Example: Viswapriya Group’s Subiksha, Piramal’s TruMart, PRIL’s Brand factory

Specialty store:

It consists of a narrow product line with deepassortment.Merchandise: Depends on the stores

Example: Bata store deals only with footwear, RPG’s Music World, Crossword.

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MBO’s:

Multi Brand outlets, also known as Category Killers. These usually do well in busy market
places and Metros. Merchandise: Offers several brads across a single product category.

Future Lifestyle Fashion Limited:

Future Lifestyle Fashions sets the trends, styles and idiom for Indian lifestyle fashion business
through integrating some of India's most popular lifestyle retail destinations like Central, Brand
Factory and Planet Sports and over 20 domestic and global fashion brands with talented business
professionals, fashion designers and entrepreneurs.

Future Lifestyle Fashions (FLF) brings together the four key components in the fashion industry
– a strong portfolio of owned and licensed brands, a well established retail presence, a pan-India
reach for its brands through a strong distribution network and investments in fast growing
fashion brands – into a single entity. FLF is a unique player in the fashion industry that is primed
to gain leadership in building both fashion brands and fashion retailing in India. As an integrated
fashion company with presence across all key segments within the fashion industry, FLF benefits
from operating mature businesses that have built its presence and strengths for well over a
decade

BRAND FACTORY

Brand Factory, a Future Group concept, is India’s leading chain of fashion discount stores that
promises consumers a revolutionary discount shopping experience. Brand Factory offers more
than
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  200 Indian and International brands
 69 Stores
 28 Cities
 At 20%-70% discount,
 365 days a year.

Brand Factory offers their customers a wide range of brands and categories at absolutely
great prices in an ambience that is refreshingly enjoyable. Merchandise available at
Brand Factory stores include
 men’s formals,
 casuals,
 youth wear,
 women’s wear,
 sportswear,
 kids wear,
 footwear,
 accessories and more.

Latest News About Brand Factory

Brand Factory plans aggressive expansion, to focus on

small towns

 Brand Factory is set to open 40 new stores over to next 8-10 months to reach the 100
mark, and will thereon add 40-50 outlets each year until it gets to 200, says business head
Suresh Sadhwani

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 Brand Factory has been in existence for a decade and has 60 outlets currently, which
means on average, it opened six new stores every year. The pace, which picked up to 10-
15 new stores over the last year, is set to rise. 

 Brand Factory operates in a space over which it has a clear dominance, considering
individual factory outlets are the only competition in the fashion discounting market,
according to Ankur Bisen, senior vice-president at Technopak Advisors and another
analyst who declined to be named. But to some extent, the analysts said, any retailer
selling value fashion could be construed as competition.

 “Last year, we did a free shopping weekend. A lot of customers came to know about
Brand Factory (through that) and since then, growth has been fantastic. We were growing
by 30-40% (revenue) before the event and suddenly growth went much higher,”
Sadhwani said in a telephone interview. 

 In 2016-17, Brand Factory clocked Rs1,045 crore in sales.

 The unit is the second-highest revenue earner in Future Group’s Future Lifestyle
Fashions division, which includes other fashion chains like Central and Planet Sports. 

 Brand Factory stocks products across categories ranging from apparel to sportswear and
accessories. A majority of its revenue comes from sales of men’s apparel, followed by
apparel for women and children. It expects revenue contribution from the footwear
category to grow much faster than the rest, Sadhwani said.

 Footwear currently accounts for 4% of the retailer’s total sales and is expected to double
over the next two years.

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Supply Chain of Brand Factory

The supply chain of BRAND FACTORY is very will organized. In the store level Team leaders
of the different Categories report about the merchandise replenishment levels and buying trends
of the merchandise to the Category Managers at store and zonal office. The category manager’s
in turn will place orders to vendors and they will either send the merchandise directly to the store
or Distribution centre and from there the merchandise is sent to the store distribution centre and
made available to the customer. All the communication is done through effective use of ERP
software’s like REM and SAP. Below is the brief representation of merchandise and information
of supply chain of BRAND FACTORY (BF)

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Activities at Store Level

1) Getting Products to Shelf Indenting & Purchase Orders (PO’s)

1. Indenting:-

Indenting will be happen after checking stock in the store and goods in transit. Or
whenever if required any changes in indenting due to season, weekends or any
festivals then the quantity is modified.

