In recent weeks, chains like Pantaloon Retail, Spencer’s, Koutons, Vishal, and Alok Retail have reportedly announced plans to raise funds to fuel their expansion plans.
While Kishore Biyani-led Pantaloon Retail, Koutons Retail and discount retailer Vishal Retail plan to raise money through qualified institutional placements (QIP), Spencer’s Retail Ltd and Alok Retail plan to tap the private equity (PE) route.
In July 2009, Pantaloon Retail announced plans to raise Rs 1,000 crore through QIP for expansion of its Central and Big Bazaar formats. At that time, it was also reportedly in talks with PE players like TPG and Bain Capital for raising an additional Rs 1,200 crore.
RPG Group-owned Spencer’s Retail is looking at diluting 10% stake to attract PE money for its Rs 100-crore expansion plan. Recently, Koutons said, it will raise Rs 100 crore through QIP for expansion. In this placement, Koutons’ equity partner Fidelity, which holds 5.6% stake in the company, may find its exit. Alok Retail India, the retail arm of Alok Industries, plans to raise around Rs 100 crore via private equity.
PE/VC players, that VCCircle spoke to, agree that a recovery is visible in the retail sector and that, with correct valuations, there could be interesting deals in this space.
Helion Ventures managing director Kanwaljit Singh terms the fund-raising activity initiated by retailers and other industry players as “definitely a sign of market revival”. “The time is very good for investment as valuations are reasonable,” he added.
Helion, which recently invested in Booster Juice and YLG hair salon, is focussed on niches in the retail sector. “We are interested in investing in healthcare chains, fast food restaurants and dining out space, slightly away from the traditional lifestyle retail formats,” he says. Helion is currently in talks with a few retail companies and is bullish on inking a few deals in the near term.
Quite a few companies in the retail and FMCG space such as Dabur India are also talking about the M&A route for growth. On the M&A opportunities in the retail space in India, Anshuman Barve, Retail Research Analyst at Jones Lang LaSalle Meghraj, says, the opportunity is immense for foreign players to enter the Indian market although the FDI restrictions pose a big hurdle. Barve forsees joint ventures and tie-ups in the retail space.