Blackstone not keen to invest in Indian retail

Blackstone, one of the largest private equity (PE) firms in the world, was averse to investing in the Indian retail sector, said Blackstone Advisors India’s Executive Director Gautam Chakravarti.

“Indian retail is going through a rough patch. We have seen some horror stories in retail and hence we are cautious,” he said.

Blackstone’s views come at a time when another PE major, TPG Capital, is close to acquiring the assets of beleaguered retailer Vishal Retail, which failed to pay its debt of around Rs 730 crore to commercial banks. Failed retailer Subhiksha is still facing regulatory probes and bankers’ ire for non-payment of dues.

Another US-based PE fund, Bain Capital, has invested Rs 270 crore in kidswear retailer Lilliput.

Blackstone has invested $1.25 billion (around Rs 5,600 crore) in a dozen Indian companies in infrastructure, logistics, power, BPO and media sectors, among others. The most recent being its $60 million (Rs 275 crore) investment in Monnet Power.

Globally, it manages fee-earning assets of over $25 billion and its portfolio includes many retail companies.

“In India, retailers have stopped irrational expansion of stores and are restructuring. Most retailers have shut loss-making stores and focussing on a few verticals,” Chakravarti said on the sidelines of a event on Indian textiles and apparels organised by business consultancy Technopak.

While retailers such as Vishal, Subhiksha have shut operations, retailers such as Reliance, Aditya Birla and Spencer’s have closed down several stores to stem losses.

However, retail consultants say besides the foreign direct investment laws, which bar foreign entities from investing in multi-brand retail, not many Indian retailers have achieved the scale to attract big PE funds.

“Globally, buy-outs happen when businesses grow big and struggle amidst competition and slowdown. In India, that stage has not come. Very few retailers have revenues of Rs 1,000 crore,” said Purnendu Kumar, associate vice-president, Technopak.

“They (PE) get good valuations in distress assets abroad. As India is in a high growth mode, promoters seek higher valuations,” he added.

Chakravarti said they had a positive outlook on apparel and textile suppliers to retailers. “Indian suppliers have a good opportunity as most of our neighbours are not doing well. Our economy is growing well and the base is huge,” he said.

Blackstone holds 68.27 per cent in Bangalore-based textile exporter Gokaldas Exports.

He said Gokaldas, whose 90 per cent revenues came from exports, would also also focus on supplying to domestic retailers given the opportunities in India. “There is an important opportunity in the domestic market. If local manufacturers do not tap that opportunity, they will miss out,” he said.