Regular readers of VCCircle already know about this deal (see our interview with KP Balaraj of Sequoia Capital India). The leading Silicon Valley and India-based venture/PE firm Sequoia Capital India will invest Rs 120 crore (about $30 million) in Cotton County Retail Ltd, the ready-to-wear apparel retail business of Ludhiana-based Nahar Group. The equity infusion will fund Cotton County's expansion plans, which intends to double its branded outlet capacity to 1,000 in two years.
The stake sold by the company is not revealed. The deal is interesting in the current context since the government is wary of bringing in foreign VC funds into the retail business. A 51 per cent FDI is allowed in single brand retail. This deal follows a series of investments in apparel retail firms like UTI Ventures and Argonaut Private Equity's $28 million deal in Kouton Retail, Avigo Capital Partners's $5 million deal in Spykar Lifestyle (see ).
Strategies and expansion plans
Sachin Sahni, Vice-President, Cotton County, told The Hindu Business Line that the company will authorise about 700 franchisees this fiscal year and the turnover is expected to touch Rs 300 crore from Rs 170 crore recorded last year. "We are in the final stage of authorising two outlets in Dubai to sell our brands," he added.
The company will approve franchises for 50 showrooms in the festival season beginning October. By end of March 2009, it will take up the number of showrooms in south and west to 100 from 16 and 52 currently.
In a press note issued from the company, Naresh Malhotra, Operating Partner, Sequoia Capital India said, "Cotton County is a market leader in the Indian retail industry with a very popular line of apparel products. We are excited to have the opportunity to partner with them as they look to expand and grow their franchise."
Sequoia Capital has invested in about 50 companies till now. Some of its investments include Applabs, Bharti Telesoft, Café Coffee Day, Dr Lal Pathlabs, Edelweiss Capital, Firstsource, GVK Biosciences, Idea Cellular, Shaadi.com and SKS Microfinance.
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