To float new retail subsidiary with Rs 100-crore investment
Bangalore, March 16
Rajesh Exports, among the world's largest jewellery makers, which is making a foray into the retail sector, has made its first big acquisition by buying out the entire retail network of OyzterBay.
"Our Board cleared the deal today. We have acquired all the 36 outlets of OyzterBay across the country," Rajesh Exports' Chairman, Mr Rajesh Mehta, told newspersons.
The promoters of OyzterBay, led by Mr Vasant Nangia and five other persons and ICF Ventures, will get Rs 11 crore in cash and a 20 per cent stake in a new subsidiary floated by Rajesh Exports.
The new subsidiary will retail branded diamond and gold jewellery.
ICF Ventures may exit
"With this acquisition, Rajesh Exports is taking a three-year leap into retail," Mr Nangia said. ICF Ventures, which has a 57 per cent stake in OyzterBay, is expected to exit from the new company at a later date, sources close to the deal said.
The retail venture in which Rajesh Exports will invest Rs 100 crore will begin operations from May 15. It will have a new logo as well as a new name. It will be positioned as a brand for the youth and for the mid-range of jewelleries. Rajesh Exports itself will float a chain of retail stores across the country under the brand name, Shubh. It will acquire small and medium range of jewellery shops across the country to kickstart its venture.
The brand OyzterBay will continue to remain with Mr Nangia and other promoters of the venture. It will have its outlets in department stores and shopping malls. There is also a possibility that the OyzterBay range of branded jewelleries will be sold through the new venture promoted by Rajesh Exports, Mr Nangia said. The sale of jewellery products through the OyzterBay's Web site will, however, be closed down because it has not been able to give the expected results, Mr Nangia said.
Lock-in period clause
Mr Mehta said OyzterBay promoters, who have a 20 per cent stake in the new retail subsidiary, will have to abide by the lock-in period clause to get the 20 per cent stake.
"It works like the ESOP scheme. Once the targeted sales are met, the promoters will get the 20 per cent stake," Mr Mehta said. As per the sales target, at the end of the first 15 months of operations, the subsidiary will have to achieve a sale of Rs 200 crore. In the second stage, it will have to achieve a sales target of Rs 1,000 crore between three years and five years.
Mr Nangia said the promoters decided to sell the retail chain of OyzterBay because they found that the network was underutilised as it did not have the complete range of jewellery products.
"We now have a strong backbone in Rajesh Exports and have access to a variety of jewellery products," Mr Nangia said.