Vishal Retail in talks for strategic investor

Vishal Retail in talks for strategic investor

New Delhi: Discount retailer Vishal Retail is in talks to bring in a strategic investor to infuse capital in the company and is negotiating with lenders to recast its Rs7.3-billion debt, a top company official said.

“It’s realised that fresh infusion of capital is mandatory. The company is looking at all the options including talking to strategic/financial investors," Group president Ambeek Khemka told Reuters in an interview.

Vishal Retail, which runs a chain of 147 stores across the country, ran into difficulty in late 2008 after it failed to raise equity amid an economic downturn which also hit its sales, leaving it with a huge debt burden.

The company has cut its workforce by 40% to about 9,000 in a year and its proposal for debt recast was admitted by the Corporate Debt Restructuring cell in November.

Vishal Retail’s founder Ram Chandra Agarwal holds about 60 percent stake in the company and, Khemka said, to help the company survive, the founder was willing to dilute his stake and bring in a strategic investor.

“Just preliminary talk that we are having," Khemka said of the startegic investor, adding a deal “may or may not" materialise this quarter.

Khemka said the company immediately needed TRs1 billion for its revival, but added a final figure on the required capital infusion could be arrived at only after a meeting of lenders likely by the end of January.

“That will be discussed in the final proposal as to what kind of sacrifice lenders are willing to take and what proportion of that has to be compensated by the promoter," he said.

The company, as part of the debt restructuring proposal, also plans to sell its “non-core" or real estate assets, including company-owned stores in Jabalpur, Hubli, Kolkata and land in Dehradun, Khemka said, adding they would lease the stores back after selling them.

Khemka also said founder Agarwal was looking to sell his privately-held firm Vishal Water World Pvt Ltd to raise funds that would be used to cut the retailer’s debt.

The sale of the privately-held firm and real estate assets could raise between 700 and 900 million rupees, he said.

Store Sales Fall In December

The company’s December quarter store sales fell an annual 5% to Rs3.18 billion as Vishal Retail closed some stores and it should not report a profit for the quarter and also for the next three months, Khemka said.

Vishal Retail is yet to announce its December quarter results. It reported a loss of Rs950 million for three months to September on net sales of Rs2.84 billion.

The retailer, which cut store space by 0.4 million sqft to 2.4 million sqft in a year, plans to reduce more, but Khemka was optimistic they should be able to post an annual 5 percent rise in March quarter sales despite lower number of stores on “boosted operational efficiency".