Kedaara-partners Group set to buy Vishal Mart
MUMBAI: A consortium of Kedaara Capital and Partners Group is set to buy retailer Vishal Mega Mart for ₹5,000 crore, two people directly involved in the transaction said.
The deal is likely to be announced within a week.
Kedaara-partners Group will buy the retailer from TPG Capital and Shriram Group, the current owners. “Kedaara and Partners Group will be signing a definitive agreement in a week’s time to acquire Vishal Mega Mart. While Kedaara will be looking after front-end operations at the firm, Partners Group will manage the back-end,” one of the two people cited above said on the condition of anonymity.
He said the deal has been structured to ensure that the foreign direct investment regulations are not violated.
Spokespersons for Kedaara Capital, Shriram Group, and TPG declined to comment. A Partners Group spokesperson could not be reached for a comment.
Up to 51% FDI is allowed in multi-brand retail in India. Consequently, Switzerland-based Partners Group has teamed up the Kedaara Capital to acquire the firm with the majority of the investment coming from Partners Group. Kedaara, being an India-registered alternative investment fund, will be treated as the local partner. Vishal Mart is a fashion-led hypermarket chain with a footprint of over 229 stores across 110 cities and towns in the country, according to the company’s website.
Apart from apparel, footwear and lifestyle accessories, the firm also offers grocery products and general merchandise. The company is one of the most notable cases of a successful turnaround led by private equity investors in India.
Vishal Mega Mart was bought by TPG and Shriram Group in a distressed condition for ₹70 crore in 2010. According to an April 12 report by Jefferies, Vishal Mega Mart slipped into a crisis due to aggressive expansion of its stores, leading to piling of debt on its books. Consequently, founder Ram Chandra Agarwal was forced by the creditors—state Bank of India, HSBC and ING Vysya among others —to sell the business.
Valuation of the company has risen more than 70 times in the last eight years. Over the years, TPG has infused over ₹760 crore, turning around the business. According to data available with the Registrar of Companies, Airplaza Retail, the front-end arm of the company, posted a loss of ₹7.6 crore in FY2017, compared to a loss of ₹10 crore a year earlier.
The backend entity, Vishal Mega Mart Pvt. Ltd, turned profitable during fiscal year 2017 and posted a net profit of ₹14.5 crore as against a loss of ₹40 crore during the previous fiscal.