Fairwinds PE exit to value Khadim at Rs1,000 crore

Fairwinds Private Equity which invested Rs90 crore for a 35% stake in Khadim India in 2013, is expecting a return of 3-4 times on its three-year-old investment


Khadim posted a revenue of about Rs550 crore in fiscal 2016 and an earnings before interest, taxes, depreciation and amortization of Rs60 crore.
Khadim posted a revenue of about Rs550 crore in fiscal 2016 and an earnings before interest, taxes, depreciation and amortization of Rs60 crore.

Mumbai: Fairwinds Private Equity (formerly Reliance Equity Advisors) is set to start discussions to sell its stake in home-grown footwear retailer Khadim India Ltd, valuing the brand at Rs1,000 crore, said two persons with knowledge of the development.

Fairwinds, which holds about 35% stake in Khadim, has appointed Mumbai-based JM Financial Institutional Securities Ltd to find potential buyers, the first person said, on condition of anonymity. The process will start by the second week of October, he added.

Fairwinds, which invested about Rs90 crore in Khadim in 2013, is expecting a return of 3-4 times on its three-year-old investment, the second person said, also on condition of anonymity.

The company recorded a revenue of about Rs550 crore in FY16 and an Ebitda (earnings before interest, taxes, depreciation and amortization ) of Rs60 crore. “Ideally, Ebitda multiple of more than 15 times is a benchmark for a consumer brand with good growth,” the second person said.

Khadim competes with brands such as Bata India Ltd, Liberty Shoes Ltd, Sree Leathers Pvt. Ltd, Mochi Shoes Ltd and Relaxo Footwears Ltd.

Emails sent to Ishani Ray, chief financial officer at Khadim India, and a spokesperson at JM Financial on Tuesday went unanswered. A spokesperson at Fairwinds declined to comment.

In value terms, the Indian footwear sector was estimated at Rs50,000 crore in 2015, which included domestic market of Rs32,000 crore and an export market of Rs18,000 crore.

India is the second largest producer of footwear after China, accounting for 9% of the global annual production of 22 billion pairs as compared with China’s share of more than 60%, according to a report by rating agency ICRA Ltd. India’s share in the global export market of $120 billion is a paltry 1.9% in value terms, making it much lower than China’s share of 40%, the June 2015 report, Indian Footwear Industry, said. India’s annual footwear consumption of 2.1 billion pairs is the third largest globally, after China and the US.

The average per capita footwear consumption in India continues to be low at 1.66 pairs per annum in comparison with the global average consumption of 3 pairs per annum and 6-7 pairs per annum in developed countries.

This gap, coupled with increasing disposable income, a rising middle class and changing consumer preferences, provide a tremendous opportunity for the Indian footwear market to grow at a rapid pace, the ICRA report said.

Khadim was established by Satya Prasad Roy Burman in 1965 after the acquisition of a small shop in Chitpur, Kolkata. In 1993, the firm entered into retailing, and has 650 outlets across 24 states. After Satya Prasad’s death in 2013, his son Siddhartha Roy Burman took charge as chairman and managing director of the company.

Fairwinds PE was launched in 2013 by Ramesh Venkat, former chief executive officer at Reliance Equity Advisors, the PE arm floated by Anil Ambani’s Reliance Group. The fund was renamed following a management buyout by Venkat. At present, Fairwinds Asset Managers Ltd manages Reliance Alternative Investments Fund Private Equity Scheme I, a $200-million fund raised in 2009-10.

Fairwinds has been actively looking to exit its portfolio companies for the last couple of years. It plans to exit Bengaluru-based Shankara Building Materials Ltd through a proposed initial public offering (IPO) of around Rs350 crore, Mint reported in August.

Portfolio firms of Fairwinds include Sarla Holdings Pvt. Ltd (Pathways), a provider of diploma programmes; Max Flex and Imaging Systems Ltd, a distributor and manufacturer of digital printing; Amber Enterprises Pvt. Ltd, one of the largest original equipment manufacturers of consumer durables in India; VVF (India) Ltd, leading chemicals manufacturer; and Butterfly Gandhimathi Appliances, a Chennai-based manufacturer of kitchen and electrical appliances.

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