A management restructuring is underway at Blackstone-controlled Gokaldas Exports Ltd, India’s largest garment exporter. The new structure will see the induction of half a dozen (six to seven) chief operating officers (COOs) who will be responsible for specific clients and oversee end-to-end operations covering production and marketing functions.
Essentially, the Rs 1,200-crore business is being carved out to these COOs internally, in a move believed to be initiated by the private equity firm, which acquired majority stake in Gokaldas Exports three years ago.
The new COOs will report to Gautam Chakravarti, a former Hindustan Unilever India honcho brought in by Blackstone, and Dinesh Hinduja, who is from the original promoter family with expertise in marketing and production.
One industry source said, Gokaldas has already poached senior resources from large as well as mid-tier rivals like Arvind Ltd and Indus Fila to fill some of the COO slots.
Blackstone declined to make any comment on the management rejig. A company official confirmed the reorganization but said the initiative was part of an ongoing evolution in the company.
The management revamp is expected to streamline the company’s vast manufacturing operations that are spread across 42 factories employing over 40,000 employees.
Private equity watchers have closely tracked Blackstone's moves at Gokaldas - on how it would consolidate and add value to an already large asset - in a labour-intensive and fragmented sector such as garments. Blackstone has poured in over $160 million (including open offer) to rustle up a big majority stake in the company. This was Blackstone's second largest India-focused acquisition after it snapped up BPO firm Intelenet for $200 million.
"The strength and weakness of Gokaldas is its size. The restructuring is possibly addressing the weakness associated with it," added this source, who heads a competing firm, and requested not to be quoted. The strategy could help Gokaldas to develop specialist verticals in the garmenting space, and possibly add another dimension to value unlocking potential in future.
The move also comes at a time when the order books from international retailers like Zara and H&M are recovering from a slump in the wake of the economic slowdown. Like its peers, Gokaldas, which derives around 90% of its revenue from export markets, went through a difficult phase as consumer sentiments worldwide plunged in the last 24 months. The three-decade-old company works with over 35 international fashion brands and retailers, with Gap Inc and Nike accounting for a substantial share of the revenue.
The company reported annualized revenue of Rs 1,173 crore in 2008-09. Revenue in the second (September) quarter this financial year stood at Rs 322 crore, almost flat in comparison with year ago period, but showed up with a substantially higher profit at Rs 9.12 crore.
In 2007, Blackstone first picked up a 50.1% stake in Gokaldas for $116 million or Rs 482.5 crore from Bangalore-based Hinduja family in August. The PE firm subsequently came up with an open offer for another 20% stake, where it ended up with another 17-18% stake in the textile exporter spending around $45 million. The shares were acquired for a price of Rs 275 per share.
The global private equity firm had forged a long-term association with the Hinduja brothers - Madanlal, Rajendra and Dinesh - who will continue in the overall strategic management. Blackstone currently holds around a 68% stake with the Hindujas retaining 20%. Anand Jain's Jai Corp is the other sizable shareholder with 6.64% stake.
On Wednesday, the shares of Gokaldas closed at Rs 181.15 on the exchanges.