VGP Ltd gears up to tackle MNC onslaught  ( February '22,2001, HBL)

THE question of survival in the face of possible competition from MNC retailing houses has spurred the Chennai-based V.G. Panneerdas & Co to set its house in order. In November, the partnership firm was converted into VGP Ltd with a paid-up equity capital of Rs 1 crore.

``It is easy to access funds if you are a company,'' says Mr V.G.P. Rajadas, Senior Director, VGP Group of companies. Mr Rajadas, who is in charge of the group's retailing business, said there was a threat from foreign competition. Once the FDI is allowed in retailing, global giants like Wall Mart, K-Mart, J.C. Penny and Lottie will swarm India. These companies are in a position to strike deals with manufacturers of consumer goods for stocking large volumes of their products for sale in outlets throughout the world. They also have the advantage of getting access to low-cost finance. Mr Rajadas, however, denied that the idea of converting VGP from a partnership outfit to a joint stock company was to take a strategic partner on board.

``We have no such plans for the time being,'' he told Business Line. The company plans to strengthen the VGP brand. A Bangalore-based architect has been hired to revamp the interiors of all its 13 outlets in South India (and a few more that are to be added).

``This is because, when you enter a VGP shop, you know it is a VGP shop. In other words, the interiors will all look alike,'' said Mr Rajadas. VGP expects to spend around Rs 1.25 crore for this. Moreover, VGP Ltd will step up ``mobile camps'', where temporary showrooms will be set up in rural and semi-urban areas for a few days at a time. ``My father, founder of the group, Mr V.G Panneerdas, used to organise such mobile camps 40 years ago,'' Mr Rajadas said.

The mobile camps will also feature ``instant loan'' facilities. Mr Rajadas sees such camps as a strategy against huge companies. ``The first time we hold a camp, the response is usually not good. However, when we go to the same place the second time, there is good business,'' Mr Rajadas said. The company also plans to take business online. VGP Ltd is planning to launch an interactive Web site -- vgpeasybuy.com.

A feature of the Web site is that if a customer decides to buy a product, he can pay an advance of Rs 1,000 and join the group of people who want to buy the same. Depending on the number of customers who buy the product in a period of time, there is an automatic rebate available. ``It is like going to a shop with 10 other prospective buyers bargaining for a volume deal collectively,'' Mr Rajadas said. In this case, the customers get together online and the rebate is automatic. VGP wants to link up this Web site to others. Negotiations are under way with Num TV for this purpose.

These steps will hone VGP's marketing edge, but ``we still have to strengthen our finances'', Mr Rajadas said. With some attention on inventory management, VGP has brought down the inventory from 1.5 month sales to two weeks sales. Further, purchasing is now centralised, while earlier regional offices used to source material directly. VGP Ltd achieved a turnover of Rs 60 crore last year and expects a 20-per cent growth this year.