Leela Group may soon bid adieu to apparel business
CHAIRMAN of the Mumbai-based hospitality firm the Leela Group, Capt CP Krishnan Nair is mulling complete or partial exit from his original apparel export business - Leela Scottish Lace.
By Arun Iyer and Boby Kurian, TNN |
BANGALORE: CHAIRMAN of the Mumbai-based hospitality firm the Leela Group, Capt CP Krishnan Nair is mulling complete or partial exit from his original apparel export business - Leela Scottish Lace.
Sources said the Rs 350-crore company is on the block with the investment bankers holding parleys with private equity players and strategic investors for a sell-out. The company has over half a dozen factories in Bangalore, Chennai, Kochi and Thiruvananthapuram, and employs over 15,000 persons.
The deal size could be around Rs 350 crore as export apparel companies normally attract 1:1 valuation in the present scenario. The move is in step with the group’s future strategy with a focus on core areas of hospitality, realty and infrastructure. Leela Scottish Lace has a client base including Wal-Mart and JC Penny.
When contacted, Leela Group spokesperson denied any plans to exit the apparel export business. The company said it was exploring opportunities to sell one of its new units as it has several offers for it, adding this will in no way compromise its production capacity. Sources, said investment bankers on behalf of Leela have had discussions with some leading apparel exporters for a complete exit. There could be a leveraged buyout with a limited private equity play.
Industry watchers say while the global market has opened up for Indian companies in the post-quota era, there is intense competition not just from Chinese firms but even players in Bangladesh, Sri Lanka and Pakistan.
“The business is now a volume game. Indian companies have to get used to living with wafer-thin margins,” said an expert. Gokaldas Exports, the country’s leading apparel exporter, recorded a net profit of Rs 60.88 crore on income from operations worth of Rs 884.49 crore.
Sources said the Rs 350-crore company is on the block with the investment bankers holding parleys with private equity players and strategic investors for a sell-out. The company has over half a dozen factories in Bangalore, Chennai, Kochi and Thiruvananthapuram, and employs over 15,000 persons.
The deal size could be around Rs 350 crore as export apparel companies normally attract 1:1 valuation in the present scenario. The move is in step with the group’s future strategy with a focus on core areas of hospitality, realty and infrastructure. Leela Scottish Lace has a client base including Wal-Mart and JC Penny.
When contacted, Leela Group spokesperson denied any plans to exit the apparel export business. The company said it was exploring opportunities to sell one of its new units as it has several offers for it, adding this will in no way compromise its production capacity. Sources, said investment bankers on behalf of Leela have had discussions with some leading apparel exporters for a complete exit. There could be a leveraged buyout with a limited private equity play.
Industry watchers say while the global market has opened up for Indian companies in the post-quota era, there is intense competition not just from Chinese firms but even players in Bangladesh, Sri Lanka and Pakistan.
“The business is now a volume game. Indian companies have to get used to living with wafer-thin margins,” said an expert. Gokaldas Exports, the country’s leading apparel exporter, recorded a net profit of Rs 60.88 crore on income from operations worth of Rs 884.49 crore.
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The prospect of wafer-thin margins is something the promoters of Leela Scottish Lace may not be prepared to live with, given the fact that their key business of hospitality offers them good margins. The Bangalore property of Hotel Leela, has the highest average room rent (ARR). And it is this focus that saw the Nair family float a “blank cheque” company raising funds from the US market for investing in the hospitality sector.Start a SIP with as low as ₹500 with ET Money App!
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