The Tata group is reportedly in discussions with the promoters and shareholders of Fabindia for a stake or outright buy of the ethnic apparel business, as per reports from The Hindu BusinessLine, citing sources.
Negotiations are ongoing, though insiders suggest that the acquisition may assess its worth below the $2.5 billion estimated during the clothing company’s unsuccessful initial public offering.
Should the agreement materialize, it could potentially become the largest deal in the sector, following Aditya Birla Fashion Retail‘s acquisition of a controlling interest in TCNS Clothing last year.
This marks a strategic expansion for the Tatas into the ethnic wear sector. Their retail branch, Trent, offers apparel under various brand names like Westside, Zudio, and Utsa. Furthermore, Fabindia’s commitment to traditional techniques and sustainably sourced, hand-woven fabrics aligns well with the ethos of the Tata group.
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Both the Tata group and Trent declined to comment. A spokesperson for Fabindia denied any ongoing discussions.
Fabindia requires funds not only to reduce debt but also to enhance production capacity and revitalize its clothing range.
The initial public offering (IPO) was intended to offer an exit opportunity for various investors, including Premji Invest, which holds over 20% stake through PI Opportunities Fund, and Bajaj Holdings. The majority of the IPO was planned as an offer for sale (OFS) by promoters and other shareholders, with INR 500 crore earmarked for a fresh issue.
In January, Fabindia reached an agreement to sell its subsidiary, Organic India, to Tata Consumer Products for an enterprise value of INR 1,900 crore. This decision came as part of its restructuring efforts following the abandonment of its INR 4,000-crore IPO last year, citing uncertain market conditions.
Fabindia, known for its premium ethnic apparel, has faced losses over the past three years. Tracxn data reveals that it recorded a revenue of INR 1,668 crore in FY23, marking a 21% increase from the previous year. However, expenses also surged by a fifth to INR 1,730 crore. The cash flow statement data indicates that it concluded FY23 with negative cash balances.
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Once beloved by women of all generations, Fabindia has been losing market share to emerging competitors due to its failure to keep pace with fashion trends and craft designs that resonate with younger audiences. Additionally, its apparel is perceived as overpriced compared to alternatives like Global Desi.
Following the withdrawal of its IPO plan, Fabindia implemented several management changes. William Nanda Bissell, owning over 15% stake in the company, transitioned from Executive Vice-Chairman and Director to Managing Director. Mukesh Chauhan assumed the position of Executive Director. Viney Singh, upon completing his tenure as MD, assumed the role of non-executive director.
Fabindia operates a network of more than 300 stores, offering a range of products including apparel, furnishings, furniture, and lifestyle accessories.