The Hong Kong headquartered fashion apparel arm of South Korean business group E-Land is acquiring a majority stake in mid-sized textile company Mudra Lifestyle Ltd in a deal worth around Rs 140 crore ($31 million).
E-Land has struck a deal to acquire over half of the promoters existing stake besides subscribing to a preferential allotment (for Rs 72 crore) that combined with the mandatory open offer will give it at least 51% stake. As per the deal struck with the promoters, the Agarwal family led by Murarilal Agarwal will sell a minimum of 10 million shares and may sell up to 12.4 million shares to ensure the acquirers get majority stake (in case no one tenders shares in the open offer).
Promoters holding will come down to 20% and may drop down to as low as 15% (if it sells the maximum number of shares as per the share sale agreement).
Mudra Lifestyle scrip is trading around the Rs 50 mark for the last two weeks and at the current price of Rs 53.7 commands a market cap of around Rs 193 crore.
This will be one of the rare deals where a Korean or for that matter an Asian company outside of Japan is acquiring majority stake in an Indian firm.
For the year ended March’10, Mudra Lifestyle had revenues of Rs 365 crore with net profit of Rs 13 crore. The firm went public in early 2007 when the stock markets was still in the ascent towards the all time peak in January that was followed by a market crash soon after.
Investors have lost interest in textile companies that were dependent on exports story supplying apparel to retail chains in the West. Mudra Lifestyle scrip that were issued at Rs 90 per share managed to touch its all time high of Rs 115 in January 2008 but has since then been trading well below that price.
The Mumbai-based company is into fabrics & garments manufacturing, processing, design development and sampling. It has production capacity of 5.4 million garments per annum in manufacturing facilities spread across five locations at Bhiwandi, Bangalore, Daman, Tarapur and Navi Mumbai.
E-Land is into fashion apparel, retail and construction businesses. Given its experience in apparel retailing through franchisee route, it may try and take Mudra Lifestyle beyond being a textile company to an apparel retailer. This would be in line with forward integration of several textile and apparel brands who have opened their exclusive retail outlets mostly through franchisee agreements.