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Troubled retail chain Vishal Retail in which media firm BCCL owns over 9% stake and Gaja Capital has around 2.2%, on Monday confirmed that it has received a proposal from buyout giant TPG, which could see one of the first of its kind PE deal in the country.

Although there have been a few buyouts by PE firms such as Blackstone-Gokuldas Exports and Actis-Halonix(formerly Phoenix Lamps), this could be the first pure distressed asset PE buyout.

In a statement issued to the stock exchange Vishal Retail said, "the company is under burden of debt and to restructure the debt burden, the proposal of the company is under CDR mechanism. The CDR cell is reviewing the case and few meetings have happened and a consensus is still awaited."

It added, "under the CDR mechanism, TPG has given a proposal to the CDR cell and the same has to be approved by all participating banks under CDR and also the CDR cell. This is at a nascent stage at the moment, unless confirmed by majority lenders."

Earlier newsreports had indicated that TPG is eyeing a stake in the firm for Rs 250 crore. This sent the scrip price soaring 4.9% to hit the upper circuit at Rs 68.9 at BSE, valuing the company at around Rs 155 crore(~$ 34 million).

According to VCCircle estimates, if TPG is indeed going to pick shares worth Rs 250 crore at the existing share price it would be subscribing to 36 million fresh shares giving it a 62% stake post equity dilution. Promoters currently hold 60% that would decline to 20% on the diluted base. However, if a proposed merger of a privately held promoter company with Vishal Retail goes through then promoters' holding could be a tad higher while TPG’s holding could be a bit lower.

Vishal Retail has a debt liability of Rs 730 crore and the new investor will have to invest through fresh issue of shares. SBI, which has an exposure of Rs 170 crore towards Vishal, leads the group of 13 lenders to the retailer. Other lenders include HSBC, HDFC, ING, Barclays, UCO, LIC and Deutsche Bank.

Vishal reported losses of Rs 115 crore for the March quarter but managed to reduce its losses in the June quarter to Rs 90 crore.

Our earlierreport here.

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