Bringing India’s fledgling textile garment industry into the global stage, Blackstone group, the world’s leading private equity firm, on Monday acquired a 50.1% stake in Gokaldas Exports from the Hindujas.
The Hinduja family (not to be confused with the promoters of Ashok Leyland) will retain only 20% of its total stake of about 71%. However, they will continue to hold the reins at the board level.
The Hinduja family and Blackstone have described the transaction as a “partnership to work together.” But Sebi regulations will mean that Blackstone will have to make an open offer, and depending on the success of the offer, it can take its stake to 70%.
The total bill, including the cost of the open offer for the 20% stake from minority shareholders, would mean that the private equity firm will spend around Rs 682 crore for the acquisition.
Akhil Gupta, CMD, Blackstone Advisors India Pvt Ltd, told DNA Money that the deal which took six months to be finalised, will be a win-win one.
In the private equity industry, Blackstone has a reputation to play above the clouds where it has fewer competitors.
The bulge-bracket firm does such a good job on due diligence that it rarely ever picks a firm where it does not have a strategic plan to add value.
Blackstone sensed an opportunity when the markets thrashed exporters following the rupee appreciation. It saw value in Gokaldas as it felt that these were mere short-term concerns.
Blackstone is said to have bought at a small premium to the current price, but close to the 52-week average. Having a roster of over 47,000 employees in 46 manufacturing units across the country, Gokaldas makes more than 1 lakh garments per day, or over 2.6 million garments per month.
In a short span of time, it left behind well-known Indian business groups to stand on the pole position in garment exports. “In 2005, the textile quota regime became history and leading importers from Europe and the US started sourcing from China and India. Indian companies are nowhere close to the position it deserves to be and it is time for us to catch the bull by the horn,” Gupta believes.
Gupta believes that with sanctions in view of tariff concerns hanging heavily on Chinese exports, every major vendor will look for an alternate vendor from India. Gokaldas currently supplies to the who’s who of global garment firmament which includes, Reebok, Nike, Adidas and Banana Republic among others.
Evidently, it is not a sell-out for the Hinduja family. The entrepreneurs who built the firm loom by loom will continue to hold the reins. Chasing a dream to be a global player of reckoning, the Hindujas believe that Blackstone can deliver the goods. We have experts in “lean manufacturing” and clearly there are opportunities in a market that is estimated at $50 billion (Rs 2,06,500 crore), Gupta said.
“We’ll control quality and we have a relationship with leading global retailers which will help Gokaldas,” says Gupta. Rajendra Hinduja said: “Blackstone is a long-term partner and an ideal partner to help us become a global industry leader.”
“With Blackstone’s relationships across the world, our customer profile is likely to get a significant impetus. This is likely to take the company to a higher growth trajectory,” Hinduja added.
For the present, the founder-promoters would continue to lead the company, with Madanlal Hinduja as chairman, Rajendra Hinduja as managing director and Dinesh Hinduja as executive director.
The big question remains unanswered. Will Blackstone delist Gokaldas? After a long pause, Gupta says due care has been taken to leave enough shares with public shareholders, so that it doesn’t breach the 90% threshold.
Kotak Investment Bank acted as the exclusive financial advisor for this transaction and is the manager to the open offer being made by Blackstone.
Source: DNA India