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Private equity firm TPG along with the Chennai-based Shriram Group has concluded the transactions for the purchase of the wholesale and franchise business and retail undertaking of Vishal Retail Ltd.
TPG also announced that it will invest Rs 200 crore into TPG Wholesale to fund the turnaround of Vishal’s business and future growth. While the company will buy the wholesale and franchise business of Vishal Retail, Shriram Group will take over the retail undertaking of the discount chain.
“These transactions are the result of Vishal Retail’s debt restructuring, which started in November 2009, under a CDR process led by SBI on behalf of certain lenders of Vishal Retail. 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 in statement today.
While TPG Wholesale will operate back-end sourcing, merchandising, logistics and franchise operations, Airplaza Retail, a Shriram Group company, will operate the retail shops alongside the other franchisee partners currently operating Vishal-branded stores.
TPG Wholesale shall be the franchisor to Airplaza Retail and the existing franchisee partners of the business.
“TPG will invest Rs 2,000 million 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,” the statement said.
The Vishal Megamart-branded retail operations will comprise over 150 stores throughout the country, mostly in Tier II & III towns and cities operated by both AirPlaza and over 20 other franchise partners.
“Vishal has a strategic fit for Shriram Group because its stores are located in small cities which are also our serving areas. Its client base is middle and lower middle class families, the ‘Aam Admi’ that Shriram Group endeavours to serve,” the Shriram Group Chairman, Mr Arun Duggal, said.
Last year, Vishal Retail had announced that it would sell its retail trading business to the Chennai-based Shriram Group and the wholesale division to the private equity firm TPG for a combined value of Rs 100 crore.
Vishal Retail, one of India’s largest discount chains, which got into financial trouble around 2009 with the pile up of Rs 730 crore in debt, underwent a corporate debt restructuring (CDR) programme.
Post the announcement, Vishal Retail’s scrip shot up by 19.97 per cent up from the previous close on the BSE to Rs 37.55 per share in the afternoon trade.
In a separate statement, the Vishal Retail Promoter and Managing Director said: “I profusely thank our lenders, stakeholders, vendors and employees who stood by the company and had belief in us whilst we went through the corporate debt restructuring. We have been successful in protecting their interest and I am confident that they will benefit from the deal.”
Post the sale, the company said it will be receiving an aggregate cash consideration of Rs 70 crore.
While the sale would include all rights, assets and interests pertaining to the retail undertaking, Vishal Retail had, however, earlier said its properties in Hubli, Kolkata, Dehradun and Jabalpur would not be a part of the deal.
The sale will also include the inventory, stock-in trade, cash and cash equivalents, store leases, leasehold improvements and fit-outs and contractual entitlements of the retail undertaking and certain identified liabilities pertaining to the retail undertaking, the statement added.
In addition, the company which operates retail outlets across India under brands like Vishal, Vishal Retail, Vishal Megamart and Vishal Fashion Mart, said the sale will also include the rights to all trademarks and intellectual property.
While Vishal Retail was advised by Zeus Law Associates and Kochhar & Co (legal advisors) on this deal, TPG was advised by E&Y (investment advisors) and Cleary Gottlieb Steen & Hamilton LLP and AZB & Partners (legal advisors). Shriram Group was advised by Trilegal Partners.
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