L Capital, Temasek may grab minority stake in Birla Retail

International investors L Capital, Temasek Holdings and International Finance Corporation

are said to be close to cracking a deal to acquire minority shares in Aditya Birla Group's retail holding company. Sources say that Kumar Mangalam Birla plans to hive off Madura Lifestyle & Fashion, Pantaloons department stores and More supermarkets into a new listed entity to be valued at 2.3 billion dollars (over Rs 14,000 crores) in enterprise valuation.

Birla plans to raise 400 million dollars (around Rs 2,400 crores) funding for its consolidated retailing business unit. The Group plans to raise 200 million dollars (around Rs 1,200 crores) each from two investors in the coming weeks. Media had reported that Birla had shortlisted L Capital and others for a stake dilution. Reuters on Tuesday reported that three above mentioned investors were in advanced talks.

The restructuring is expected to see Madura getting subsidiarized from the listed Aditya Birla Nuvo with public shareholding. Pantaloons and More will be merged with the demerged Madura and the combined entity is expected to be led by Madura with a projected valuation of 1.5-1.8 billion dollars (over Rs 9,000 to 1,8,000 crores) with Pantaloons and More being the smaller businesses by value in the restructured retail company.

Aditya Birla Group entered fashion retail with the acquisition of Madura for Rs 236 crores in 1999. It entered food and grocery retail following the acquisition of Fabmall and Trinethra supermarkets in 2007. The department store chain Pantaloons was acquired from Kishore Biyani's Future Group in 2012.

Aditya Birla Retail (ABRL) recently borrowed Rs 500 crores from Yes Bank to grow its food and grocery business. The company, in its recent filing with the Registrar of Companies, said it has issued non-convertible debentures to Yes Bank for the amount.