PE firms wary of investing in Indian apparel retail sector

27 Jul '12

2 min read

The private equity (PE) funding firms are becoming wary of investing in the Indian apparel retail sector as the PE-supported garment retailers are currently struggling with inventory management and heavy debt issues.

Mr. Harminder Sahni, the Managing Director of Wazir Advisors, in an exclusive interview with Fibre2fashion, said, “The most obvious reason for PE firms turning wary of investing in the apparel retail sector is the lack of performance by the companies that received PE funding in the last four to five years.”

“Popular brands like Koutons and Lilliput, have destroyed valuations and it has affected investors’ confidence,” he adds.

His advice to clothing retailers trying to gain investors’ interest - “The business projections and promises of the brands should be reasonable and not over ambitious. Sometimes in order to seek higher valuations, companies inflate their projections and that becomes the single biggest reason for bitter relationships.”

“The companies that are interested in attracting PE funding should take care of the standard issues related to corporate governance and accepted accounting practices,” he mentions.

According to Mr. Sahni, the opportunities in the Indian garment retail sector are too large and therefore the investors are still interested in investing, but preferably in good companies and brands.

However, when quizzed about future consolidations happening on the same lines as the Aditya Birla Group taking over Pantaloons, he averred, “Consolidations will happen in Indian apparel sector, but on smaller scales. A consolidation of the comparable size as the AV Birla Group and Pantaloons is highly unlikely.”

Fibre2fashion News Desk - India

More Apparel/Garments News - India...