Shopper's Stop Limited - Securities and Exchange Board of India

Enhancing our operational efficiencies through better systems and processes
We have a consistent focus on enhancing our operational efficiencies and monitor key operational
parameters on an ongoing basis using concepts such as GMROF, GMROL and GMROI to improve our
productivity on space, labour and inventory (For further details, please refer to Section titled
“Management Discussion and Analysis on our Financial Statements” on page number_138 of draft Red
Herring Prospectus) .
We benchmark our stores within the chain on performance parameters on historical as well as
comparable basis to seek areas for improvement to reduce our operating costs and enhance our
productivity levels.
Enhancing our human capital
We have engaged SHL Limited (UK), a leading consultancy specializing in competency and assessment
centers to map competency for all key jobs. We periodically assess our CCAs across all levels through
assessment centers to identify competency gaps and use development inputs (i.e. training, job rotation
etc.) to bridge them.
Validation of improvements is done through Customer Satisfaction and Employee Satisfaction studies.
This ensures that there is a constant endeavour to align human capital to organizational objectives.
Our Option to acquire a controlling shareholding in Rainbow Retail Private Limited, set up to
venture into food and value retailing
One of our promoter companies, Inorbit Malls Private Limited has incorporated a wholly owned private
limited company, Rainbow Retail Private Limited. The objects of the said company inter alia include the
running and managing of hypermarkets, supermarkets, etc. Inorbit Malls Private Limited has clarified and
indicated that the said company will not carry on the business of running departmental stores or a format
competing with Crossword Bookstores Limited or Shopper's Stop Limited and that the business of the
said company would be limited to the business of food and value retailing, i.e. to provide all kinds of
products to consumers at competitive prices through a hypermarket, supermarket or other format but not
through the format of a departmental store.
The Company has entered into an Option Agreement dated August 6, 2004 with the said Inorbit Malls
Private Limited and Rainbow Retail Private Limited under the terms of which the Company has an option
(in the form of a right and not an obligation) to acquire upto 51% of the equity share capital of Rainbow
Retail Private Limited in one or more tranches from the said Inorbit Malls Private Limited (or other
companies promoted by the Promoters) at any time before December 31, 2008 at a price (to be
determined by a independent reputed chartered accountancy firm which is one amongst the big 4 firms
and / or by a reputed Merchant Banker) which is the fair market value or a price which provides a return
of 10% p.a. (compounded annually) of the investment made by Inorbit Malls Private Limited (or other
companies promoted by the Promoters), whichever is lower.
In the event of the said Inorbit Malls Private Limited inducting any other company promoted by the
Promoters into the said Rainbow Retail Private Limited prior to the exercise of such option, the said
Promoter group company would also have to execute a deed of adherence agreeing to be bound by the
said Option Agreement in favour of Shopper’s Stop Limited. Further, the said Inorbit Malls Private Limited
and other Promoter group companies would be free to transfer the share capital of Rainbow Retail
Private Limited at any time including to the Promoters or to any other entity promoted by the Promoters,
however ensuring that the Promoters and the companies promoted by the Promoters shall always have
sufficient equity shares held by them to enable the Company to exercise the option.
On exercise of such option if the Company becomes the single largest shareholder of Rainbow Retail
Private Limited, the Company would also be required to replace the guarantees, if any, provided by third
parties in respect of liabilities of the said Rainbow Retail Private Limited. The price to be determined by
the said independent chartered accountant / merchant banker shall consider the same as part of the
valuation.
In the event that the Company views that the investment in Rainbow Retail Private Limited would be
beneficial to the Company, then the Company may acquire such shares. We believe that this option
would be beneficial to the Company as it would allow the Company to participate in such new possible
formats at such time as the Company considers such a venture profitable to the Company. As and when
the Company does acquires shares in Rainbow Retail Private Limited the same would be subject to
regular market risk as any other equity investment.
Rainbow Retail Private Limited has initiated work on its business plan and key recruitments, with the
opening of the first hypermarket planned during the year ending March 31, 2006.
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