By R.JAI KRISHNA
Vishal Retail Ltd. said Monday it had completed the sale of its wholesale and retail businesses for about 700 million rupees ($15.5 million) in cash, ending a process to revive the cash-strapped retail company, that started in late 2009.
The conclusion of the sale makes Vishal Retail Ltd. the first listed Indian retailer to sell out in the wake of the global economic meltdown.
Vishal Retail has sold and transferred its wholesale trading, institutional sales and franchisee operations to TPG Wholesale Pvt. Ltd., the Indian unit of U.S.-based private equity firm, TPG; and its retail business to Airplaza Retail Holdings Pvt. Ltd, a company owned by the Chennai-based diversified Shriram Group, via a slump sale, it said in statement.
The deal has been structured to conform to current Indian regulations restricting foreign investment in multi-brand retail, which prevent foreign players from directly selling to the public.
It will also transfer some of its “certain identified liabilities,” in both its businesses, the statement showed.
Slump sale, is a mode of selling a company, in which one or more undertakings are transferred for a lump-sum, without values being assigned to individual assets and liabilities.
The development completes a process that Vishal Retail started in late 2009, after it couldn’t pay back the loans it took to scale up in 2008-09, when liquidity dried up in the wake of the global economic meltdown.
Falling sales and rising financing costs added to the Indian retail company’s woes, pushing the company into the red. It had reported a consolidated net loss of 4.16 billion rupees ($92.1 million) for the financial year ended March 31.
In late 2009, Vishal founders’ approached several of its lenders to restructure about 7.30 billion rupees ($161.7 million) in debt under the existing corporate debt restructuring guidelines issued by India’s central bank.
Subsequently, some of the Indian company’s lenders – who held majority of its debt – had approved a proposal to recast its debt, which also involved the company’s founders ceding control to TPG.
State Bank of India, HSBC, HDFC Bank Ltd., ING Vysya Bank Ltd., UCO Bank Ltd. and Bank of India were the lenders who agreed to the proposals.
However, its other lenders – Deutsche Bank, Barclays, SICOM Ltd. and DBS Bank Ltd. — didn’t participate in the debt recast exercise and opposed the asset sale plan. They also approached the courts in early 2010, seeking the liquidation of Vishal Retail for failing to honor debt repayment commitments.
Acting on the complaints filed by Barclays, SICOM Ltd. and DBS Bank Ltd., the Delhi High Court restrained the retailer from selling its assets.
Vishal Retail said Monday the sale completion follows an approval from a Delhi Court
Shares of the company rose by the maximum daily upper limit of 20% to 37.55 rupees ($0.83) on the Bombay Stock Exchange at 0630 GMT. In comparison, the benchmark Sensex was trading 0.94% higher on the day.