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(b) Raising PO:-

PO (purchase order) for different merchandise is placed and is released to the vendors. PO on
vendors can be raised requirement basis & its validity be accordingly
and all the delivery and payment conditions are mentioned in it.

2) Receiving:-

(a)Checking of Delivery in DC

All the Dry DC delivery will be checked by a store staff in the DC staging area before packing
and loading. This is to minimize delivery count error and ensure that right quantity is delivered
to the stores. Behind this all the activity owner is Store Manager.

(b) Receiving Goods in Store: From DC & CPC

Receiving indented goods from the DC & CPC as per the delivery schedule. At the time of
receiving goods from DC many things which is followed by the SCM, ASCM, &CSA

1. Check the seal in front of driver.

2. Note down the air condition temperature.
3. Inspect stocks for transit damages.
4. If any HU (Handling unit) / article is found damaged, excess, or missing noted it on the trip
sheet for return to DC.
5. Do the GRN (Goods return note) for the delivery for the actual received quantity.
6. Stores are not unloading transit damaged stocks. Transit damages will be returned to DC in the
same delivery truck.

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7. The main focus during goods receiving must be to unload the crates/ cartons from the truck as
quickly and safely as possible.

(c) Receiving from Vendors

Procedure for receiving goods directly from vendors.Behind this whole activity owner is store

manager/
asst.store manager. Food bazaar stores indenting specially bakery, beverage and books/
magazines and music. SCM/ASCM

3) Replenish Shelf from Goods Receiving Area

4) Managing waste and markdowns:

Segregation of damaged and expiry in store:

For F&V crates are received carefully for the item not for sale as per PRIL quality and are
removed from the shelf. It is done by Team lead/Floor manager.

EXPIRY:
1. Near expiry product is markdown as per the RR rule.
2. An expired product is segregated and is treated as per following.
Vendor supply-

Exchange with fresh stock from the vendor at the time of next delivery

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DC supply- Dump in store.

Markdown for damages and near expiry: Damaged and near expiry products is markdown as per
the following rules:

Markdown criteria

Up to Rs. 15 or 15 % of selling price (whichever is lower)& it is done by Store manager. Up to

Rs 30 or 30% of SP(whichever is lower) & it is also done by DM / AM. Beyond Rs 30 or 30% of
SP & it is done by state fresh head.

E-tailing
Futurebazaar.com
Futurebazaar.com offers the widest range of products at ‘lowest prices – everyday!’

CHAPTER 2:
LITERATURE REVIEW

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Step 1:

 Business Process

Basically there are 2 type of Brands; Private (Own) and Other Brands.

 Private Brands – Brands which are owned by Future Lifestyle & Fashions
Ltd.
- Jealous 21
- Indigo Nation
- ALL
- Bare Casuals
- Scullers
- Spalding etc.

 Other Brands –
- Levis
- Raymond
- Arvind
- Color plus
- Piyush etc.

For Private (Own) Brands, there is no need of any agreement or MOU (Memorandum of
Understanding) between the vendors and the Company.

Company can directly raise the required Purchase Order and sell the articles on their own price.

For other Brands there are 4 types of selling agreements

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 - S.O.R. (Sale Or Return)
- Bought Out
- On Approval Basis
- Vendor Commission

 S.O.R. (Sales Or Return)

The ownership of Product(s) belongs to company because company buys the goods from the
vendor(s) on credit.

This process starts with the preparation of agreement between vendor and the company. This
agreement is generally a MOU (Memorandum of Understanding), which contains various
important clauses and terms, such as

 Tenure of Agreement
 Credit Period ( Generally 1 Month)
 Renewable Terms & Notice Period
 Gross Margin Percentage
 Volume of Articles

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Once company is satisfied with vendor’s proposal, company raise a Purchase Order and Vendor
give an Invoice to the company and delivers the goods.

Company keep the product(s) in their stores for Sale for the agreed period of time. Once tenure
exhausted, company make the payment to the vendor after deducting their agreed Share and
Return the unsold stock to the vendor.

 Bought Out

In this process company buy the product from the vendor(s), and the ownership & risk belongs to
the company only.

This process starts with the preparation of agreement between vendor and the company. This
agreement is generally a MOU (Memorandum of Understanding), which contains various
important clauses and terms, such as

 Tenure of Agreement
 Renewable Terms & Notice Period
 Gross Margin Percentage

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  Volume of Articles
 Credit Period (Generally 90 Days)

Once company is satisfied with vendor’s proposal, company raise a Purchase Order and Vendor
give an Invoice to the company and delivers the goods. Payment is done partially at the time
of Purchase Order and partially after delivery of goods. Company cannot return the unsold
stock and keep it for further sale on same or lower price.

