Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil A+/Stable/Crisil A1+’ ratings on the bank loan facilities of Shoppers Stop Ltd (SSL).

 

The ratings reflect the established position of SSL in the retail industry, particularly the departmental stores category, its prudent working capital management, healthy financial risk profile, brand loyalty and strong financial flexibility enjoyed by being a part of the K Raheja group. These strengths are partially offset by susceptibility of operating performance to economic downturns and increasing competition in the apparel retail segment.

 

During fiscal 2025, the company reported consolidated revenues of Rs. 4,628 crore, a year-on-year (y-o-y) of around 7%. The revenue growth was largely driven by increase in Average Transaction Value owing to higher average selling price (ASP) owing to premiumization. In addition, recovery in same store sales growth (SSSG) during the third and fourth quarter of fiscal 2025 coupled with ramp-up in revenues from value fashion business unit ‘INTUNE’ during the said fiscal period also contributed to the overall revenue growth. Post Ind-AS reported operating margins (including non-operating income) contracted by around 200 basis points (bps) to around 16.5% during fiscal 2025 on account of overall decline in revenue contribution from private brands (around 11% during fiscal 2025 as against ~12% during the same period of corresponding fiscal), higher fixed costs emanating from rapid store expansion of ‘INTUNE’ (22 stores as on March 31, 2024 increased to 71 stores as on March 31, 2025), and weak SSSG during the first and second quarter of fiscal 2025.

 

Over the medium-term, revenues are estimated to grow around 6-7% driven by improvement in SSSG, continuing premiumization trend, and revenue accretion from new ‘INTUNE’ stores. Post Ind-AS operating margins shall witness sequential improvement to around 17% driven by better fixed costs absorption with the ramp-up in ‘INTUNE’ revenues. 

 

The business risk profile remains healthy, marked by widespread presence in the premium and luxury segments. SSL has around 299 stores (excluding Shop-in-shop) across 70 cities and caters to more than 1,000 brands. SSL through its distribution business of subsidiary– Global SS Beauty has entered into partnerships and distribution rights with multiple international brands.

 

Financial risk profile shall continue to remain healthy with pre Ind-AS adjusted networth of around Rs. 856 crore as on March 31, 2025 (post Ind-AS adjusted networth is estimated around Rs. 271 crore) and pre Ind-AS adjusted gearing for external borrowings of around 0.40 time; post Ind AS adjusted gearing i.e. including lease liabilities is around 12.23 times (10.97 times as on March 31, 2024). With operational capital expenditure (capex and deposits) spends of around Rs. 192 crore, the company’s net cash accruals shall be more than sufficient to cover for the same, and in addition given the sustenance of a negative working capital cycle of 95-100 days (103 days as on March 31, 2024), working capital intensity is also expected to be modest, thus reliance on external borrowing requirements shall be limited. That said, the company has drawn down term loan of Rs. 120 crore pertaining to capex undertaken earlier, which has a 1-year moratorium and 2-year re-payment term. Nevertheless, pre Ind-AS adjusted gearing is expected to remain comfortable around 0.20-0.30 times over the medium term; including for lease liabilities, adjusted gearing is estimated around 9-10 times. Pre and post Ind-AS interest coverage to also remain comfortable at over 5 times and 3 times respectively over the medium term.

 

Overall liquidity remains comfortable, supported by cushion available in working capital limit, unencumbered cash surplus of Rs. 14 crore as on March 31, 2025, and financial flexibility with the company’s ability to access capital markets, as demonstrated earlier.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of  Shoppers Stop and its subsidiaries, Global SS Beauty Brands (rated Crisil A / Stable / Crisil A1, erstwhile Upasna Trading Ltd), Shoppers Stop Brands (India) Ltd erstwhile known as Shopper's Stop Services (India) Ltd, Shopper's Stop.com (India) Ltd and Gateway Multichannel Retail (India) Ltd.  All these entities are collectively referred to as the Shoppers Stop Group.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

