Vishal Retail’s founder forms new firm

After selling off debt struck-Vishal Retail to the Texas

Pacific Group (TPG) and the Chennai based-Shriram Group, Vishal Retail’s founder Ram Agarwal has registered a company under the name of V2 Conglomerate in Kolkata with his son and cousin as directors. There are four company-owned stores which will remain with Vishal Retail, according to the deal struck with Texas Pacific. The retail chain had run into trouble during the economic downturn in 2008 due to excessive expansion after its successful IPO in 2007. It accumulated debt to the tune of Rs 730 crores, which forced its lenders to go in for a corporate debt restructuring process.

At the time Texas Pacific agreed to infuse Rs 500 crores, it put in a condition that Vishal Retail would transfer all its fixed assets to a special purpose vehicle that will be predominantly owned by the foreign private equity firm. Once the assets are parked in the SPV, TPG will run the business under a wholesale cash-and-carry entity because present regulations do not allow foreign direct investment in multi-brand retail companies. TPG will hold an 82 per cent stake in the proposed SPV while the balance equity will be held by lenders such as State Bank of India, HDFC, Bank of India, HSBC, among others.