 On Approval Basis

As the name suggest, in this process company take the goods On Approval Basis, ownership of
goods remains with vendor(s) only.

In this process also, firstly MOU is prepared between the company and vendor(s), which
involves various terms, such as

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  Tenure of Agreement
 Renewable Terms & Notice Period
 Gross Margin Percentage
 Volume of Articles
 Credit Period (Generally 1 Month) etc

After preparation of MOU, company raise the Purchase order, than vendor(s) gives a Delivery
Challan at the time of delivering the goods. Vendor gives 1 month credit period, once this period
completed company issues sales report to the vendor, and according to that sales report vendor
issues Invoice Note. Once company receives the invoice, they make payment to the vendor.

 Vendor Consignment

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Vendor Consignment is just same as On Approval only one difference is there.

In this process company provides extra services for selling the product, such as Special seller in
store for specific brand or different space provided for the specific brand. In these scenarios,
company charges the expenses incurred and deduct Service Tax and TDS at the time of payment
to the vendor

Step 2:

 Memorandum of Understanding

FORMAT

Memorandum of Understanding Dated 19th June 2018 for space in ‘Brand Factory Stores’ Between
Future Lifestyle Fashion Limited, Knowledge House, Shyam Nagar, Off Jogeshwari -Vikhroli Link
Road, Jogeshwari (E), Mumbai 400 060.
And
ABC Group ,B2/F5, Cooperative Industrial Area, New Delhi 110 044 represented herein by its
authorized signatory (Hereinafter referred to as “the Company” which expression shall, unless it be
repugnant to the context or meaning thereof, mean and include its nominees, successors and permitted
assigns);

Terms Description

1. Tenure Up to 31.07.2021 from date of agreement and can be renewed

with mutual understanding.

2. Category Brand – ABC

3. Chargeable Area 50 sft per store

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4. Nature of Agreement Sale or Return Agreement.

5. Infrastructure/Furniture Infrastructure and Fixtures provided by FLFL. Cost will be debited

over a period of 3 years as hire charges @ Rs 300/- per sft

Power Power to be supplied by FLFL, common lighting at FLFL cost but

special lighting/equipment cost to be borne by brand partner as
per standard cost per fittings.

6. Financial Terms

Margin% VM = 28% on Net Sales

Minimum guaranteed sale : NA

Net sale price means final sale price to the customers, including
all taxes and levies there on (MRP-Discount –Cust. returns).

Mode of Operation Sales or Return

Interest free refundable Rs 50000/- Per Store

security deposit

Pilferage UP To 0.5% of total sale PA will be borne by the brand and

beyond that FLFL Will share the liability Up to 50% of the
Cost( cost assumed to be 50% of MRP).

Staff No. of Staff to be provided: 1 per store

Staff is Brand partner responsibility and cost need to be borne by

them only.

Insurance FLF will take appropriate Insurance.

Billing/Taxes Billing to be done by FLFL only and Company will reimburse us

cost of Service tax/ VAT /sales tax
/duties/turnovertax/luxurytax/octroi/entrytax surcharges and same
will adjusted against amount payable.

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 Payment terms “Monthly” basis between 15th-20th of every succeeding month for
the sale of the Products in the preceding month.

Stock Correction Company has agreed for 100% stock Correction/Return

Invoicing pattern MRP-VMG%-GST. Invoicing pattern as per P.O only.

Date of Commencement April 2018

6. Stamp duty and To be borne by the Brand Partner

registration charges

7. Marketing Cost Marketing cost-20 Sqft/Month/store

8. Termination 1. Both parties can terminate the agreement at any time by giving
3 month notice with valid reason and with out any reason with 6
month notice period.

2. FLFL can terminate the agreement if the Brand fails to comply

with statutory obligations or to pay the fee for two consecutive
months and the FLFL can retain the stock, fixtures and the
deposit as damages for default.

Area is subject to change from time to time based on operational exigencies.

_________________________________ _________________________________

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In approval and confirmation signed by In approval and confirmation signed by

on behalf of on behalf of

Future Lifestyle Fashions Limited. ABC Group

TERM

A memorandum of understanding (MOU) is a nonbinding agreement between two or more

parties outlining the terms and details of an understanding, including each parties' requirements
and responsibilities. An MOU is often the first stage in the formation of a formal contract.

