Mumbai: TPG Wholesale Pvt. Ltd, a subsidiary of TPG VW Ltd, and Airplaza Retail Holdings Pvt. Ltd, a company owned by the Shriram Group, have completed their acquisition of debt-ridden Vishal Retail Ltd.
The TPG-Shriram combine paid Rs70 crore to the erstwhile chairman and managing director of Vishal Retail, Ram Chandra Agarwal, for the transfer of all assets, rights, and interests, inventories, cash flows, store leases and liabilities, the company said on Monday in a stock exchange filing.
Vishal shares rose nearly 20% to close at Rs37.55 on Monday on the Bombay Stock Exchange even as the exchange’s bellwether equity index, the Sensex, rose 1.55% to close at 18,455.69.
“TPG brings a wealth of experience in managing and operating a multitude of businesses from across the world, including a track record of turning around and transforming a number of portfolio companies,” said Puneet Bhatia, managing director, TPG Capital India, the group’s private equity arm in India.
The new owners can use the brand names Vishal, Vishal Megamart and Vishal Fashion Mart for five months.
The conclusion of the sale marks the end of efforts aimed at reviving Vishal Retail, India’s first publicly traded retail firm, that began in the aftermath of the global economic downturn of 2008-09. Attempts to fund its ambitious expansion plan with borrowings left the retailer laden with debt and inventory. As much as Rs730 crore of debt was sought to be restructured.
The completion follows an announcement in September 2010 when Vishal’s board approved a Rs100 crore sale of assets and transfer of some liabilities to TPG and Chennai-based Shriram Group.
However, the retailer was barred by court order from disposing of assets until it resolved the situation with its lenders, stalling a final agreement with the prospective buyers.
Vishal Retail’s main lenders include State Bank of India, HDFC Bank Ltd and ING Vysya Bank Ltd. The deal has been approved by the board and shareholders of Vishal Retail and accepted by its creditors, said a TPG release.
TPG will invest Rs200 crore in TPG Wholesale to fund the turnaround of its business and future growth, the release said.
“How well TPG will manage can only be said on knowing what deal they have got with the bankers,” said Abhishek Ranganathan, research analyst, retail and real estate, institutional equity research, MF Global Sify Securities India Pvt. Ltd.
The Vishal Megamart-branded retail operations consists of at least 150 stores across India operated by both Airplaza and 20 other franchise partners.
The new structure will see TPG Wholesale operate the back-end sourcing, merchandising, logistics and franchise operations, while Airplaza Retail will operate the retail shops along with other franchisee partners currently operating Vishal branded stores.
TPG Wholesale will be the franchisor to Airplaza Retail and the existing franchisee partners of the business.
The current government policy on foreign direct investment in organized retail chains allows 51% stake in single-brand retail and 100% in wholesale cash and carry.
Globally, TPG has made significant investments in a wide range of businesses in the retail and consumer sectors, including Lilliput Kids Wear Pvt. Ltd in India.
For the quarter ended December, Vishal Retail posted a net loss of Rs19.37 crore on Rs302.71 crore revenue.