Praxis Home Retail Ltd Management Discussions.

The Indian Retail Industry has emerged as one of the most dynamic and fast-paced industries due to the entry of several new players, accounting for over 10 percent of the Countrys Gross Domestic Product (GDP) and around 8% of the employment. India is the worlds 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 rapid increase in internet penetration. While on one hand the boom in the residential real estate industry over the last few decades has given an impetus to the home dcor market, it has on the other increased consciousness and upgradation in style of living among home owners has boosted the demand for stylish interiors and colourful classy dcor.

During the year under review, the Scheme of Arrangement between Future Retail Limited (‘FRL) and Bluerock eServices Private Limited (‘BSPL) and Praxis Home Retail Limited (‘PHRL or ‘the Resulting Company or ‘the Company) and their respective Shareholders under Sections 230 to 232 read with Section 66 of the Companies Act, 2013 and other applicable provisions of the Companies Act, 2013 ("the Scheme") was made effective on 20th November, 2017. As a result, Home Retail Business Undertaking of FRL (as on appointed date 1st August, 2017) and e-Commerce Home Retail Business Undertaking of BSPL (as on appointed date of 15th April, 2016) is now vested with the Company.

Post Demerger, your Company now operates stores of home furniture and home fashion under the brand name of HomeTown and also operates the web portal ( to drive online sales of Furniture, Furnishing products with wide range of assortment catering to large section of customers. The web portal in addition to offering rich information on design & modular solutions i.e Design & Build, Modular Kitchens & Wardrobes also helps in capturing details of potential customers to enable service closure by the physical stores.

HomeTown is a one-stop shop that brings together under one roof a wide range of furniture, home furnishing goods, design and build, other home related products and high quality services including complete home design, modular kitchen, flooring, tiles, plumbing, wallpaper among others, along with great in-store experience. Currently, HomeTown has a pan India presence with 39 stores, across 26 cities and 13 states majorly in Maharashtra, West Bengal, Karnataka, Uttar Pradesh, Telangana and Delhi NCR.

The Demerger has resulted in consolidation of physical and online Home Retail Businesses under the single roof of the Company and has given a focused leadership and dedicated Management with greater visibility on the performance of physical and online formats.

With regards to the vesting of demerged Home Retail Business Undertaking of Future Retail Limited, the Company had completed the entire process, starting with the Board approval in April 2017, approval of Shareholders in September 2017 and finally sanction of Honble Mumbai Bench of National Company Law Tribunal (NCLT), in November 2017. The Scheme has been given effect in the books of accounts of the Company, with effect from 1st August, 2017 for FRL and 15th April, 2016 for BSPL, post completion of necessary compliance. Your Company continues its strategy of adopting a measured approach towards growth that captures consumer spend from a growing set of Indian consumers and at the same time ensuring that this growth is sustainable, profitable and value accretive in the long run. A key focus for the Company is to increase its velocity of sales for its existing business and increase its overall retail space and presence. The objective has been to enhance assortment relevance, improve quality standards, shopping experience and reinvent ourselves for higher customer conversion ratio, better ticket sizes, better same store sales growth and focus on higher margin products.

Your Company is determined to design its format stores to be smarter and experiential through use of technology, innovation in services, layouts, sections and digital interface. It aims at attracting more evolved and experience seeking customers in key catchments and metros. These stores redefine the shopping experience and set new benchmarks for retailing in India. HomeTown store is where many of the Companys innovations and ideas to give consumers a world class shopping experience have come together.

As part of other efforts to enhance customers shopping experience and have a bigger share of their shopping wallet certain other initiatives have also been taken. This includes introduction of payback loyalty points, EMI facility through Bajaj Finserv for spends above certain limit across stores of the Company, and many more initiatives. These innovative fast-growing digital tools are yielding deep consumer big-data which in-turn shall immensely help us in penetrating deeper into our customer-base while at the same time, bringing in new age customers in large numbers.

Operational Overview

Your Company is focussed on the objective of improving its Return on Capital Employed (ROCE) and it would continue to take necessary steps to improve the financial position.

As part of Companys plan to remain relevant to the internet-savvy new age consumers and other stakeholders, the Company, in coming months, proposes to focus on various digital initiatives. As a result, e-commerce has become an important pivot of growth. Your Company has taken definitive steps to stay ahead of the curve in this space; and has identified and appointed dedicated resources and is working with top-class consulting companies for growing the e-commerce business.

Your Company continues to strive hard for optimising productivity on per store basis. The optimum utilisation of the retail space, introduction of new and high demand products, better negotiation with vendors, attracting customers to stores to increase overall customer footfall and then better conversion rate would result in better store productivity as well as better contribution per square foot of retail space.

