Home / Home-page / TPG Capital, Shriram Group to take over Vishal Retail

Mumbai: Private equity (PE) firm TPG Capital Lp and Chennai-based Shriram Group are close to taking operational control of debt-ridden retail chain Vishal Retail Ltd, two persons with direct knowledge of the development said.

The TPG-Shriram combine had earlier struck a deal to take over Vishal Retail in September, after nearly a year of negotiations.

Taking control: A file photo of a Vishal Retail outlet in Delhi. In September, Vishal’s board had approved Rs 100 crore sale of assets and transfer of some liabilities to TPG Capital and Shriram Group. Rajkumar/Mint

“All finer details for the transfer of the company have been worked out and an announcement will be made soon," one of the two persons referred above said.

Attempts to fund its ambitious expansion plan with borrowings left the retailer laden with debt and inventory during the downturn of 2008-09, eventually requiring a corporate debt restructuring of 730 crore of debt. Many outstanding issues had to be settled for the change in ownership, a consultant involved with the transaction said. He did not want to be named as he is directly involved with the transaction.

The decks have now been cleared for the actual handover of the company, and all its employees will be absorbed by the buyers, the second person with the direct knowledge of the development said.

One of the smaller companies of the Shriram Group will form a joint venture with TPG and the entire venture will be driven by the PE firm, a third person involved with the transfer said.

A TPG spokesperson did not comment on the development. “We cannot talk over the telephone," Vishal Retail chairman and managing director Ram Chandra Agarwal said.

The main challenges ahead for the new joint venture will be to rationalize the operations, portfolio of products, identify the target clientele and consolidate in one year before opening new stores, the consultant said.

In September, Vishal’s board had approved a 100 crore sale of assets and transfer of some liabilities to TPG Capital and Shriram Group. However, the retailer has been barred by court orders from disposing off its assets until it resolves the row with its lenders, stalling a final agreement with the prospective buyers.

Vishal Retail’s main lenders include State Bank of India, HDFC Bank Ltd and ING Vysya Bank Ltd. The lenders have now given the go-ahead, according to one of the persons cited earlier.

For the quarter ended December, the company had a net loss of 19.37 crore on revenue of 302.71 crore.

The chain has 172 stores in 110 cities, according to the company’s website. Now it has about 80 stores, according to a fourth person familiar with the development.

TPG has also invested in kids wear retail chain Lilliput Kids Wear Pvt. Ltd.

According to the government policy on foreign direct investment in organized retail chains, 51% is allowed in single brand retail and 100% in wholesale cash and carry.

The Vishal stock closed at 31.05 on Friday, 1.43% lower than its previous close, whereas the key Sensex index ended at 18,174.09 points, down by 0.84% from its previous close.

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