Koutons in talks to shed 15% stake

Debt ridden, Delhi-based apparel retailer Koutons Retail, is in talks with its lenders to recast its debt besides

looking to raise funds from private equity players. A few private equity funds, such as TPG Capital, Banyan Tree Finance, and a Mumbai-based apparel company are in talks with the promoters for the deal. Faced with a debt of Rs 660 crores, the company is mulling to offload at least 15 per cent stake to repay its debts and revive its operations. The accumulated debt and high interest cost has led to reduction of its operations to 1,020 stores pan-India from 1,400 stores in early 2008. The proposed stake sale, which will happen through the issue of fresh shares, will reduce the promoters’ stake to 27 per cent, on the expanded capital base, from 32 per cent.

For the quarter ended September, Koutons Retail had posted 53.21 per cent decline in its sales to Rs 162.47 crores as against Rs 347.25 crores for the same period a year ago.The net profit had declined by 90.42 per cent to Rs 2.26 crores in quarter ended September 2010 as against Rs 23.59 crores for the same period last year. Koutons, which went public in 2007, raised long-term debt from a consortium of banks led by Indian Overseas Bank two years ago to take advantage of the then booming retail sector. It started as a men’s brand in India, but later extended its portfolio to accommodate women and children wear. But the economic slowdown in 2008 had an adverse impact on overall sales and the company had to stall expansion plans. Inventories piled up and the company fell short of cash.

Also, the accumulated debt and high interest cost associated with it forced the company to downsize operations to 1,020 stores pan-India from 1,400 stores in early 2008. Koutons currently operates a mix of both company-owned and franchisee apparel stores across India. The apparel retailer is the latest in the line of modern Indian retailers, including discount store operators such as Subhiksha and Vishal Retail, to face pressing cash problems and turn to private investors and debt recast for help.