Morgan Stanley to find buyer for Videocon?s Next

Television and fridge maker Videocon Industries, which has interest in oil and natural gas, will sell a 40% stake in its retail chain Next Retail India, a senior company official said.

?The company has appointed investment banker Morgan Stanely India to find a buyer,? Videocon Industries chairman Venugopal Dhoot told FE on Monday.?We are in talks with four retail chains from the US and Europe, which operate in the same segment.? He, however, refused to divulge names of buyers as the deal is still in the works.

Next Retail sells mobiles, television sets, cameras, washing machines, home and kitchen appliances through 730 stores in India. ?We will sell a 40% now and later sell an additional 11% later,? Dhoot said.

In December 2011, the retail chain planned to sell a controlling stake in its retail chain to the $50-billion US electronic retail chain Best Buy, but talks failed as the world?s largest electronics retail chain got involved in a legal tussle over delayed shipments of HTC phones.

Consultants say margin from electronic retail chains is lower compared to food and grocery and apparel chains. ?CDIT is a tough business to sustain, even more now as much of the buying happens online,? Arvind Singhal, chairman of Technopak Advisors, told FE in an earlier interaction. ?While gross margins in food and grocery are 18-20%, in apparel 35-40% and in luxury goods it is as high as 60%, consumer durables and electronics give only 10-12% margins.?

Videocon, which sells its own fridges and television through its retail chain, had to face a conflict of interest with other makers who sells their products through Next.

Next, set up in 2003, competes with Croma, Reliance Digital and e-Zone in the R65,000-crore CDIT retail market. Only 10% of the CDIT goods are sold through retail chains. In 2007, the company had acquired music and entertainment retail chain Planet M, from Bennett, Coleman & Company for R200 crore. In June, Essar Group shut down all stores of X-Cite, citing margin pressures. Future Group has also put e-Zone on the block.