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Our Bureau

Chennai , June 19

THE Rs 160-crore Celebrity Fashions Pvt Ltd, garments exporter to some of the world's top brands and parent company of menswear brand Indian Terrain, has struck a long-term private equity deal with New Vernon Bharat, the Mauritius-based investment arm of New Vernon Capital, New Jersey.

The transaction, facilitated by Avendus Advisors Pvt Ltd, Mumbai, will see New Vernon pumping in Rs 25 crore into Celebrity for a 22 per cent stake.

This is the second investment by the India-specific fund in an unlisted company. New Vernon Bharat, which manages $500 million worth of assets in India, had earlier invested in the Gurgaon-based listed auto components company Rico Auto and in Balrampur Chini, and is now investing in Jagran TV Pvt Ltd, the broadcasting arm of publisher Jagran Prakashan.

The fund has been founded by Mr Arshad Zakaria, former Merrill Lynch investment banker and brother of Mr Fareed Zakaria, Newsweek International's Editor.

Mr V. Rajagopal, MD, Celebrity, confirming the deal to Business Line, said that the group had also recently been sanctioned an ECB of Rs 19.5 crore by a large commercial bank. The funds raised, he said, will be used to embark on a expansion drive for exports as well as build the Indian Terrain brand and fund its foray into knitwear. The Celebrity group would plan for an IPO in the next 12 months, he indicated.

Celebrity and Indian Terrain together employ around 4,000 people in and around Chennai and have a capacity to make 4.5 million garments a year. This, Mr Rajagopal, a former Indian Police Service officer-turned-entrepreneur, said would be expanded to 6.5 million pieces in the next 18 months. By March 2006, Celebrity expects to put up a Rs 22-crore 1,000 machine dedicated factory to make trousers for the export market at the SIPCOT apparel park near Chennai.

The group expects to add another 1,700 employees at this new unit. Also, 400 new machines would be added at existing factories. "Celebrity is looking to reach a turnover of Rs 400 crore by 2009 and this investment will enable us to reach that," said Mr Rajagopal.

In a statement, Mr Mark Rubin, Director, New Vernon Bharat, said: "We believe that the Indian textile industry is poised for accelerated growth, both export-led and domestic... we believe that Celebrity is strategically well-positioned to take advantage of the strong secular growth prospects in the Indian textile industry."

The New Vernon investment fund comprises several top investors including university endowments and foundations, and as Mr Rajagopal said, he had to make an over two-hour presentation to the board in the US to justify the fund's investment in Celebrity.

Earlier this year, the Bennett Coleman group, publishers of The Times of India, had taken a 3.6 per cent equity stake in Celebrity in exchange for advertising and brand building in their publications for the Indian Terrain brand. This stake could go up to 12 per cent over three years depending on ad inventory used. The deal with BCC gave Celebrity a valuation of Rs 200 a share, said Mr Rajagopal, "And, we had to find an investor who would respect that valuation."

The Celebrity group makes apparel for some of the top brands in the world like Kohl's, J.C. Penney, Diesel, Timberland and Marlboro Classic, among others.

"The writing on the wall is clear; we need a right mix of volume and value and post-quotas large US brands are looking to consolidate with a few suppliers and we need to scale up and gain economies of scale to be profitable," added Mr Rajagopal.

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