AB Nuvo to buy control of Pantaloon retail arm

MUMBAI Mon Apr 30, 2012 9:47pm IST

A mannequin is on display beside a window as people shop in a clothes shop in New Delhi June 17, 2007. REUTERS/Desmond Boylan/Files

A mannequin is on display beside a window as people shop in a clothes shop in New Delhi June 17, 2007.

Credit: Reuters/Desmond Boylan/Files

Related Topics

Stocks

   

MUMBAI (Reuters) - Aditya Birla Nuvo, part of the Aditya Birla conglomerate, is to pay an initial 8 billion rupees towards getting a controlling stake in the Pantaloons Format clothing brand and retail chain which is being demerged from the broader Pantaloon Retail business, it said on Monday.

The Pantaloons Format spin-off will enable Pantaloon Retail, the country's biggest retail group, to cut its debt by 16 billion rupees from its current 58 billion rupees, which has constrained it from investing in growth.

"It (the retail sector) is a business that needs a good model, which Pantaloon has, and continuous investments, which Birla can offer," said a fund manager at SBI Mutual Fund who declined to be named.

Pantaloon Retail is controlled by tycoon Kishore Biyani's Future Group and will continue to own its other businesses such as hypermarkets under the Big Bazaar brand, the E-zone electronics chain and lifestyle retailer Central.

Retailers including Future Group and Shoppers Stop have been scrambling to raise funds after the Indian government backed down on a decision to allow foreign direct investment in the multi-brand retail sector in December.

"This will help Biyani reduce his mounting debt, which has been a very big concern for his investors," the fund manager said.

Shares in Pantaloon Retail jumped 9.35 percent on Monday to close at 187.70 rupees ahead of the deal's announcement. Before Monday's rise the stock had fallen by more than half since the start of 2011.

Pantaloon Retail will keep a minority stake in the Pantaloons business, which will have its own listing, and will continue to manage it while ABNL will hold at least 50.01 percent on completion of the transaction.

The Aditya Birla group is one of the country's biggest business houses, with interests including mobile carrier Idea Cellular and aluminum maker Hindalco Industries.

Its ABNL arm operates the Madura Fashion & Lifestyle retail business which it said will complement the Pantaloon business.

"The two entities, ABNL's Madura Fashion & Lifestyle and 'PRIL' (Pantaloon Retail) will work closely as partners to derive operational synergies, in terms of back-end, supply chain and many other important value drivers of the business," the company said in a statement.

It said Madura's retail space covers 1.6 million square feet while the Pantaloons Format business is spread over 2.05 million square feet.

"We are delighted to have Mr. Kishore Biyani as our partner in the Pantaloons Format business," ABNL chairman Kumar Mangalam Birla said.

Under the transaction Aditya Birla Nuvo, which the market values at $2 billion, will subscribe to debt issued by Pantaloon Retail which will be converted into equity on completion of the spin-off process, the companies said.

ABNL, which expects the deal to be completed in eight to 10 months, will also make an open offer to shareholders of the newly listed entity, to take its holding to just over 50 percent.

The Pantaloon-branded business is on track to generate 17 billion rupees in revenue in the current fiscal year and expects to add 20 stores annually, the companies said.

Last year ABNL's Madura Fashion & Lifestyle unit generated revenue of 21.45 billion rupees, it said.

(Editing by Greg Mahlich)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Coal Block Allocation

Coal Block Allocation

Government urges Supreme Court to not cancel some 'illegal' coal mines  Full Article 

Modi in Japan

Modi in Japan

Japan and India agree to boost strategic ties at summit  Full Article 

Basel III Norms

Basel III Norms

RBI amends Basel III guidelines for banks  Full Article 

HSBC PMI

HSBC PMI

Factory activity expands at slower clip in August.  Full Article 

Current Account

Current Account

Balance of payments surplus for third straight quarter  Full Article 

India Infrastructure

India Infrastructure

RBI rule handicaps India's infrastructure hopes  Full Article 

Book Talk

Book Talk

Reema Abbasi and a glimpse of Pakistan’s Hindu past  Full Article 

China Economy

China Economy

Retreat in China's PMIs heightens calls for policy easing.  Full Article 

Managing Share Sales

Managing Share Sales

Govt seeks bids from banks to manage PFC, REC share sales   Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage