Vishal's board clears pact with TPG

Beleaguered retailer Vishal Retail today said its board had approved an agreement with private equity major TPG in accordance with the corporate debt restructuring (CDR) scheme cleared by its lenders.

“The agreement with TPG is subject to negotiations and executions of definitive agreement,” it said in a statement to the stock exchanges.

The move was expected to hasten the CDR process, said a senior executive at a bank involved in the process. Vishal was asked by lenders to either pump in equity or rope in investors as part of its debt restructuring.

Ram Chandra Agarwal, chairman of Vishal Retail, said: “The board has passed a non-exclusive, non-binding agreement.”

Though the company did not spell out the MoU (memorandum of understanding) details, TPG is expected to set up a wholesale company, while some Indian investors are likely to run the retail operations of the company, according to earlier reports.

The assets and liabilities of Vishal will be transferred to the wholesale company on a slum sale basis. Vishal’s stores, which will be owned by the wholesale company, will be leased to a retail company decided by investors.

“In a month or two, CDR will be through. There are some issues. We are progressing on a positive note,’’ Agarwal had earlier told Business Standard.

Vishal, with 170 stores, ran into trouble in 2008 as economic slowdown hit sales and it could not raise funds. It has debt of Rs 730 crore.

Vishal’s losses mounted to Rs 414 crore in 2009-10 as compared to Rs 94 crore a year ago, due to write-offs. Last November, Vishal became the second such retailer to approach CDR after Chennai-based Subhiksha did so.

However, retail experts said Vishal’s case was stronger than Subhiksha, given its scale.

“Vishal has much more sustainable scale and fairly big revenues compared to Subhiksha,’’ said Pinakiranjan Mishra, partner and industry leader, retail and consumer product practice, Ernst & Young.