After over a year of negotiations and entry of new suitors like Future Group, Vishal Retail said, its board last week approved sale of its retail trading business to Chennai-based Shriram Group and the wholesale business, institutional sales and franchise operations to an Indian arm of private equity firm TPG. The combined deal value of the two transactions is Rs 100 crore, less than the market cap of the company.
Vishal Retail scrip rose 9.6% in early morning trade after the announcement and is valued at Rs 124 crore at present. The company operates under brands/corporate identities of Vishal, Vishal Retail, Vishal Megamart and Vishal Fashion Mart.
The company has said that the asset sale does not include its freehold properties in Hubli, Kolkata, Dehradun and Jabalpur.
The asset sale proceeds will only partly meet the huge outstanding debt of Rs 730 crore that the company has with lenders such as SBI, HDFC Bank, HSBC and ING Vysya Bank who are also part of the corporate debt restructuring process of the retail company. The lenders had recently approved a revised offer from TPG to take over the assets of the firm.
The transaction will also mean a bailout for the retail firm that was otherwise all set to join the likes of PE-backed company Subhiksha that folded up after it couldn’t manage the debt taken for stupendously fast rollout of retail stores at the peak of the retail boom. Subhiksha’s lenders, including ICICI Bank, HDFC Bank and Yes Bank, could not see through the restructuring process last year.
In Vishal’s case, TPG has brought on board its other portfolio group Shriram that has among its businesses a successful retail finance firm as foreign investors are not allowed to invest directly in multi brand retail companies. TPG has investment in Shriram City Union Finance and was also reportedly in talks to increase exposure in the group with investments in Shriram Properties as well as the holding company of the South-based group Shriram Capital.
TPG had already initiated the process of hiring people to manage the show in the future, led by former Reliance Retail Ltd's head of food business, Gunender Kapoor. Mr Kapoor, who joined TPG sometime back is among several industry veterans including Aparnaa Raje (former vice-president at Aditya Birla Retail Ltd), and Kevin Pleass (a Tesco Plc man who has worked as head of store design at Reliance Retail) are also part of the team as per an earlier report by Mint.