Investors in Credo Brands in talks with firms as they seek exit
The investors are in talks with firms including the Carlyle Group
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Mumbai: Private investors in Credo Brands Marketing Pvt. Ltd, which owns the casual wear Mufti brand, are looking to sell their 33% stake to other private equity (PE) funds, founder and managing director Kamal Khushlani said.
These investors are in talks with firms including the Carlyle Group, two people close to the transaction said on condition of anonymity. The deal could be worth Rs.200 crore, one of them said.
Khushlani did not name the potential investors, the valuation sought by his firm or the amount of dilution.
“Our current investors who own 35% in the company are looking for an exit and are holding talks with potential buyers,” said Khushlani. Bennett, Coleman and Co. Ltd (BCCL), which publishes The Times of India and The Economic Times newspapers, and some friends own 35% in the company, he said.
Credo Brands has signed non-disclosure agreements with some private funds, said the second person cited above.
Mumbai-based JM Financial Institutional Securities Pvt. Ltd has the mandate for the transaction.
The company, which was started in 1998, closed financial year 2013 with a revenue of Rs.235 crore and expects sales of nearly Rs.280 crore in the year to 31 March, said the second person cited above. The firm, which focuses on shirts, jeans, t-shirts, sweatshirts, sweaters and jackets, has over 200 stores and a presence in 1,200 supermarkets such as Shoppers Stop, Lifestyle and Central departmental stores.
Venture capital and PE firms have consistently shown interest in the apparel space on the back of domestic consumption. Investors pumped in $224.7 million in apparel firms in 2012, compared with $80.3 million across 12 deals in 2011, according to VCCEdge, an investment tracker.
This year, in one of the largest private equity investments in the Indian ethnic wear market, PE firms Warburg Pincus and Faering Capital invested Rs.300 crore in Biba Apparels, a firm engaged in women and girls’ ethnic wear, In May, Mint reported that several PE firms have shown interest in Kishore Biyani-led Future Ventures India Ltd’s stake in apparel brands BIBA and AND. The PE firms include Warburg Pincus, Norwest Venture Partners (NVP), L Capital, General Atlantic and Sequoia Capital, they added. Last year, L Capital and PremjiInvest bought stake in Fabindia Overseas Pvt. Ltd.
Experts say apparel brands typically fetch valuation of 1.5 to 2 times of sales. Other factors taken into consideration for a valuation would include company’s growth rate, future projections and pipeline of alliances and new offerings, among others.
PE firms have always been bullish on the apparel segment but clarity on foreign direct investment for single brands has further strengthened their interest, said Sunil Jain, founder partner at Sprout Capital Advisors LLP, an investment bank. In January 2012, India allowed 100% investment in single-brand retail.
“Its easier for PE firms to look at such companies now,” Jain said. Secondary transactions will dominate investments in established apparel companies, Jain said. “Once a brand is established, promoters do not need a lot capital. The most capital-intensive periods for these companies are the first five years,” he said. “Most investors trying to invest in such firms will see secondary opportunities.”
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