Brand, Customer and Marketing Overview

HomeTown is a one-stop shop destination for all home interior needs for the lifestyle seeking consumer. The brand is targeted at the aspirational upper-middle class consumer, seeking good quality, trendy and functional furniture, homeware and interior solutions. HomeTown has emerged to be the number one player in the organised home retail category and a strong aspirational lifestyle brand.

True to the brand positioning of ‘Art of Better Living, HomeTown brands vision is to inspire people to create living spaces that are beautiful, partnering with customers in building their dream homes by offering wide range of great quality and thoughtfully curated products, personalised buying experience and unmatched customer service.

Our marketing efforts are focussed on increasing brand salience and lead generation with print and outdoor advertising forming the core of our awareness strategy. Digitisation, Big Data and Omnichannel marketing are the key strategic themes for driving growth in the coming years. Digitisation efforts like Marketing Automation with Salesforce offer opportunities to deliver on our strategy of being a default home shopping destination by creating unique customer journeys and personalised dialogues with customers based on their needs and requirements throughout their lifecycle. Big Data Analytics offers us opportunities to understand each customer segment in a unique manner and formulate selling and marketing strategies relevant to their attitude and purchase needs. Omnichannel marketing will ensure a fully integrated approach to deliver a unified and seamless experience across physical and online store.


Your Company is a part of the Future Group, which is a pioneer in organised Retail Industry. As of 31st March, 2018, the Company operates 39 stores covering a wide range of furniture, home furnishing goods, design and build, other home related products and high quality services including complete home design, modular kitchen, flooring, tiles, plumbing, wallpaper among others, along with great in-store experience. Praxis has presence across both metro and tier II cities and future expansion plans are in line with the need to serve the target customer.

Your Company is determined to increase sales from its existing stores and optimising its value chain, reduction in operating costs, improving margins and increasing sales thereby adding to the bottom-line. Goods and Services Tax (GST) is one of the biggest indirect tax reforms which India has ever witnessed. The enactment of the GST legislation has been a milestone reform that has created a win-win environment for all stakeholders with an integrated and productive economy and is expected to further boost economic growth.

Human Resource Initiatives

Human Resource is one of the key interfaces the Company has with its customers and hence it plays a vital role in writing the success story of any Company. The Human Resource functions strategy is focused on creating a future-ready workplace, strengthening the Companys culture, building capability for business and nurturing careers. We are very proud to state that post the Demerger, we have taken several initiatives in this direction.

Your Company currently employs approximately 1,750 employees spread across 39 stores and 26 cities. With an aim to hire and retain good talent we have revamped our hiring strategy and incorporated the Top Grading methodology of recruitment which is a detailed multiple step interviewing process including competency and role-based interview.

With an intent to make your Company an employer of choice, we undertook the Great Place to Work survey in which the strengths and weakness of the organization were highlighted after a detailed analysis.

You would be happy to know that your Company has been certified a "Great Place to Work" based on the engagement survey and an audit of its policies and practices adding another feather to its cap. This is a proud moment for your Company, as this was the first year of participating in such an engagement survey. Learning from the findings, your Company is now investing in transformational projects by aligning with larger business goal of growing at a fast pace.

Business Outlook

With the unorganized and fragmented players forming almost 80% of the furniture market, India offers immense opportunities for domestic and international players. The demand for furniture is growing in the country on account of increasing purchasing power of the consumers, changing lifestyle, increasing urbanization and widespread availability in tier II and III cities. The domestic furniture market in India is highly unorganized with regional players offering a stiff competition to leading furniture companies, which form the organized sector in the Indian furniture market. To increase product availability, your Company has entered into tie-ups with e-commerce marketplaces such as Flipkart and Amazon.

According to "India Furniture Market Forecast & Opportunities, 2019", the Countrys furniture market is projected to grow at a CAGR of around 26% during 2014-19. Home furniture segment is the leading contributor, followed by office and institutional segment. Western region is expected to be the highest revenue contributor in Indian furniture market, followed by southern region due to the presence of large number of industrial hubs and upcoming infrastructure developments in these regions. Over the next five years, the Indian furniture market is expected to witness increasing consolidation due to growing entry of international companies as a result of the governments 100% FDI approval in the Countrys furniture industry. Consequently, the value share of small and mid-sized furniture players forming the unorganized sector is expected to decrease over the coming years.

Risks and Threats

Risks might be with respect to regulatory changes pertaining to the industry in India in which we operate and our ability to respond to them, our ability to successfully implement our strategy, our growth and expansion, technological changes, our exposure to market risks, general economic and political conditions in India which have an impact on our business activities or investments, the monetary and fiscal policies of

India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices, the performance of the financial markets in India and globally, changes in domestic laws, regulations and taxes, and changes in the competitive environment.

