Three chains to bid for Khadi JV

In a bid to reposition the khadi brand and reforming the organization

after many of its units ran into losses, the Khadi & Village Industries Commission (KVIC) has decided to privatize the portion of Khadi Gram Udyog Bhawan by forming a joint venture with a private chain. Three chains which have been shortlisted to bid for the partnership are Fabindia, Shoppers Stop and a group led by The Bombay Store. The winning firm will partner with the government-owned chain in running and marketing about 10 of its mega stores across the country.

In this public-private partnership, the winning private chain would hold 51 per cent equity the rest would be with KVIC. With the JV, around 20 new ‘Khadi Plazas’ would be opened across the country. Officials in the Ministry of Micro, Small & Medium Enterprises say the bidding is likely to happen by the end of this year. More than a year ago, after KVIC floated a tender where about six entities had submitted expressions of interest to partner Khadi Bhawans. KVIC owns 7,050 sales outlets, which account for sales of about Rs 1,000 crores. Post bidding, major Khadi outlets in Delhi, Mumbai, Kolkata, Ernakulam (Kerala), Goa, Bhopal, Patna and Agartala would be handed over to the JV under a lease to operate and manage.

Recently, Fabindia received a nod from the government to have a 49.5 per cent FDI. US venture capital fund owned by James Wolfensohn, along with Louis Vuitton’s L-Capital and Delaware-based fund JLB Canton, have invested in the company. Also, a couple of months ago, Premji Invest, the investment fund owned by Wipro Chairman Azim Premji, acquired a seven per cent stake in Fabindia. The retail chain was pegged at about Rs 1,500 crores.

Whereas, owing to an increase in costs, Shoppers Stop had recorded a decline of 96 per cent in its standalone profit in the quarter ended June. Now, in order to improvise its revenue and margin, the chain is increasing its share of private labels.

The third shortlisted chain The Bombay Store is the first retail company to have been listed on the BSE. It operates 17 stores across India.