Legal Ramifications of an MOU

An MOU signals a legal contract is imminent. However, an MOU itself is not legally defensible
but should still clearly outline specific points of an understanding. An MOU should describe who
the parties are, what the project is they are agreeing on, the scope of the document, each parties'
roles and responsibilities and more. While an MOU is not legally binding, it can help two parties
move in the right direction toward an agreement.

An MOU, while not an enforceable document, still holds a lot of power because of the time,
energy and resources needed to draft an effective and fair document. An MOU forces the
participating parties to reach a semblance of a mutual understanding, and in the process, the two
sides naturally mediate and figure out what is most important in moving toward an eventual
future agreement that benefits both sides.

Basic Process for Drafting an MOU

 Each party starts with a planning phase where it decides what is wanted or desired, what
can be offered, what is willing to be negotiated and what is off the table.

29
  An initial draft is then written, after which representatives from each party meet to
discuss the details. MOUs often list communication expectations to help mediate the
sides.
 During this time, agreements regarding the timeline for when the MOU takes effect are
discussed.
 Agreements outlining how or when a party can terminate the understanding are also
decided.
 This is when a party puts in disclaimers, restrictions or privacy statements, as desired.
 Once discussions are finished, a final MOU is drafted and signed.

Step 2

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Vistex is the specific tool used in Brand Factory. Precise information about all the Brands in
Brand Factory with all the data specifically is stored in this file.

1. SALES ORG – Company Code

2. Agreement – As per MOU

3. SITE – Every State/City Store has respective Code

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4. Vendor – Vendor Details (State, Brand Name, etc)

5. Margin %, Mark Down Value

6. Calculation of Margin Sales

7. Area as per MOU is considered

Step 3

This helps to understand any particular brand quantity of stock available in days and what
is the value of the mentioned quantity of stock in Brand Factory. It is useful while
preparing Reports to check the availability of the stock and number of Days it took.

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STEP 4

33
 REPORT PREPARATION FOR ANAYLSING MARGIN
DIFFERENCE

This report help company to anaylse the margin which was decided in the Memorandum of
Understanding and actual revised.

The discrepancy shows whether during the period any variation in margin or mark down value
took place between Brand Factory and Vendor Company

The differences are then balance according to the discussion and movement in the cycle of the
concerned parties

KEY FINANCIAL INDICATORS

Key Financial Ratios

------------------- in Rs. Cr. -------------------

  Mar Mar Mar Mar

Mar '13
'17 '16 '15 '14

       
Investment Valuation Ratios
Face Value 2 2 2 2 2
Dividend Per Share 0.8 0.4 0.4 0.4 --

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Operating Profit Per Share (Rs)
18.84 17.15 17.73 16.59 -0.19

Net Operating Profit Per Share (Rs)

204.04 174.05 168.31 177.63 --

Free Reserves Per Share (Rs)

-- -- -- -- --

Bonus in Equity Capital -- -- -- -- --

       
Profitability Ratios
Operating Profit Margin(%)
9.23 9.85 10.53 9.34 --

Profit Before Interest And Tax Margin(%)

4.4 4.93 5.07 -4.18 --

Gross Profit Margin(%) 4.41 4.96 5.1 -4.69 --

Cash Profit Margin(%) 5.99 5.75 5.97 13.46 --
Adjusted Cash Margin(%) 5.99 5.75 5.97 13.46 -221.62
Net Profit Margin(%) 1.17 0.89 0.59 0.84 --
Adjusted Net Profit Margin(%)
1.17 0.88 0.58 0.75 --

Return On Capital Employed(%)

8.24 7.09 6.68 7.7 --

Return On Net Worth(%) 2.72 1.81 1.18 1.8 --

Adjusted Return on Net Worth(%)
2.74 1.81 1.18 2.24 -7.1

Return on Assets Excluding Revaluations

88.05 85.61 84.3 83.6 1.87

Return on Assets Including Revaluations

88.05 85.61 84.3 83.6 1.87

Return on Long Term Funds(%)

