Aditya Birla Nuvo to invest Rs 1,600 cr in Pantaloon Retail

Tuesday, 01 May 2012
Aditya Birla Nuvo to invest Rs 1,600 cr in Pantaloon RetailThe oldest and biggest torch-bearers of India’s organised retail -- the Future Group and Shoppers Stop -- are undergoing major restructuring processes at operational as well as top management level. The latest development is that the Future Group has agreed to sell a controlling stake in its Pantaloon stores business to the AV Birla Group. A significant step in its attempts to address shareholder concerns by cutting its consolidated debt of over Rs 7,000 crores. The proposed deal, coming 13 years after the AV Birla Group entered fashion retail with the purchase of Madura Garments, will help the Kumar Mangalam Birla-led group expand through new products and a doubling of retail space under its control.

InAditya Birla Nuvo to invest Rs 1,600 cr in Pantaloon Retail the first stage, Aditya Birla Nuvo (ABNL), the parent of Madura Garments, will subscribe to debentures worth about Rs 800 crores to be issued by Pantaloon Retail Industries (PRIL). PRIL will then transfer Rs 800 crores of debt along with Rs 800 crores of debentures into another firm where Aditya Birla Nuvo will make an open offer of a minimum 26 per cent stake. Depending upon the success of the offer, ABNL could end up owning up to 50.01 per cent of the new company.

“On completion of this acquisition, the two entities -- Madura Fashion and PRIL -- will work closely as partners to derive operational synergies in terms of back end, supply chain and other important value drivers,” said Kumar Mangalam Birla, Chairman of ABNL, in a statement. “This marks a unique coming together of brands and enterprise that will create significant value for customers, suppliers and all stakeholders,” says Kishore Biyani, Pantaloon’s Founder and Group CEO.

This is for the first time that the retail giant has sold a stake in its venture to get rid of debt pressures. The Group recently undertook several measures like top level restructuring, recruitment tightening, appointing of committee to review the situation and suggest ways, deciding to focus on FBB chains and Food Hall business to ease the situation.

While low buying sentiment that prevailed during the last fiscal year continues to impact sales and inventories at these retail chains, retail expansion has become mandatory to survive the tide. And with the government’s decision on FDI in multi-brand retail still in limbo, retail majors are finding ways to streamline businesses by trying their best to keep the pressure points under control. And apart from spreading their footprint in smaller towns by focusing on small sized stores, partnering with each-other seems to be another way these retail chains are looking at easing the situation.

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