• Established position in the departmental stores category and entry into the value segment: Shoppers Stop is one of India’s leading retail store chains, with retail carpet space of 4.5 million square feet (sq ft) as on March 31, 2025. With a diverse range of offerings (apparel, baby care, footwear, personal accessories, and furniture), the format targets the relatively less price-sensitive, upper- and upper-middle-class consumers. The company has established a strong brand equity in this target demographic, with repeat customers (through its loyalty program, First Citizen) contributing to around nearly 82% of sales. The company has also successfully scaled up this business through regular store additions. It has 112 department stores as on March 31, 2025. The company has also ventured into the value segment via launch of ‘INTUNE’, which are relatively smaller stores (5,000-5,500 sq ft), and as on March 31, 2025, the company has opened 71 ‘INTUNE’ stores across India and aims to add around 35-40 more stores in fiscal 2026. Shoppers Stop through its distribution channel by way of its subsidiary Global SS beauty has also entered into distribution partnerships with international brands which should support growth over the medium term.

 

• Prudent working capital management: Inventory management practices are robust. In fiscal 2024, over 70% of revenue was derived from merchandise procured on consignment / concessionaire / sale-or-return (SOR) basis. This optimal mix ensures an adequate gross margin, while reducing susceptibility to inventory build-up during a slowdown, or to unsuccessful store additions. Besides, quick cash conversion on sales also minimises dependence on the working capital limit.

 

• Healthy financial risk profile: Financial risk profile shall continue to remain healthy with pre Ind-AS adjusted networth of around Rs. 856 crore as on March 31, 2025 (post Ind-AS adjusted networth is estimated around Rs. 271 crore) and pre Ind-AS adjusted gearing for external borrowings of around 0.40 time; post Ind AS adjusted gearing i.e., including the lease liabilities is around 12.23 times (10.97 times as on March 31, 2024). Over the medium term pre Ind-AS adjusted gearing to remain comfortable around 0.20-0.30 times; including for lease liabilities, adjusted gearing is estimated around 9-10 times. Pre and post Ind-AS interest coverage to also remain comfortable at over 5 times and 3 times respectively over the medium term. Overall liquidity remains comfortable, supported by cushion available in working capital limit, healthy unencumbered cash surplus of Rs. 14 crore as on March 31, 2025, and financial flexibility with the company’s ability to access capital markets, as demonstrated earlier.

 

Weaknesses:

• Moderate susceptibility of operating performance to economic down-cycles, inflationary pressures, and large annual addition of stores: The branded apparel segment relies heavily on the disposable income of its customer segment and hence remains susceptible to economic cycles, given the discretionary nature of purchases. Large expansion by retailers can exert pressure on operating margin as earnings from existing stores may not adequately offset losses from new stores. While a large portion of stores had break even, significant improvement in operating profitability is unlikely due to gestation losses from new stores and inflationary pressure on raw material cost over the medium term.

 

• Exposure to increasing competition in the apparel retail segment: The attractiveness of the apparel segment has led to increasing competition with presence of large domestic players such as Lifestyle, Reliance Trends and Pantaloons, apart from numerous smaller players entering the market. Large global apparel brands, including GAP, H&M have also entered the Indian market in the past, thus increasing the competitive intensity.

Liquidity: Strong

The company continues to fund its capex primarily from internal funds. The overall liquidity position continues to remain strong supported by cushion available in working capital limits, unencumbered cash surplus of around Rs 14 crore as on March 31, 2025, and financial flexibility with the company’s ability to access capital markets as demonstrated in the past. Over the medium term, the company shall generate pre Ind-AS net cash accruals of Rs. 220-280 crore per annum (post Ind-AS net cash accruals of Rs. 600-700 crore per annum), which shall be sufficient to cover yearly operational capex spends of Rs. 180-200 crore and term debt repayment obligations of Rs. 60 crore per annum beginning from fiscal 2027. SSL has drawn down term loan of Rs. 120 crore for capex undertaken in the past. The loan has a 1-year moratorium and 2-year repayment term. Working capital requirement shall remain modest owing to the sustenance of a negative working capital cycle and shall be met through internal cash accruals with limited dependance on working capital borrowings.

 

Fund based limits of around Rs. 138 crore have been utlised to the extent of 73% on an average during the last twelve months through to February 2025. In addition, strong parentage of the K Raheja group also supports financial flexibility and overall liquidity.

