Vishal Retail, burdened with Rs 730-crore debt, has approved the terms of a memorandum of understanding with private equity firm TPG VW (TPG). The MoU is in accordance with the corporate debt restructuring (CDR) scheme approved by the company?s lenders, Vishal Retail informed the Bombay Stock Exchange late on Wednesday.
Earlier, the company?s stock closed 0.22% down at Rs 66.95, while the benchmark 30-share Sensex rose 0.04%.
There have been reports that should the deal with Vishal finally go through, TPG would convert the business into a cash-and-carry operation, leaving some part of it in a retail operation. According to bankers in the know, the CDR committee was not in favour of infusing any fresh funds.
TPG had submitted its intention to invest in the company to the CDR committee of six banks. According to sources, TPG was willing to invest around Rs 200 crore. It is also understood to have agreed to infuse some more money after a couple of years.
To enable that to happen, Vishal would possibly have to transfer its assets and some part of its liabilities to a new entity, retail industry experts point out. Foreign direct investment in retail operations is restricted, though it is permitted in cash-and-carry operations.
Vishal Retail?s consortium of lenders includes State Bank of India, HDFC Bank, HSBC and Uco Bank. In November last, the retailer, which runs a chain of nearly 150 stores mainly in the northern part of the country opted for a CDR scheme after facing cash flow problems in late 2008.
The company had gone public in 2007 and raised Rs 110 crore. Chairman RC Agarwal owns just over 60% of the company. Group president Ambeek Khemka later quit the company over differences with the management.