PE infusion in the Indian Retail Sector

Circa 2006 can easily be categorised as the year of retail. Whether it was the Rs 25,000-crore Reliance retail juggernaut or the behemoth Wal-Mart-Bharti combine or even private equity players investing in retail, consumer has been clearly crowned king. According to PE experts, while investing in retail is an uncertain and expensive proposition, it is a sunrise industry from which there can be profitable exits.

Investors are keen to invest in businesses that benefit from the rising spending power among Indian consumers. From coffee shops and fast food restaurants to branded wines and tea, companies across this industry are attracting interest from investors. “Retail is not only a sunrise industry but is an under-penetrated market as well. The huge Indian middle-class means retail has a huge drawing power,” says Ravi Sardana, senior VP, ICICI Securities.

One of the biggest deals in the retail space was acquisition of a 51% stake in Nilgiri Dairy by Actis’, recently Matrix Partners also invested $5.5 million in fast-food retail chain Yo! China. Similarly Sequoia Capital made a $20 million investment in Cafi Coffee Day primarily to funds its global expansion plans. Earlier, this year Malaysian-based Navis Capital bought Delhi-based fast food chain Nirula’s for Rs 90 crore and invested in Sanjay Narang’s Mars Restaurant. “The heightened interest in the F&B space is not surprising given the 20% growth it is witnessing,” says Technopak Advisors’ chairman Arvind Singhal.

Meanwhile, menswear brand Koutons Retail India attracted investment of Rs 50 cr from US-based PE player Argonaut, and Avinashi-based SP Apparel sold 10.7% equity to New York Life Fund for close to Rs 45 cr. Similarly, Celebrity Fashions of the popular brand ‘Indian Terrain’ received an infusion of Rs 25 cr from PE player New Vernon Bharat. Another big deal earlier this year was when PE player Actis picked up 23% stake in OTC pharma brand Paras Pharma for $42 mn after Sequoia Capital had earlier invested $12 mn. There are a quite a few retail players who are scouting for private equity; popular brands such as Fab India and Weekender are in queue to offload stake and garner capital to grow.


Source : Economic Times