 

ESG profile

The environment, social and governance (ESG) profile of SSL supports its strong credit risk profile.

 

The retail sector has low environmental impact, primarily in the form of low emissions and water consumption and increasing focus on the usage of sustainable packaging. The sector has moderate social impact because of its direct bearing on the health and wellbeing of its workers and customers.

 

The company’s increasing focus on addressing ESG risks supports its ESG profile.

 

Key ESG highlights of SSL:

• Shoppers Stop’s energy consumption has reduced by around 5% in fiscal 2024 on a year-on-year basis. 
• The company has transitioned to 100% recyclable paper bags made from corn, eliminating the use of plastic packaging and shopping bags.
• At the standalone level, the company's attrition rate of permanent employees is relatively high at around 47% in fiscal 2024, though it has reduced by ~8 percentage points during fiscal 2024 from the previous year.  Also, the company has maintained its gender diversity level with share of female employees at around 29% during the fiscal 2024.
• The company's governance structure is characterized by around 60% of its board being independent directors, around 20% women board directors and extensive financial disclosures.

 

There is growing importance of ESG among investors and lenders. The company’s commitment to ESG will play a key role in enhancing stakeholder confidence and access to capital markets. As informed by the management, the company has already engaged with one of the leading consultants to understand the ESG maturity and materiality by benchmarking both Indian and Global Standards, review the existing data management system and ESG focus areas across the value chain for comprehensive coverage of ESG aspects

Outlook: Stable

Crisil Ratings believes SSL’s business risk profile will continue to be healthy over the medium term supported by its established position in the domestic apparel retail sector, strong relationship with leading apparel brands, and wide geographical presence. Also, its financial risk profile is expected to remain adequate, supported by steady cash generating ability, moderate capex and prudent working capital management.

Rating sensitivity factors

Upward factors:

• Sustained improvement in operating performance with significant increase in scale of operations while maintaining pre Ind-AS operating margins of over 5% (pre Ind-AS of 17-18%) leading to steady improvement in cash accruals.
• Maintenance of strong financial risk profile with efficient working capital management
• Build-up of surplus cash

 

Downward factors:

• Lower than anticipated growth with slower than expected ramp up of newly added stores; pre Ind-AS operating margins falling below 4% (post Ind-AS of 12-13%) on a sustained basis, based on Crisil Ratings adjusted financials.
• Larger than expected debt funded capex or inorganic acquisition, or elongation in working capital, leading to material moderation in debt metrics

About the Company

Shoppers Stop is a K Raheja Corp group company, promoted by Mr. Chandru L Raheja, in 1991. It is one of India’s leading omni-channel retailers in the apparels and non-apparel segments. The promoter holds 65.52% stake in the company as on March 31, 2025.

 

The company mainly operates through retail and departmental stores. Shoppers Stop is one of the largest departmental store chains in India. The company also operates beauty segment stores, Home Stop (retailing home décor) and airport stores. As on March 31, 2025, SSL has 112 department stores, 11 premium home concept stores, 85 specialty stores, 71 ‘INTUNE’ stores and 20 airport doors with retail chargeable carpet space of 4.5 million sq ft. The company is listed on the Bombay Stock Exchange and National Stock Exchange.

Key Financial Indicators- Crisil Ratings adjusted financials

As on / for the period ended March 31	Unit	2025^	2024	2023
Revenue	Rs crore	4,628	4,317	4,025
Profit after tax	Rs crore	11	77	116
PAT margin	%	0.24	1.79	2.88
Adjusted debt/adjusted networth	Times	12.23	10.97	15.10
Adjusted Interest coverage	Times	2.92	3.19	3.26
Adjusted debt/adjusted networth (pre Ind-AS)*	Times	0.40	0.21	0.16
Adjusted Interest coverage (pre Ind-AS)%	Times	-	8.38	9.23

*Adjustment made of lease liabilities and right of use assets

%Adjustment made to operating profitability for actual lease rentals paid and interest & finance charges comprising of interest on lease liabilities

^Fiscal 2025 financials are based on published abridged financial statements. Pre Ind-AS adjusted interest coverage for fiscal 2025 cannot be calculated owing to lack of information.

Any other information: Not Applicable