Certain important factors that could cause actual results to differ materially from our expectations include, but are not limited to general political, social and economic conditions in India and other countries. Strikes or work stoppages by our employees or contractual employees, Increasing competition in, and the conditions of, the Indian Retail Industry, failure to continue business or undertake projects on commercially favourable terms, changes in government policies, including introduction of or adverse changes in tariff or non-tariff barriers, foreign direct investment policies, affecting the retail industry generally in India, accidents and natural disasters are factors which are beyond our control.

We expect significant demand for our products and hence require to continuously evolve and improve our operational, financial and internal controls across our Organization, and our continued expansion increases the challenges involving integration of new stores, preserving a uniform culture, values and work environment, developing and improving infrastructural, operational, and other internal systems, recruiting, training and retaining sufficient skilled management, project management, human resources and marketing personnel and adhering to health, safety and environmental standards.

Delay in store openings will impact our schedules and cause cost and time overruns. In addition, our expansion may present distribution and merchandising challenges that differ from those in our current operation. Addressing the challenges arising from our growth entails substantial senior level management time and resources and would put significant demands on our Management team and other resources. Any inability to manage our growth may have an adverse effect on our business and results of operations.

There can be no assurance that we will be able to execute our strategy on time and within the stipulated budget or that we will meet the expectations of the customers and achieve our planned growth. Further, large number of stores may increase our fixed operating costs, and there can be no assurance that we will experience a commensurate increase in revenue or derive operational synergies to offset these higher costs. Our inability to manage our growth could have a material adverse effect on our business, results of operations and financial condition.

Our business is subject to seasonal and cyclical volatility and our inability to forecast the trends and consumer preferences or demands in the forthcoming seasons may contribute to fluctuations in our results of operations and financial condition.

Your Company always strives to mitigate each of the above discussed risks both internal and external risks. We shall also note that at this time, we do not anticipate any major adverse change in the macroeconomic factors.

The set controls and defined responsibilities at each level of management require evaluation of the various existing risks and new expected risks at an early stage and immediate action plan to mitigate such risks. Further, the authority vested at each Management level ensures implementation and execution of such action plan with minimised risk. Further, use of information technology for implementation as well as regular review and evaluation of such risks and risk mitigation action plan by Management ensures minimisation of such risks.

Internal Controls and their adequacy

The Company has identified the key risks and control processes to mitigate the same. Further, the Company uses Enterprise Risk Management to identify and define new risks and establish the control processes to mitigate the identified risks. Further, the Internal Control Framework for financial reporting, organization structure, documented authorities and procedures and internal controls are being reviewed by the internal audit team on a continuous basis and any issues arising out of the said audit are addressed appropriately. The Company is also continuously upgrading its internal control systems by measuring state of controls at various locations. Controls in SAP, our ERP system have been strengthened.

The Audit Committee, comprising of Independent Directors is involved in regular review of financial and risk management policies, significant audit findings, the adequacy of internal controls and compliance with the applicable accounting standards.

Review of Financial Performance of the Company for the year under review.

In light of the aforesaid Scheme, the figures for the current financial year is not comparable with the last financial year on account of various adjustments including accounting treatments given effect for the vesting of incoming business undertakings from FRL and BSPL with the Company.

Statement of Profit and Loss review:

During the financial year ended 31st March, 2018, the Companys Revenue from Operations was Rs 38,054.06 Lakh. The Companys Finance Costs was Rs 227.02 Lakh for the financial year ended 31st March, 2018. Net Loss during the fiscal was Rs 199.10 Lakh.

Equity Share Capital:

Pursuant to the Scheme, 2,46,33,208 Equity Shares were issued and allotted to the shareholders of FRL. The equity shares of the Company were listed on the Stock Exchanges (BSE Limited and National Stock Exchange of India Limited) w.e.f. 31st January, 2018, post receipt of trading approvals from the Stock Exchanges.

Preference Share Capital:

Pursuant to the Scheme, the shareholders of BSPL were allotted 6,30,000 - 9% Non-Cumulative Redeemable Preference Shares of face value of Rs 100/- each on a proportionate basis, redeemable at the end of 60 months from the date of allotment. The Company has an option to redeem the Preference Shares at any time after the end of 24 months from the date of allotment. The Company, upon exercising such option or on redemption, will pay the amount of face value of the Preference Shares along with dividend accrued up to that date, if any. The Companys liability to the Preference Shareholders shall stand extinguished from the date of dispatch of the cheques / pay order for the redemption amount along with dividend, if any.

Earnings Per Share (EPS)

The Companys basic and diluted EPS was ( Rs 2.67) for the financial year ended 31st March, 2018.