Gitanjali's biz restructuring delays private equity investments

Gitanjali Gems Ltd (GGL), which is in the process of raising funds from private equity (PE) players, is unlikely to close the deal any time soon due to the ongoing business restructuring of the company.

The company was in talks with various PE players to raise $100 million by selling about 10 per cent in the company. Earlier media reports said Blackstone, CX Partners, Bain Capital, Apax Partners were in race to acquire the stake in the proposed holding company.

According to sources, Gitanjali Gems plans to hive off various businesses such as Gitanjali Lifestyle, the retail arm which operates through shops named-Maya; real estate-proposed SEZs; jewellery and international businesses as subsidiaries of the new holding company-Gitanjali Brands.

The company is looking to dilute stake in those subsidiaries to the PE players. However, Gitanjali, which earns major chunk of revenue from diamonds business, wanted to keep that with the parent company. The PE players, in talks with the management, are not keen to buy stake in the lesser important new subsidiaries, sources said.

KPMG, the global consultancy firm, is currently working on restructuring the company.

A Gitanjali spokesperson said, “We initiated the restructuring activity a few months ago to unlock and maximise shareholders value. During the process, few PE players approached us. Since the restructuring is yet to conclude we have not taken any call on the matter. The deals are available to us, and we are encouraged by the bullishness and favourable terms it offers for our brands and businesses. However, if we decide to go ahead with any of the PE player, it would be a strategic partnership which can enhance the corporate vision and contribute to the future growth.”

Founder and Managing Partner, CX Partners, Ajay Relan said, “We are not in race for Gitanjali’s stake.” Amit Chandra, MD, Bain Capital India, said the company will not comment on deals.

According to reports, the holding company is valued at close to Rs 5,000 crore, three times the current market capitalisation of Rs 1,650 crore of the entire group. The GGL shares were closed on the Bombay Stock Exchange on Monday at Rs 199.55, up by 1.86 per cent. Rothschild is mandating the deal.

The board of directors of the company, at its meeting held on February 2, had decided to raise funds by issuance of convertible bonds/equity shares/ ADRs/ GDRs/FCCBs or any other form of convertible security not exceeding $ 250 million. The funds will be raised subject to approval from the shareholders of the company.