9.14 7.84 6.86 7.93 -6.8

       
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Liquidity And Solvency Ratios
Current Ratio 1.11 1.13 1.55 1.52 763.7
Quick Ratio 0.52 0.6 0.78 0.92 763.7
Debt Equity Ratio 0.29 0.56 0.73 1.04 --
Long Term Debt Equity Ratio
0.16 0.42 0.69 0.98 --

       
Debt Coverage Ratios
Interest Cover 1.52 1.33 1.15 1.24 --
Total Debt to Owners Fund
0.29 0.56 0.73 1.04 --

Financial Charges Coverage Ratio

3.11 2.53 2.22 3.61 --

Financial Charges Coverage Ratio Post Tax

2.98 2.41 2.19 3.51 --

       
Management Efficiency Ratios
Inventory Turnover Ratio 2.74 2.53 2.67 2.68 --
Debtors Turnover Ratio 18 12.91 11.77 10.43 --
Investments Turnover Ratio
2.74 2.53 2.67 2.68 --

Fixed Assets Turnover Ratio

2.13 2.04 2.01 1.84 --

Total Assets Turnover Ratio

1.98 1.43 1.17 1.06 --

Asset Turnover Ratio

1.72 1.26 1.17 2.08 --

36
FLFL Fundamental Analysis

1. Net Operating margin or operating profit margin measures what proportion of a

company's revenue is left over, after deducting direct costs and overhead and before taxes
and other indirect costs such as interest. Operating margin ratio shows whether the fixed
costs are too high for the production or sales volume.
High or increasing operating margin is preferred because if the operating margin is
increasing, the company is earning more per dollar of sales.

Operating margin can be used to compare a company with its competitors and with its past
performance. It is best to analyze the changes of operating margin over time and to compare
company's figure to those of its competitors.

Operating margin shows the profitability of sales resulting from regular business. Operating
income results from ordinary business operations and excludes other revenue or losses,
extraordinary items, interest on long term liabilities and income taxes.

As per the analysis of last 5years it is increasing every year except in the year 2015, this shows
company is growing efficient and earning at increasing rate. This shows they are overall good
performance in the Investment Ratio

2. In Profitability Ratio, the Gross Profit Margin is being increased in 2015 and then
gradually decreased from 2015-2017. The gross profit margin ratio is an indicator of a
company’s financial health. It tells investors how much gross profit every dollar
of revenue a company is earning. Compared with industry average, a lower margin could
indicate a company is under - pricing. A higher gross profit margin indicates that
a company can make a reasonable profit on sales, as long as it keeps overhead costs in
control. Investors tend to pay more for a company with higher gross profit.

37
  As per the analysis, gross profit margin is being decreased by 2016-17, these
show the profit earning is either stable and no new improvement in the promotion
or branding is being done
 Net Profit Margin is being increased as compared to gross profit margin, it
indicates how much net income a company makes with total sales achieved.
 Return on Capital Employed is a financial ratio that determines a company’s
profitability and the efficiency the capital is applied. A higher ROCE implies a
more economical use of capital. It is being increasing by 2014 – 17 from 6.68 –
8.24 this indicates company is efficient and with good performance and a control
over capital.
 Return on Net Worth is a ratio developed from the perspective of the investor and
not the company. By looking at this, the investor sees if entire net profit was
passed on to him, how much return would he be getting. It explains the efficiency
of the shareholders’ capital to generate profit.
 Return on Long Term Fund is showing increasing trend from negative to positive
rate throughout 5 years. It indicates that company is managing their long term
liabilities and getting returns as per expectation.

3. In Liquidity and Solvency Ratio, Current ratio (also known as working capital ratio) is a
popular tool to evaluate short-term solvency position of a business. Short-term solvency
refers to the ability of a business to pay its short-term obligations when they become due.
Short term obligations (also known as current liabilities) are the liabilities payable within
a short period of time, usually one year.

 Current ratio is a useful test of the short-term-debt paying ability of any business.
A ratio of 2:1 or higher is considered satisfactory for most of the companies but
analyst should be very careful while interpreting it.  Simply computing the ratio
does not disclose the true liquidity of the business because a high current ratio
may not always be a green signal.

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  Debt to equity ratio is a long term solvency ratio that indicates the soundness of
long-term financial policies of a company. It shows the relation between the
portion of assets financed by creditors and the portion of assets financed by
stockholders. As the debt to equity ratio expresses the relationship between
external equity (liabilities) and internal equity (stockholder’s equity), it is also
known as “external-internal equity ratio”. In these it is being decreased every
year.

