Blackstone strives to revive Gokaldas Exports

Blackstone, the private equity (PE) investor, who had acquired a 68 percent stake in Gokaldas Exports at 158.7 million dollars (over

Rs 960 crores) in 2007, has been struggling to keep the business running. The originally Hinduja-owned Bangalore-based company has failed to perform in last five-six years, since the time Blackstone bought the majority stake in it. The investor has been putting in efforts to revive the company. It was evident from its sales growth in FY14. Sales have grown 16 percent at around Rs 1,100 crores with operating profit improving as much as Rs 100 crores. Company’s stock too has soared 4 times during the past 12 months over FY13 levels.

To reach the current level, the company has been working on achieving operational efficiencies across the business. As a part of its rightsizing exercise, the company asked around 2,000 people to leave. Now the headcount is about 30,000 churning out two million garments a month. Company caters to some of the big names in the global apparel business including Nike, Levis, Lee, Abercrombie & Fitch, Benetton, Marks & Spencer, and Guess, among others.

For the first quarter of FY15, while revenue grew by 6 percent on a year-on-year basis to Rs 274 crores, EBIDTA at Rs 18 crores saw a positive swing of Rs 17 crores over the year-ago quarter, translating into a 6.5 percent EBIDTA margin.

What hit the once flourishing business was also the economic slowdown in 2008-09 that ensued immediately after the stake acquisition, which led to heavy loss of orders from the US and Europe. On the other hand, according to the industry experts, usually PE investors let the experienced company promoters run the business even after acquiring it to ensure smooth functioning but in Gokaldas Exports’ case Blackstone made a mistake of taking over the management.