Shoppers Stop to raise funds

MUMBAI (Reuters) - Department store Shoppers Stop is planning to raise funds to acquire 32 percent in group firm and hypermarket chain Hypercity, a top official said over the weekend.

The company is looking at generating 1 billion to 1.2 billion rupees ($21.6 million to $26 million) for the acquisition, President and Chief Executive Govind Shrikhande told Reuters.

On Saturday, the company's board approved an issue of 4 million shares to institutional investors and also 4 million convertible warrants to founders, but did not specify how much it would be raising.

Hypercity is the multibrand retailing format floated by the founders of Shoppers Stop, which has a 19 percent stake in it and under an agreement is exercising the option to raise it to 51 percent by June next year.

Shoppers Stop, with a total retail area of 1.88 million square feet, operates large format department stores, home stores and speciality stores like bookstore chain Crossword and M.A.C cosmetics stores through a retail agreement with Estee Lauder. It has distribution tie-ups with Britain's Mothercare Plc and German lifestyle and jeanswear Mustang in India.

Earlier this year, it dissolved its catalogue retailing venture with Britain's Home Retail Group as the venture did not perform up to expectations.

Shoppers Stop has plans to open 15 to 18 stores in India over the next 40 months with an average investment of 1 billion rupees a year, Shrikhande said.

The company, which reported a 120.6 million rupees net profit in the Sept. quarter versus loss year-ago expects its financial performance to improve in future quarters with an improvement in the retail climate.

"Customer confidence is improving, rental rates are coming down and overall costs are also coming down," Shrikhande said.