Story Behind Vishal Retail-Continued

TPG, which has assets worth $47 billion under management, has also agreed to reduce the moratorium period by a year. The banks have also stated that no other proposal for the debt restructuring of Vishal Retail will be entertained. Vishal Retail had signed a MoU with TPG which was a non-exclusive and non-binding agreement. This had allowed the company to invite other investors as well. TPG’s proposal had received a nod from the CDR cell in March.

The debt restructuring was in the works when Future Group showed interest in the beleaguered company. Lenders discussed both the proposals and decided to go with TPG which has proposed splitting Vishal into a retail trading firm and a wholesale cash-and-carry company. The company will acquire a stake in the latter, while Shriram Transport Finance Company, in which TPG has a stake will takeover the retail business.

Meanwhile, Vishal Retail has announced that net losses for the quarter ended June 30 that has gone down to Rs 19.47 crores as compared to a loss of Rs 90.65 crores in the same quarter last year. Its net sales, however, registered a jump of 26 per cent to Rs 334.63 crores. Its accumulated losses as of March 31, 2010 were Rs 426.90 crores, exceeding its net worth.

R C Agarwal, promoter of beleaguered Vishal Retail, has come out in support of the offer from Texas Pacific Group (TPG) over that from Kishore Biyani’s Future Group. Media reports suggest that the lenders, who are finalizing a debt restructuring plan for Vishal, are also expected to opt for TPG, as Agarwal has advised. TPG is expected to sweeten its offer when the lenders proceed with discussion on its proposal.

It may be noted that a few days ago differences had cropped up between Vishal Retail and the US-based private equity firm TPG. TPG was upset with Agarwal because he had written a letter to the lenders supporting a bid from Future Group even as TPG has been given three weeks — until late August — to come up with a revised proposal to take over the cash-strapped retailer. Currently, Vishal Retail’s lenders including State Bank of India, HDFC Bank, Hongkong and Shanghai Banking and ING Vysya Bank are involved in the debt recast and looking for a buyer for the retailer.

Prior to that Agarwal in a letter to the bankers supported TPG’s bid ahead of a crucial bankers meeting on July 27 in New Delhi. In late July, Vishal Retail and TPG came close to signing a deal .But banks involved in CDR said they wanted to study Future Group’s proposal first before giving the Vishal Retail-TPG deal the go-ahead. Once among the most aggressive modern retailers in India, Vishal Retail has fallen on hard times after the economic slowdown. It is trying to find its feet again after the slowdown left it saddled with Rs 730 crores in debt and hundreds of crores worth of unsold inventory. The firm operates 117 discount stores in several cities.