Westside: The Indian Retailing Success Story

In 1996 Lakme entered into a joint venture with Hindustan Lever² for the marketing and distribution of Lakme brands. In 1997, the Tatas sold their stake in Lakme to HLL for Rs 2 billion. After selling off their stake in Lakme, the Tatas scouted for business opportunities and decided to venture into retailing. Retailing was at a nascent stage in the late 1990s, and it was expected to be a booming business in India in the following decade (Refer Exhibit II for note on retailing industry). In 1998, the Tatas ventured into retailing, acquiring the Britain-based Littlewoods retail stores in Bangalore. The company was renamed, Trent Ltd., and the Littlewoods stores were renamed Westside. Along with the Littlewoods stores, the Tatas acquired the firm's warehouse and infrastructure.

In 2001, Westside had average sales of just above Rs 5,000 per sq ft. in all its stores. By 2002, it had a store in Nagpur and a second store in Delhi. In 2002, Westside reported a net profit of Rs 102.2 million (Refer to Exhibit III) and it also reported cash break-even in the same year. Analysts felt that the surplus cash reserves from the sale of Lakme provided the financial back-up for Trent-Westside. With cash reserves of around Rs 1.61 billion (on 31st March 2000), Trent had the option of avoiding high interest debts for its expansion. The company planned to increase its retailing space to 0.3 million sq ft. by 2003, from 0.12 million sq ft. in 2001. The firm wanted to expand Westside's operations to other cities. Trent announced that it would enter food retailing by the end of 2003 with an estimated investment of Rs 400 million...