Ascent exits Koutons Retail at a loss

Wednesday, 02 February 2011

Ascent Capital has exited Koutons Retail at a loss and considers the investment a write-off. Ascent Capital invested about Rs 54.6 crores in Koutons through two rounds in 2006, a year ahead of the company going public. The PE firm held an 8.3 per cent stake. Koutons, established in 1991, sells clothing for men, women and children through more than 1,300 company-owned and franchisee outlets across India. It moved up the value chain from a garment manufacturer to a retailer by opening its own stores in 2002. In December, VC Circle reported that Ascent Capital part-exited from its investment by selling 2.8 per cent stake at a 58 per cent loss. It sold the balance stake in the market late December.

Trouble for Koutons started with inventory misestimates, which had debts, lots of inventory was bought than could be sold over the years. The leftover was then sold for much lesser prices and debts kept piling up. According to reports some funds are in talks with Koutons for taking over. Besides, in August, three directors exited Koutons, including Rajiv Grover, an independent director, Anil Khatod, who represented the $2 billion (Rs 9,360 crores) fund Argonaut Private Equity, and Ajay Mittal, an appointee of Ascent Capital. Other investors in Koutons include Argonaut, Fid Funds (Mauritius), ING Vysya Life Insurance and Lloyd George Investment Management (Bermuda).  Ascent Capital is one of India’s largest private equity firms. It manages $600 million worth of funds and was formed to pursue the reconstruction and recapitalization of existing listed companies, assist in the establishment of new businesses and the listing of new companies on recognized stock exchanges. Like Subhiksha, Vishal Retail and My Dollar Store, Koutons is amongst one of the retailers who got debt ridden in the past few years.