4. In Debt Coverage Ratio is a financial ratio that measures a company’s ability to service
its current debts by comparing its net operating income with its total debt service
obligations. In other words, this ratio compares a company’s available cash with its
current interest, principle, and sinking fund obligations.

 The debt service coverage ratio measures a firm’s ability to maintain its current
debt levels. This is why a higher ratio is always more favorable than a lower ratio.
A higher ratio indicates that there is more income available to pay for debt
servicing.
 According to the analysis, company is considerably showing stability in it’s
overall performance in the Debt Coverage.
 This show it has a hold and income to cover the debt respectively.

5. Managerial Efficiency Ratios measure the ability of a business to use its assets and
liabilities to generate sales. A highly efficient organization has minimized its net
investment in assets, and so requires less capital and debt in order to remain in
operation. In the case of assets, efficiency ratios compare an aggregated set of assets to
sales or the cost of goods sold. In the case of liabilities, the main efficiency ratio
compares payables to total purchases from suppliers.

 Accounts receivable turnover. Calculated as credit sales divided by average

accounts receivable. A high turnover rate can be achieved by being selective

39
 about only dealing with high-grade customers, as well as by limiting the
amount of credit granted and engaging in aggressive collection activities.
 Inventory turnover. Calculated as the cost of goods sold divided by average
inventory. A high turnover rate can be achieved by minimizing inventory
levels, using a just-in-time production system, and using common parts for all
products manufactured, among other methods.
 Fixed asset turnover. Calculated as sales divided by average fixed assets. A
high turnover ratio can be achieved by outsourcing the more asset-intensive
production to suppliers, maintaining high equipment utilization levels, and
avoiding investments in excessively expensive equipment.
 It is being increased every year in all the ratios i.e. Asset Turnover, Inventory
Turnover, Debtor Ratio.

CASHFLOW

Future Lifestyle Fashions

Cash Flow
------------------- in Rs. Cr. -------------------

Mar 17 16-Mar 15-Mar 14-Mar 13-Mar

  12 mths 12 mths 12 mths 12 mths 12 mths
Net Profit/Loss Before
Extraordinary Items And Tax 60.46 44.98 23.48 34.24 -0.33

Net Cash Flow From Operating

511.73 358.36 230.82 -592.97 -0.63
Activities
Net Cash Used In Investing
87.58 -155.31 -266.61 -1,783.63 -4.35
Activities

40
 Net Cash Used From Financing
-584.13 -248.09 -175.63 1,378.96 5.15
Activities
Adjustments on Amalgamation /
Merger / Demerger / Others 0 0 0 1,268.55 0

Net Inc/Dec In Cash And Cash

15.18 -45.04 -211.42 270.91 0.17
Equivalents
Cash And Cash Equivalents Begin
of Year 14.62 59.66 271.08 0.17 0

Cash And Cash Equivalents End Of

Year 29.8 14.62 59.66 271.08 0.17

OPERATING CYCLES & CASH CONVERSION

CYCLES:

To calculate the operating cycle, determine the duration of each element of the operating cycle
including raw materials, work-in-process, finished goods and bills receivable. .

Operating Cycle = Raw Material Holding Period + Work-in-process Period + Finished Goods
Holding Period + Receivable Collection Period

Cash operating cycle = Raw Material Holding Period + Work-in-process Period

+ Finished Goods Holding Period + Receivable Collection Period – Creditor’s Payment Period.

Operating cycle (Days) = DIO +DSO

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Cash operating cycle = DIO+DSO-DPO

DIO = Days inventory outstanding= (Cl inventory / cost of goods sold)*365 days

DSO= Days sales outstanding= (Cl accounts receivables / sales )*365 days

DPO=Days payment outstanding= (Cl accounts payables / cost of sales)*365 days

DIO: It shows how quickly management can turn inventories into cash. In general, a decrease in

day’s inventory outstanding (DIO) is an improvement to working capital, and an increase is

deterioration.

DSO: The longer our money is on streets, higher the risk. This looks at the number of days
needed to collect on sales and involves AR. While cash-only sales have a DSO of zero.

DPO: This involves the company's payment of its own bills or AP. If this can be maximized, the
company holds onto cash longer, maximizing its investment potential; therefore, a longer DPO is
better.

Operating cycle: The greater the operating cycle, the greater the business requirement for
working capital. The greater the working-capital requirement, the higher the inventory-carrying
cost, including interest payments, and the greater the opportunity cost due to the inability to
invest funds in a higher use.

