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Business News/ Industry / Retail/  Manyavar promoters turn their back on global PE funds
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Manyavar promoters turn their back on global PE funds

Several funds are keen to invest in the fast growing ethnic wear brand, but founder says no plan to dilute stake

Founded by Ravi Modi in 1999 under his company Vedant Fashions, Manyavar has 400-plus stores and expects to take the number to 600 by 2020.Premium
Founded by Ravi Modi in 1999 under his company Vedant Fashions, Manyavar has 400-plus stores and expects to take the number to 600 by 2020.

Mumbai: Popular ethnic wear maker Manyavar finds itself in a unique position—not one that privately held companies find themselves in very often.

Private equity (PE) funds are making a beeline for buying a stake in Manyavar. Founder Ravi Modi is reluctant to sell.

Several global PE firms, sovereign funds and mid-market growth funds have shown interest in investing in Manyavar and approached bankers in Mumbai and Kolkata to start discussions with the company, according to two people with knowledge of the development who spoke on condition of anonymity.

Kolkata-based investment bank Resurgent India has been approached by several funds keen to acquire a stake of about 10-15% in the fast-growing ethnic wear brand, one of the two persons said.

Founded by entrepreneur Modi in 1999 under his company Vedant Fashions, Manyavar has 400-plus stores and expects to take the number to 600 by 2020. The stores are a mix of company- and franchisee-owned ones.

Modi has decided not to dilute any more of his stake in the company unless it opts for a large acquisition in India or abroad, said the second person.

In December, Vedant Fashions founder and managing director Modi had told Mint that his company has no plans to sell a stake in Manyavar.

“There is no such development on our end," he said.

He did not respond to repeated calls and text messages made on Tuesday and emails sent to him last week did not elicit any response.

“Manyavar being a leading company in its category and one of the successful consumer brands in India, lots of PE funds keep meeting the company to know about the company, though we don’t have a mandate at present," said Kavish Sarwagi, director at Resurgent India.

Vedant Fashions, which owns Manyavar, has been posting 40% year-on-year growth through the past five years, The Economic Times reported in February.

The company was expected to post sales of 550 crore and earnings before interest, tax, depreciation and amortisation (Ebitda) of 160 crore in the fiscal year to 31 March, the report said.

Manyavar plans to reach 600 exclusive stores, 1 million sq. ft of retail space, 100 flagship and 50 global stores in 200 cities across India and abroad by 2020, the company website says. It has 400-plus stores including 50 flagship and 11 international stores across 160 cities in India, the UAE, Bangladesh, Nepal and Saudi Arabia, it adds.

Manyavar, which set up its first international store in Dubai recently, plans to expand into the US and the UK. It has already entered into merchandising tie-ups with retail chains such as Planet Fashion, Ethnicity, Central and Pantaloons.

“Manyavar can easily fetch a valuation of five times sales or 15-17 times Ebitda, which would be in the range of 2,700 crore and 3,000 crore. Several PE funds are keen to acquire about 10% stake in Manyavar. However, it is not yet sure whether the cash-rich company needs to dilute promoter stake," said a Mumbai-based investment banker, who has been approached by two-three global funds that are keen to buy a stake in Manyavar.

The Indian ethnic wear market was estimated to be worth 82,220 crore in 2014 and is expected to grow at a compound annual rate of 9% to reach 1.26 trillion in 2019, according to a November 2015 report from consulting firm Technopak Advisors.

“The ethnic wear consumers have started inclining towards branded apparel owing to assurance of better design, quality and fit. Growing disposable income, increasing aspiration levels among youths are driving factors for branded ethnic wear market," said the Technopak report.

Another popular ethnic wear brand, Fabindia, has also seen mounting interest from PE investors. In February, Premji Invest, an existing investor in Fabindia, bought an 8% stake from LVMH Moet Hennessy Louis Vuitton SE’s PE fund L Capital Asia Advisors. The deal would have valued Fabindia at about 4,500 crore, The Economic Times reported.

In 2012, L Capital bought the 8% stake in Fabindia from Wolfensohn Capital Partners for around 150 crore.

Private equity investor TA Associates Management Lp is interested in acquiring a minority stake in TCNS Clothing Co. Pvt. Ltd, which owns the W brand of clothing for women, Mint reported last month. TCNS is seeking a valuation of 3,000 crore.

“Branded apparel segment is usually a high-margin segment and seen significant investor interest in recent times," said Sanjeev Krishan, transactions services and private equity leader at PwC India, adding that Indian consumers’ purchasing power is expected to rise as economic growth accelerates, providing a boost to the segment.

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Published: 03 Aug 2016, 01:05 AM IST
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