Vishal Retail has been under the storm for quite some time now. First the debt problem, then the inventory issues and finally expansion plans... Is it even possible for the company to stand on its own? Or is the TPG investment proposal its clarion call?
After struggling for almost two years, Vishal Retail has finally found itself a saviour. The beleaguered retailer would now be acquired by Texas Pacific Group (TPG), a private equity firm that plans to infuse Rs.2.50 billion in it. Further, the business would be divided into two formats namely the cash & carry and retail business. “TPG has given a proposal under the CDR mechanism. However, the outcome will be weighed with pros/cons and the decision post the outcome will be taken considering interest of all stakeholders,” R. C. Agarwal, CMD, Vishal Retail, tells B&E. The retailer has revived, in part, but is it even remotely possible for Vishal Retail to continue on its own? To understand that, let’s go back to how the train of cataclysmic events unfolded:
March, 2008: The Retailers Association of India forecasts an annual growth of 30% for the sector. One of India’s leading retailers, Vishal Retail grows at 100% (y-o-y) with a turnover of Rs.10 billion. But soon the global slowdown hits India and the growth forecast for the sector is slashed to 12-15%. Vishal is debt trapped – an obligation of about Rs.7.5 billion. In fact, by December 2008, Vishal’s expenditure on interest increases by a whopping 137.26% and profit plunges by a horrifying 86%. Speculations are rife that Vishal is the next Subhiksha. June, 2009: Vishal consolidates its back-end and front-end operations. The hard work pays off and finally in Q2 of 2009, business improves. Topline shows signs of recovery with net sales of Rs.2,653.70 million for Q1 2009, an increase of 13.96% from the previous quarter. But the debt challenge still persists.
March, 2010: Vishal’s stock touches an intraday high of Rs.65.25, up by 5%, on speculations of Texas Pacific Group acquiring Vishal Retail (by the time this magazine goes for print).
Phew! … Three years, one retail giant, a slowdown and the ultimate struggle for survival. Though this retailer started its journey three years before Kishore Biyani could set up his first store in 1997, it could not sustain the first mover’s advantage. Raison d’être: Vishal Retail made the one mistake of using short-term debt for long-term growth. But this ‘one mistake’ proved too costly.
After struggling for almost two years, Vishal Retail has finally found itself a saviour. The beleaguered retailer would now be acquired by Texas Pacific Group (TPG), a private equity firm that plans to infuse Rs.2.50 billion in it. Further, the business would be divided into two formats namely the cash & carry and retail business. “TPG has given a proposal under the CDR mechanism. However, the outcome will be weighed with pros/cons and the decision post the outcome will be taken considering interest of all stakeholders,” R. C. Agarwal, CMD, Vishal Retail, tells B&E. The retailer has revived, in part, but is it even remotely possible for Vishal Retail to continue on its own? To understand that, let’s go back to how the train of cataclysmic events unfolded:
March, 2008: The Retailers Association of India forecasts an annual growth of 30% for the sector. One of India’s leading retailers, Vishal Retail grows at 100% (y-o-y) with a turnover of Rs.10 billion. But soon the global slowdown hits India and the growth forecast for the sector is slashed to 12-15%. Vishal is debt trapped – an obligation of about Rs.7.5 billion. In fact, by December 2008, Vishal’s expenditure on interest increases by a whopping 137.26% and profit plunges by a horrifying 86%. Speculations are rife that Vishal is the next Subhiksha. June, 2009: Vishal consolidates its back-end and front-end operations. The hard work pays off and finally in Q2 of 2009, business improves. Topline shows signs of recovery with net sales of Rs.2,653.70 million for Q1 2009, an increase of 13.96% from the previous quarter. But the debt challenge still persists.
March, 2010: Vishal’s stock touches an intraday high of Rs.65.25, up by 5%, on speculations of Texas Pacific Group acquiring Vishal Retail (by the time this magazine goes for print).
Phew! … Three years, one retail giant, a slowdown and the ultimate struggle for survival. Though this retailer started its journey three years before Kishore Biyani could set up his first store in 1997, it could not sustain the first mover’s advantage. Raison d’être: Vishal Retail made the one mistake of using short-term debt for long-term growth. But this ‘one mistake’ proved too costly.
Read these article :-
No comments:
Post a Comment