Vishal Retail is looking to raise Rs50 crore through debt to invest in inventory and stock, as it puts on hold an earlier plan to raise Rs150 crore through private equity.
The company is still keeping its option of going for PE funding open but the current market situation is unfavourable for the same. It is to be noted that the company’s plan to seek debt comes a fortnight after it called halt to its retail expansion citing the ongoing economic downturn.
Vishal Retail, which operates 187 stores across India, currently has a debt of about Rs750 crore on its books and is paying high interests costs on account of the same.
Raising debt would not only increase its leverage from 2.66x to 2.83x, but would also result in further rise in interest costs which is expected to have severe effect on the Bottom-line of the company.
Hence, we maintain our Neutral view on Vishal Retail.