Vishal Retail sells business for Rs.100 crore

MUMBAI - Debt-ridden Vishal Retail Monday said it would sell its retail operations to the Shriram Group and wholesale business to the Indian subsidiary of US-based private equity firm TPG.

It said the company board has approved the deal whose combined worth is Rs.100 crore, which is less than its current market capitalisation of Rs.121 crore, and sought shareholders’ approval for the same.

The sale, however, would not include the company’s properties in Hubli, Kolkata, Dehradun and Jabalpur, the firm said in a regulatory filing.

The company operates under the brands — Vishal, Vishal Retail, Vishal Megamart and Vishal Fashion Mart.

On the Bombay Stock Exchange, the Vishal Retail scrip soared almost 16 percent to touch an intra-day high of Rs.58.95.

It closed the day at Rs.54.25 up 6.69 percent from its previous close of Rs.50.85.

The sale of these businesses will, however, service only a small portion of Vishal Retail’s Rs.730 crore debt.

It had initiated a corporate debt restructuring programme in 2009 and its prime lenders, SBI, HDFC Bank, HSBC and ING Vysya Bank approved a package which entailed the firm’s promoters giving up control to TPG.

The deal, will conform to foreign investment regulations in the sector, which does not allow foreign players to run multi-brand retail chains.

The TPG’s Indian arm will get control of Vishal’s wholesale business, institutional sales and franchise operations. The Shriram Group will run the retail operations, with TPG handling the back-end operations.

As part of the transaction, both entities will also take over majority of the liabilities of Vishal Retail.

The sale is, however, subject to a clearance from the Delhi High Court, which has restrained the retailer from selling any assets after a case was filed by some of Vishal lenders — Barclays, DBS Bank and SICOM Ltd– who did not take part in the debt-restructuring programme.

These lenders had approached the court earlier this year, seeking liquidation of Vishal Retail.

The company said it was hopeful of getting a favourable verdict from the court.

Debt woes have plagued the relatively smaller Indian retail chains. Subhiksha, one of the earliest home-grown grocery, pharmacy and mobile retail chains, was forced to shut all of its stores following a cash crunch and has since been the target of a series of litigations, mostly filed by lenders and investors. The troubled retail chain owes Rs.750 crore to 13 banks.