Private equity funds Advent International and Partners Group are in separate talks to buy a minority stake in underwear brand Dixcy Scott, two people familiar with the development said.
Dixcy Textiles Pvt. Ltd, the owner of the brand, plans to raise about $80 million (Rs500 crore) from private equity funds at a valuation of Rs3,000-3,400 crore, the people cited above said, requesting anonymity. Avendus Capital Pvt. Ltd has been hired by Dixcy Textiles to find an investor.
Advent and Partners are in advanced discussions with the management, said one of the two people cited above. Dixcy Textiles will dilute 15-20% in the company, the second person said.
Dixcy, a closely held family business, is owned by managing director Prem Prakash Sikka and his family.
Founded in 1982, Dixcy Textiles (formerly known as Prem Hosiery) makes men’s and women’s apparel, T-shirts, pyjamas and underwear. The underwear business accounts for about 90% of Dixcy’s sales.
Dixcy Textiles is planning to raise about Rs300 crore from private equity investors, Mint had reported in September.
Emails sent to Raghul Sikka, director of Dixcy Textiles, went unanswered. Spokespersons for Partners Group, Advent International and Avendus Capital declined to comment.
Dixcy Textiles’ standalone revenue rose to Rs568.7 crore in 2015-16 from Rs524.4 crore in the previous year, according to documents filed with the Registrar of Companies. Profit rose to Rs20.4 crore in 2015-16 from Rs7.1 crore in the previous year.
Dixcy Textiles has a network of more than 850 distributors that supplies products to 120,000 retail outlets across India.
Dixcy Scott, endorsed by Bollywood star Salman Khan, competes with Page Industries Ltd, the licensee for the Jockey brand in India; Rupa and Co. Ltd, the owner of MacroMan, Frontline and Euro brands; Lux Industries Ltd, the owner of the Lux Cozi brand; and Dollar Industries Ltd, which sells brands such as Bigboss and Club in India.
“Success of brands like Jockey have increased investors’ interest in the innerwear market in India,” said Harminder Sahni, founder and managing director of consulting firm Wazir Advisors.
Private equity fund Nalanda Capital is the largest institutional shareholder in Page Industries, with a 9.96% stake, followed by Cartica Capital with 7.7%. Steadview Capital, an investor in Flipkart and Ola, also holds 3.71% stake in Page.
Based in Bengaluru, Page Industries is the exclusive licensee of Jockey International Inc. for the manufacture, distribution and marketing of Jockey products in India, Sri Lanka, Bangladesh, Nepal and the UAE.
The Indian underwear market is currently estimated at Rs24,000 crore and the segment has grown at 15% over 2010-15, according to a 2016 report by Intimate Apparel Association of India and Wazir Advisors.
The underwear market is estimated to continue at the same growth rate over the next five years and expected to become a Rs47,000 crore market, which is nearly 8% of the total estimated apparel market, by 2020, said the report.
The men’s underwear market is currently valued at around Rs8,500 crore. With increasing disposable income and changing consumer attitudes towards the category, the segment is expected to maintain the growth to reach Rs16,500 crore by 2020, added the report.
“International brands like Jockey, Hanes and Fruit of the Loom and licensed brands like Tommy, CK and FCUK will take major share of the market in coming years and become a threat to most Indian brands,” Sahni added.