Specialty retailer SSIPL Pvt Ltd, or Sports Station, may offload a big stake to induct strategic investor into the company. The New Delhi-based firm, which is a distribution and manufacturing ally to global brands like Nike, Levi’s and Lotto, could possibly offer majority equity to a corporate house with interests in the retail industry.
Private equity firms Tano Capital and Halcyon, along with a few HNI investors, hold around 45% stake in the company with annualised revenue of over Rs 350 crore, which include its footwear manufacturing operations. A potential deal here will essentially be a secondary transaction with the PE funds exiting, while the promoter Rishab Soni may not exit.
Alternatively, SSIPL is also exploring another round of fundraising to pursue expansion plans. It could look at another tranche of $10 million if talks in this direction gather steam.
“We are looking at all options that will help shareholder value,” Rishab Soni, MD, SSIPL, said. However, he declined to comment any further on the development.
One banking source said SSIPL has been exploring strategic options after the firm’s plans for an initial public offer did not take-off. SSIPL operates over 120 stores for the global brands but does not hold the exclusive franchisee rights for Nike or Levi’s mainstream
businesses. But the firm holds the license for Levi’s footwear and Lotto operations, apart from working with niche international club brands like H2O.
The company’s footwear manufacturing units cater to some of the lifestyle sports brands such as Reebok and Nike. Besides, the company also operates its own multi-brand retail formats like Shoe Tree and Vale Station even though these form only a part of the overall
“The question is what strategic value the company’s business model brings to any strategic investors, beyond just numbers. There are corporate groups looking to acquire a retail management firm that carries skill sets in specialty retail,” said a senior honcho from the
retail sector, who looked at the proposal.
India’s specialty retail is still in its infancy and is expected to witness the entry of several global brands across price segments, as FDI restrictions slowly give away. The domestic regulations allow 51% FDI in single brand lifestyle retailing, while it is completely barred
in the case of multi-brand stores.
Halcyon had invested $8 million in SSIPL through optionally convertible preference shares with a coupon rate of 12%. These shares are currently held through a mix of equity and convertibles. The amount invested by Tano Capital remains unknown. The company had
exited its presence in the luxury retail segment when it offloaded its assets, or international brand affiliations in this segment, to Genesis Colors Pvt Ltd.
Indian retail market, which is the fifth largest retail destination globally, has been ranked the second most attractive emerging market for investment after Vietnam in the retail sector by global management consulting firm AT Kearney in 2008. India was ranked as the third most attractive market destination for apparel retailers. Apparel is the second largest retail category in India accounting for 10% of the $37 billion retail market.
There have been several investments by growth capital firms in the apparel retail space. Besides Genesis, Sequoia Capital has also invested in Cotton County. Other investments include Alchemy Ashmore’s deal with Numero Uno and Spykar’s fundraising from Avigo Capital. It remains to be seen what kind of returns these bets are able to generate in the future.