In addition, the lower the operating cycle, the greater the number of completed cycles per year,
and the greater the annual gross and net profits.

Cash Conversion cycle: The cash cycle measures the amount of days between paying the
vendor for the inventory and when the retailer actually receives the cash from the customer.

42
As with most cash flow calculations, smaller or shorter calculations are almost always good. A
small conversion cycle means that a company's money is tied up in inventory for less time. In
other words, a company with a small conversion cycle can buy inventory, sell it, and receive
cash from customers in less time.

Avenue
Particulars  Future Life Future Retail Aditya Birla F
Supermarket

Closing inventory  1418.01 933.16 3735.16 1431.25

Closing A/R  188.88 21 228.06 453.87

Closing A/P  1585.8 853.34 3254.32 2045.95

Sales  3877.07 11881.12 17075.09 6602.86

Cost of sales/COGS 2446.99 10095.99 12775 2966.55

DIO              (in days)    128.1765 24.47481382 75.162883 77.92553151

DSO                            17.78178 0.645141199 4.875049 25.08951424

DPO                   149.2924 26.21546622 69.564892 113.0982256

Operating Cycle          145.9583 25.11995502 80.037932 103.0150458

Cash operating cycle     -3.33408 -1.095511198 10.47304 -10.0831799

43
Interpretation:

DIO:

Comparing the days of inventory outstanding i.e., inventory converting into sales out of 4
companies Avenue Market has 24days which is considerably low DIO that is good for the
company. The lesser the number of days the faster the company can sell its inventory by
reducing its holding costs and giving space for new inventory. The more the company sells the
more it makes profits. But if we look at the value of inventory level its so lesser than that of
future life which is making approximately same value of sales but with lesser closing stock.
Talking about Aditya Birla F and Trent are maintained almost same DIO according to their
inventory and sales.

DSO:

Among the four companies the value of debtors is high in case of Aditya Birla and it is also
having high DSO 1month where as the other 3 companies has relatively so less amount of
debtors and also DSO. But collecting such huge amount in a month is challenge than collecting
lesser amount in lesser period. It is in a company's best interest that it collects its receivables as
soon as possible into cash so that it can reinvest its cash into working capital.

DPO:

DPO is high in case of Future Life 146 days where it is least in case of shoppers stop 73days.
That means shoppers stop is paying off its paybles sooner than the rest of the companies. Trent
company is holding its cash better than the rest of the companies comparing the amount of
payables is 230 crores only which is least amount of credit the company has among the other 3
but still it holds the cash for 125 days and then pays off. Accounts payable is an
important factor in a company's working capital. If it's too high, the company may soon be

44
struggling to find the cash to pay the bills; if it's too low, the company may be unwisely directing
its cash toward paying the bills too soon rather than enjoying the full grace period and
investing that cash in the business instead. Changes in the DPO indicate which way this is
trending and in turn how well management is retaining cash.

Operating cycle:

Talking about operating cycle, no. of operating cycles in a year are:

Operating cycle is a measure of the operating efficiency and working capital management of a
company. A short operating cycle is good as it tells that the company's cash is tied up for a
shorter period. There are several other factors that should be considered to see the efficiency and
profitability of the company for in this case lesser the cycles lesser is the company can be out of
risks. Here among the 4 companies the frequency is greater in case of future lifestyle than that of
other companies.

Cash conversion cycle:

Cash is converted badly in case of shoppers stop because the DPO is greater than DIO and DSO.
The credit period or the amount to be given to the creditor is faster than the days debtors are
being released. As the figures indicate that shopper’s stop is 10 days ahead of credits to be paid
before than the debts are released where as Future Life has higher number of credit period. A
shorter CCC is favorable also and entirely possible to have negative CCC. This would indicate
that the company manages its working capital so well that it is , on average , able to purchase
inventory, sell inventory, and collect the resulting receivable before the corresponding payable
from the inventory purchase due.

Future Lifestyle's Shareholding Pattern

45
 Percent of Share (%)

18%

Promoters
Individuals
Institutions
52% FII
19% Govt.
Others

3% 8%

Percent of Share (%)

Description

Promoters 52.08

Individuals 7.83

Institutions 3.42

FII 18.55

Govt. 0.00

Others 18.12

SWOT Analysis:

46
SWOT is an analysis tool that gives you a way to see how your existing or start-up fashion brand
stands up against the competition. In a larger sense, SWOT will help you understand the fashion
marketplace and your brand's place within it. SWOT stands for "Strengths," "Weaknesses,"
"Opportunities" and "Threats."

