PE-backed Spykar on sale

After the promoter of Lilliput decided to sell the company, another apparel chain is going to be put on the block. Seven months after acquiring controlling stake, the private equity (PE) investor of Spykar Lifestyle, a leading apparel player, has put up the company for sale. Avigo Capital Partners holds 60 per cent stake in Spykar.

Achal Ghai, founder of Avigo Capital Partners that holds controlling stake in Spykar along with its global investor, said: “We are seriously looking for an exit from the company.” The 2003-formed PE fund manager has begun talks with various investment bankers for giving a sell mandate. The city-headquartered Avigo is looking for an enterprise value of Rs 350-400 crore for Spykar.

Last year, Avigo had taken over reins from the promoter after roping in its global investor, Metmin Investments, to acquire 30 per cent stake in Spykar by pumping in Rs 30 crore. Metmin Investments is owned by NRI tycoon Raj Bagri, who was the chairman of London Metal Exchange. In 2007, Avigo had invested about Rs 25 crore in Spykar.

Spykar, established by Prasad Pabrekar in 1992, is a known name in the denim garment space. Currently, Pabrekar holds 40 per cent in the company. Pabrekar could not be reached for comments despite repeated attempts. Mails sent to him also remain unanswered. Spykar makes casual wear and accessories for men and women. Spykar products are sold through 1,000 multi-brand outlets and 198 exclusive brand outlets across the country. Last week, Sanjeev Narula, promoter of Delhi-based Lilliput Kidswear, announced his plans to sell off the company. Last year, the PE investors — Bain Capital and TPG— had accused Narula of fudging the company’s books and not providing access to its financials to auditors. In turn, Narula accused the investors of trying to stall the company’s Rs 850-crore initial public offering.

Last year, another retail chain, Vishal Retail, was sold for Rs 70 crore to existing PE investor, TPG. This was after the company failed to restructure its debt. In early 2011, Ascent Capital-backed Primus Retail sold apparel brand Weekender to finance firm Madhusudan Securities for Rs 100 crore.

However, Achal Ghai claims there are no issues between Avigo and Spykar promoter. “We are in good relationship,” Ghai said. “There are no issues between us.” Last year, Avigo had dropped its plan to sell 40 per cent stake after it bought controlling stake in Spykar. “We are in the process of reviving the business and rationalising the cost,” he added without disclosing the financial details.

Spykar’s plans to launch children’s brand OYO did not take off last year following the downturn. As a result, Spykar had cancelled the property leases that were meant for the OYO brands.

Though private equity players are facing setbacks to their investments in the retail space, more high-valued PE deals are taking place in the space.

Recently, through a secondary transaction, L Capital, the PE arm of global luxury major LVMH, bought eight per cent stake (for Rs 120 crore) that Wolfensohn Capital Partners held in FabIndia. The deal values FabIndia at Rs 1,500 crore.

According to Pinaki Ranjan Mishra, Ernst and Young’s national leader (retail), the growth in the country’s middle and upper-middle class in terms of income has brought more potential in the apparel space. “The PE investors are realising the facts of fast growth in young population with large disposable income in India, who are spending more on apparel and entertainment,” he added.

Wolfensohn Capital Partners, owned by former World Bank President James Wolfensohn, had bought 8 per cent stake in Fabindia for nearly Rs 50 crore in 2007.