Private retail chains Fabindia, Shoppers Stop and a consortium led by The Bombay Store have been shortlisted to place financial bids for partnering government-owned Khadi Gram Udyog Bhawan in running and marketing about 10 of its mega stores across the country, it is learnt.
One these chains, one would form a joint venture to manage the Khadi outlets through the public-private partnership mode, in which the private entity would hold 51 per cent equity and Khadi & Village Industries Commission (KVIC) would hold 49 per cent. The joint venture may also set up 20 new ‘Khadi Plazas’ in some commercial centres of the country.
The financial bids for part-privatising the 87-year-old Khadi brand is likely by the end of this year, according to an official in the Ministry of Micro, Small & Medium Enterprises (MSME). About six entities had submitted expressions of interest to partner Khadi Bhawans more than a year ago, in response to a tender floated by KVIC, which is under the MSME ministry.
KVIC owns 7,050 sales outlets, which account for sales of about Rs 1,000 crore.
The finance ministry’s Expenditure Department would have to clear the financial bid process for the venture.
Once the financial bids are concluded, some of the major Khadi outlets in Delhi, Mumbai, Kolkata, Ernakulam (Kerala), Goa, Bhopal, Patna and Agartala would be handed over to the joint venture, which would operate and manage these under a lease contract. The joint venture method is aimed at repositioning the Khadi brand and reforming the organisation. Many Khadi Bhawans were listed as loss-making units and some were even shut in the recent past.
The shortlisted private retail chains did not comment on the matter. One of these, however, said it had not received any official communication from the government on the issue. The government was yet to announce the timeline for the next step, said a senior executive of one of the retail chains.
Recently, the government had approved Fabindia’s proposal of 49.5 per cent foreign direct investment into the company. A US venture capital fund owned by James Wolfensohn, along with Louis Vuitton’s L-Capital and Delaware-based fund JLB Canton, have invested in the company. A few months ago, Premji Invest, the investment fund owned by Wipro Chairman Azim Premji, acquired a seven per cent stake in Fabindia. The retail chain was pegged at about Rs 1,500 crore.
In the quarter ended June, Shoppers Stop recorded a 96 per cent drop in its standalone profit, owing to an increase in costs. To improve its revenue and margin, the chain is increasing its share of private labels.
The origin of The Bombay Store, the third chain shortlisted for the Khadi venture, can be traced to the Swadeshi movement. The chain, founded by Bal Gangadhar Tilak and supported by Ratanji Jamsetji Tata, has, through the decades, seen many a change of hands. The first retail company to be listed on the Bombay Stock Exchange, the chain has 17 stores across India.