Homegrown denim brand Spykar Lifestyles has initiated a process of getting international strategic investors on board, two people with direct knowledge of the development told VCCircle. The company, which is majority-owned by private equity investors such as , has formally appointed the global investment bank Lincoln International, which specialises in mid-market M&A deals, to help find a strategic partner.
The investment bank has completed more than 100 cross-border M&A transactions in the consumer space and more importantly, has represented private equity clients.
When contacted, the Avigo Capital spokesperson declined to comment on the development.
“The intent is not to sell out a majority stake but get an international partner who brings best practises to the table,” said a source briefed with the matter. It was only mid-last year when Avigo Capital roped in its Limited Partner Metmin Investments (an investment firm owned by Indian-born copper king Raj Bagri, honorary president of LME and chairman of the UK-based Metdist Group) to infuse Rs 30 crore for an additional 30 per cent stake in the fashion apparel company. In 2007, Avigo had picked 30 per cent in Spykar for an undisclosed amount.
Besides denim makers, potential partners for Spykar could include fashion apparel companies. There are around two dozen fashion brands keen to enter India and are said to be scouting for a right partner.
According to reports, UK garment chain Topshop, the Marc Ecko clothing line promoted by the US entrepreneur of the same name and the Japanese casual wear brand Uniqlo are preparing to open outlets in India and try their luck in an apparel market that is expanding annually at the rate of 10 per cent.
NYSE-listed PVH Corp, which acquired the Tommy Hilfiger Group from private equity giant Apax Partners, had last year struck a deal to buy out the licence for trademarks of the Tommy Hilfiger brand that was with the Murjani Group in India, as well as the 50 per cent stake owned by the Murjanis in Arvind Murjani Brands, a local joint venture with the Arvind Group.
The apparel maker has seen tangible turnaround in business fortunes in the last two years. According to industry insiders, it has now grown to become one of the top denim brands in the country behind Levis and Pepe Jeans, though we could not verify it independently.
It claims its penetration in the tier II and tier III cities as a unique selling point. It has about 230 exclusive branded stores in tier II and tier III cities besides presence in 700 multi-brand stores and more than 150 large format stores in the country.
The company has cut down on its debt and is expected to clock revenues of around Rs 180 crores this fiscal year, the source added. “It can prove to be a good platform for an international brand to come in,” said an industry expert.
Such restructuring, however, came about only after going through the learning curve. In mid 2007-08, the apparel retailer had been on an expansion drive – opening more stores and adding new brands. But the strategy did not pay off and the company faced a huge financial burden.
As part of its restructuring exercise, the company had to shut down 60 high-cost stores and trim the size of the other stores. The company’s move to launch children’s brand OYO (a premium kids’ fashion wear brand) backfired as it was followed by the global economic downturn, which also saw consumers cutting down on discretionary spends including fashion apparel. Getting a foreign partner on board will provide the much required depth and scale to the company – which is now showing signs of turnaround.