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Business News/ Home-page / TA Associates in talks to buy stake in owner of fashion brand ‘W’

Private equity investor TA Associates Management Lp is in talks to acquire a minority stake in TCNS Clothing Co. Pvt. Ltd, which owns the ‘W’ brand of clothing for women, according to two people close to the development.

TA plans to acquire a stake of about 30-35% in W, with existing investor Matrix Partners India selling its almost 20% stake and promoters 10-15% to raise fresh capital for funding expansion, said one of the two persons.

Besides TA Associates, four-five other private equity investors are in the running to purchase the stake, said the second person. Both spoke on condition of anonymity.

According to the second person, TCNS is seeking a valuation of 3,000 crore.

Several large investors, including Singapore’s state-run Temasek Holdings Pte. Ltd and US-based Blackstone Group Lp, held discussions with the company, but backed out on grounds that the valuation was too high, said the second person.

Investment bank Avendus Capital has been appointed to scout for potential investors. Matrix has invested about 100 crore in TCNS since 2011.

TCNS Clothing is in talks to raise around $100 million to fund its growth plans and provide an exit to Matrix, Mint reported in February.

Besides W, sold by around 200 exclusive brand outlets, TCNS Clothing sells other brands such as Aurelia, through 90 stores, and Wishful, across the country. W contributes about 70% of the company’s revenue while ethnic brand Aurelia and premium brand Wishful contribute the rest. W competes with brands such as Chemistry and Biba.

The proceeds of the proposed stake sale will be used to expand into new markets and increase the number of outlets in India, said the first person.

Anant Daga, chief executive officer at TCNS, and a spokesperson at Temasek declined to comment. Mails sent to Dhiraj Poddar, co-head, India, and director, TA Associates Advisory Pvt. Ltd, and a spokesperson at Avendus Capital on Tuesday did not elicit any responses.

“We don’t comment on fund raising and your information is speculative," said Rishi Navani, former managing director at Matrix Partners India, who is also a board member of TCNS.

Founded in 1968, TA Associates has invested about $17 billion in 460 companies across the globe.

In India, it has invested in payment platform BillDesk, diagnostic chain Dr Lal PathLabs Ltd, mobile handset-maker Micromax Informatics Ltd and RateGain IT Solutions Pvt. Ltd, a price recommendation engine for hotels.

TCNS Clothing is promoted by Onkar Singh Pasricha and Arvinder Singh Pasricha, who have been in the textiles and clothing business since 1972.

TCNS Clothing posted revenue of 358.7 crore and profit of 27.2 crore in 2014-15, according to Registrar of Companies data. The firm aims to increase its sales to 1,000 crore by fiscal year 2017 on the back of new stores, innovative product offerings and increase in online sales, Press Trust of India reported in October 2015, citing CEO Daga.

According to consulting firm Technopak Advisors, the size of the Indian apparel market stood at $41 billion in 2014 and is expected to grow at an annual rate of 9% over the coming decade. Womenswear is a $15.5 billion category and accounts for 38% of the overall apparel and textile market in India, it said in a report.

“The womenswear market is a huge opportunity, given the rising incomes, aspirations and an increasing tendency in the growing urban middle class to dress more smartly," said Dhanraj Bhagat, partner at Grant Thornton India Llp.

However, while the market opportunity is big, it is also highly competitive, especially for companies wanting to create a national presence, he said.

“Growing nationally is a big challenge. A lot of investment is needed in building the brand, for promotion and advertising etc. Building the physical store infrastructure, distribution supply chain for serving a national market is also costly," said Bhagat.

The womenswear market has invited the interest of several private equity investors in the last couple of years.

Aditya Birla Private Equity backed Creative Lifestyle Pvt. Ltd, owner of women’s apparel brands 109F, Fusion Beats and O2xygen, last September. Everstone Capital had picked up a minority stake by investing 100 crore in fashion label Ritu Kumar in 2014.

General Atlantic bought a minority stake in AND Designs India Ltd, a designer and manufacturer of women’s apparel, for about 150 crore. Private equity firms Warburg Pincus and Faering Capital also invested about 300 crore in Biba Apparels Pvt. Ltd, a firm that makes women’s ethnic wear, in 2013.

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Updated: 24 Jun 2016, 02:41 AM IST
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