FDI Impact: Ailing brands/retailers look for revival

FDI has augured well especially for ailing retailers and brands. For example, after a long battle of accusation and court drama, private equity investors, Bain Capital and TPG have transferred their shares in Lilliput Kidswear to promoter Sanjeev Narula.

This put an end to their much publicised spat. The move was made after the government allowed FDI in retail, to attract foreign investment. Indeed, the government’s decision in favour of foreign investment has surely brought new hopes to the defunct and struggling domestic retailers such as Subhiksha and Vishal Retail, who are hoping for a revival.

In a compromise deal, both Bain and TPG have transferred their entire 45 per cent share in Lilliput—bought for $86 million (Rs 453 crores) in 2010—to Narula, who, in turn has returned the favour by withdrawing all the cases filed against the private equity firms. The dispute between the promoter and investors started in September last year when Bain Capital and TPG withdrew their consent for Lilliput’s initial public offering, accusing Narula of fudging company funds and Narula in turn has filed a case against them in Delhi High Court alleging that the investors were trying to seize control of the company.

Sources say, the kids’ wear player having 240 stores across the country, is already in talks with three strategic investors from Japan, China and South Korea. Similarly, the buzz is that R Subramanian, Founder of Subhiksha Trading Services is contemplating resolving issues with lenders and restarting full-fledged operations of his discount retail chain by the end of this fiscal.

Vishal Retail, too, which collapsed during the 2009 slowdown, is on an expansion drive under its new owners—an alliance of TPG Capital and Shriram Group. Since acquiring the debt-ridden retailer in March last year from promoter Ram Chandra Agarwal, TPG-Shriram alliance has closed about a dozen loss-making stores and pumped in Rs 200 crores to bring back the retailer to financial health. Currently Shriram’s arm Airplaza Retail and other franchisees operate more than 140 Vishal Megamart stores in 24 states and it plans to add 15 stores by January.

While global players and investors are busy considering India entry, on the domestic front, things are surely hitting up with players getting ready to face the new saga of organised retailing.