 Strengths

Huge variety of clothing available for both men’s and women’s categories

Reputation for value for money (Competitive pricing), convenience and a wide range of products
all in one store

Presence in major cities

Being financially strong helps Future Lifestyle & Fashions Ltd. deal with any problems, ride any
dip in profits and out perform their rivals

Development and Innovation are high at Future Lifestyle & Fashions Ltd. with regards to it
products and consumer preferences and lifestyle changes which keep it ahead of its competitors.

 Opportunities

The Government of India has taken various initiatives to improve the retail industry in India.
Implementation of GST is expected to enable easier movement of goods across the country,
thereby improving retail operations for pan-India retailers.

E-commerce is probably creating the biggest revolution in the retail industry, and this trend
would continue in the years to come

Huge untapped market

The Government of India has introduced reforms to attract Foreign Direct Investment (FDI) in
retail industry. The government has approved 52 per cent FDI in multi-brand retail and increased
FDI limit to 100 per cent (from 52 per cent) in single brand retail

47
  Weakness

Future Lifestyle & Fashions Ltd. does not function internationally, which has an effect on
success, as they do not reach consumers in overseas markets.

Very less focus on e-commerce business

 Threats

A slow economy or financial slowdown could have a major impact on retail business

 Price wars between competitors, price cuts and so on could damage profits

Retail brands like Pantaloons, West Side, Reliance Trends, Aditya Birla etc. are catching up fast

Shopping culture changing with people preferring online shopping

-Competitors have good presence on e-commerce websites like Amazon, Flipkart, etc.

Vision

To be the leading lifestyle fashion company in India by creating exceptional brands

and shopping experiences that will bring alive the Indian idiom of fashion.

Mission

We at Future Lifestyle Fashions aim to create a globally recognized fashion

organization here in India by bringing alive the Indian idiom of fashion. We thus
strive to:

 Be the most preferred fashion destination of India

48
 Create the most preferred portfolio of fashion brands
 Be as the most innovative, efficient, and profitable retailer
 Be the preferred employer in the fashion space
 Be the trendsetter in Indian fashion through superior understanding of the culture,
style code, passion and aspirations of Indian consumers

Create happiness for customers, colleagues, business partners and every stakeholder

 For Commercial/Financial Department:

 Agreements should be properly maintained.
 All soft copies of agreements should be kept at a Cloud Space, so that there is no risk
of misplace or lose.
 If there are any amendments have been made in the terms of agreement, the amended
agreements copies should be kept with original agreements.
 There should be smooth communication procedure among the departments, which
reduce the chances of confusion.

 Conclusion:

 Completing this project as a part of MBA curriculum has been a great experience for

me. The Summer Internship Program has helped me reform my outlook towards the
functioning of an organization and furthermore, it has helped me grow as an
individual. The project gave me the opportunity to work in real life situation which
cannot be simulated in the classroom. The learning which I have will be an asset
throughout my life. This project has given me broader view and exposure of financial
and business operations in retail business. I was introduced to the various BTL or
Below the Line activities and the vehicles of communication executed by the
organization.
 I have learned about different financial & business operations in retail business, and
what are the significant incomes & expenses involved. And how the financial team
monitor these expenses and incomes to operate business smoothly.
 I have learned to interpret huge data into meaningful information, and how that
information can be used to monitor the discrepancies if any. This Summer Internship

49
 Program also helped me to get verse in Microsoft Excel and I have also learned basic
operations of SAP Software.
 In this tenure of 2 Months I have not worked on only one task, first I have learned
about the business process than, I have started to work on Memorandum of
Understanding and than finding of discrepancies or errors in Mu like Area sqt,
Margin, Change in any Pilferage. This whole task took 2 months approx, but it helps
company to generate payments easily and it reduces chaos and confusion among the
department and also increases the efficiency.
 Overall, I enjoyed learning in such a great organization, and I am very thankful to my
guides for their continuous guidance and appreciation throughout the SIP which
helped me a lot.

Reference/Bibliography:

 FLFL Annual Report 2016-17

 www.futurelifestyle.in

 www.moneycontrol.com

 www.wikibusiness.org

 Investopedia

50