E-commerce takes its toll; cellphone retail chain Univercell planning to exit enterprise

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KOLKATA | HYDERABAD: E-commerce discounting has began to take its toll, with the homeowners of South India’s largest brick and-mortar cellphone retailer UniverCell seeking to exit the 380-store chain.

UniverCell, managed by personal fairness fund Peepul Capital, which owns a more-than-70% stake within the firm, has approached a number of cellphone and digital retail chains for a sale, 4 senior trade executives mentioned, asking to not be recognized. UniverCell has contacted Videocon-owned PlanetM Retail, Bangalore-based Sangeetha Mobiles and Delhi-based Optiemus Group, which distributes Samsung smartphones to massive retail chains, all 4 executives mentioned.

Venkat Shankar, funding director of Peepul Capital, mentioned he will not touch upon portfolio firms.

UniverCell founder and promoter D Sathish Babu mentioned the corporate is all the time taking a look at elevating funds to fund its progress plans and denied that he or Peepul Capital is in talks with anybody at current to promote a stake. Sangeetha Cell MD Subhash Chandra and Videocon Retail director Sanjay Karwa declined to remark.

Talks with Optiemus Group are at a complicated stage, the 4 executives mentioned. Optiemus Group chairman and managing director Ashok Gupta mentioned the corporate has had an exquisite relationship with UniverCell since 2009 and it’s obliged to assist it throughout unhealthy instances. “Since UniverCell is below monetary pressure, it’s our ethical responsibility as considered one of its commerce companions to increase some credit score to help it and guarantee provides usually are not stopped.

If there’s something else later, we’ll get again to you,” mentioned Gupta, who additionally owns a stake in cellphone retailer Mobiliti World, which has 100 shops. Babu informed ET over telephone that his firm making efforts to fight on-line retail, which has taken an enormous toll on the brick-and-mortar cellphone commerce, together with Univer-Cell. “In current instances, with on-line attacking us in a giant approach, we’re consolidating and watching what is going on. UniverCell can be giving closing touches to a complete technique to counter on-line retailers comparable to EMI facility, postsale providers, serving to clients with nano-SIM playing cards and copying contacts from outdated telephone,” he mentioned.

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Business executives mentioned Univer-Cell has shut some 70 shops up to now few months and plans to shut non-viable shops. Nonetheless, it nonetheless faces a working capital disaster as a consequence of poor gross sales. Peepul Capital, which invested within the firm in February 2007, just isn’t eager to supply any additional capital because it needs to exit the corporate.

Babu mentioned UniverCell is reviewing the efficiency of its shops and is shutting down or relocating these that aren’t making earnings. “There is no such thing as a have to have retailers that aren’t making earnings,” he mentioned, declining to disclose particulars. Indus Cell Distribution, the corporate that runs the UniverCell chain, reported a steep fall in revenue to Rs 99.8 lakh in 2013-14 from Rs 13 crore the earlier 12 months, whereas gross sales elevated 11% to Rs 1,172 crore, in keeping with newest knowledge accessible from filings made to the RoC. A senior govt with a rival cellphone retailer, which evaluated the acquisition alternative, mentioned the state of affairs which Univer-Cell is going through is a warning of how e-commerce reductions are taking a toll on bodily shops.

 

“It’s changing into a giant problem for any brick-and-mortar chain to outlive with such big reductions by e-commerce corporations. Gross sales are down by nearly 40% since final Diwali, which is affecting our working capital and solely these backed by massive company homes will be capable to survive,” he mentioned.

Three main cellphone retailers in south India, Sangeetha Mobiles, Poorvika Mobiles and BigC Mobiles, have additionally determined to mix sources to struggle on-line retail by creating a typical back-end to barter for greater margins and launch unique fashions by their shops.

As per estimates, cell phones are the largest-selling class of merchandise in e-commerce. On-line gross sales account for nearly 15% of complete smartphone gross sales in India and its share is predicted to double within the subsequent two years.

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