Beleaguered Vishal Retail today said it has concluded transactions for sale of its wholesale and franchise business, and retail undertaking to private equity firm TPG and Chennai-based Shriram Group.

The company, which last year said it would be selling the businesses for a combined value of Rs 100 crore, said it now stands to get Rs 70 crore from the deal.

As part of a deal signed last year, TPG Wholesale Private Ltd (TWPL) will buy the retailer’s wholesale and franchise business, while Airplaza Retail, a part of the Shriram Group, will take over the retail undertaking of the discount chain.

“Pursuant to the transfer of retail undertaking to Airplaza Retail and the wholesale undertaking to the wholesale company (TWPL) on a slump sale basis for a lump sum consideration, the company will receive an aggregate cash consideration of Rs 70 crore from Airplaza Retail and the wholesale company,” Vishal Retail said in a statement.

On the other hand, TPG announced that it will invest Rs 200 crore into TWPL to fund the turnaround of Vishal’s business and future growth.

“TPG will invest Rs 200 crore into TPG Wholesale to fund the turnaround of its business and future growth... TPG will leverage its resources and know how and extend all manner of support to the new management to bring the business back on to a growth path,” TPG said in a statement.

The deal follows Vishal Retail’s debt restructuring, which started in November, 2009 under a corporate debt restructuring (CDR) process led by SBI on behalf of certain lenders. The retailer had got into financial trouble around 2009 and piled up about Rs 730 crore in debt.

“These transactions have been approved by the board and shareholders of Vishal Retail and accepted by all of the bank creditors of Vishal Retail,” TPG said.

The retailer’s scrips soared on the BSE hitting the circuit limit of Rs 37.55 per share, up 19.97 per cent from the previous close, following the announcement.

Analysts pointed out that the decrease in the deal size has to do with the depletion of inventory value.

“The common sense is that in the past few months since Vishal first announced selling of businesses for Rs 100 crore, the value of the inventory levels have depleted at the stores resulting in a lower value,” UBS Securities India Analyst, Ms Sunita Sachdev said.

Under the deal, TPG Wholesale will operate back-end sourcing, merchandising, logistics and franchise operations, while Airplaza Retail will operate the retail shops alongside the other franchisee partners currently operating Vishal-branded stores.

(This article was published on March 14, 2011)
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