Nitin Kasliwal and his family, owners of apparel and fabric maker S Kumars Nationwide Ltd (SKNL), will sell a minority stake between 10% and 12% in their family holding company Anjaneya Holdings Ltd, along with a part of their stake in its fully owned subsidiary Reid & Taylor (India) Ltd (RTIL) in a public offer by December.
The funds obtained will be used to repay a part of the company’s Rs. 2,800 crore debt, to purchase the premium suiting brand Reid & Taylor, now licensed to SKNL by its Scottish owner, and in acquiring companies both in India and abroad, Vice-Chairman and Managing Director Kasliwal said.
“As we grow, we may be open to diluting some stake at our holding company level. If this were to happen, we could start with a dilution of about 10-12%,” said Kasliwal who, along with his wife, daughter and son, controls all of the holding company.
Kasliwal, took over the reins of the company after a five-way family split of the 57-year-old textile-to-real-estate group among his brothers and cousins in 2005. The family has appointed Deutsche Bank AG and London-based Euromax Capital Global Finance Ltd to work on structures and find PE funds.
Anjaneya Holdings controls a 49.83% stake in the domestically listed SKNL, which owns clothing brands such as Reid & Taylor, Belmonte, S Kumars and home linen brand Carmichael House.
“Over the last few years, we have raised substantial monies in the form of debt and equity, and have also had substantial internal accruals. Going forward, our source of funding will be a combination of all three,” Kasliwal said, adding that the firm will be “very careful” in ensuring a healthy leverage.
In June 2008, SKNL sold a 25.6% stake in RTIL for $211 million (Rs 990 crore today) to Government of Singapore Investment Corp. Pte Ltd (GIC), the island-nation’s sovereign wealth fund, to repay loans, build brands and expand RTIL capacity. Around Rs 790 crore was used to completely repay loans of RTIL and exit SKNL from a corporate debt restructuring plan.
SKNL, which has the right to use the Reid & Taylor brand in India in perpetuity, has also started negotiations to buy the international rights from Scottish company Reid and Taylor. An initial public offer (IPO) by Reid and Taylor slated for the end of 2010, will comprise three parts.
“The main part will be a primary market offering into Reid and Taylor for its growth. The second will be a small secondary offering by SKNL, funds from which will be used to retire SKNL debt, and a small secondary offering by GIC is also on the cards", he said, but added that he has not heard from GIC yet.
JPMorgan Chase and Co., Deutsche Bank, UBS AG, HSBC Securities and Capital Markets (India) Pvt. Ltd, JM Financial have been given the mandate for the IPO. JPMorgan analysts, Princy Singh and Dinesh Harchandani, stated in a report on July 14 that a delay or cancellation in the Reid and Taylor IPO could likely “have an adverse impact” on SNKL valuations.
“Group SKNL is aiming for a 35% CAGR (compound annual growth rate) over the next five years and has set an internal target of reaching $5 billion in the top line. The existing businesses that we have on hand are on a traction to achieve a turnover of $3.5 billion over five years and hence we will need to add another $1.5 billion worth of businesses in the next three to four years,” Kasliwal further added.
Bharat Chhoda, Chief Manager, equity, at brokerage ICICI Securities Ltd, said, “Integrating possible new foreign acquisitions with Indian operations will be a challenge because of the difference in geographies and regulations.”
He expects the 25-30% growth in volumes to drive SKNL’s business this year, but cautions about taking on too many brands. “So far their strategy is to be available at each price point and they have managed brands well, but if they go on adding brands then it will become a problem. Somewhere they have to think about consolidating the existing brands,” Chhoda said.