Pepe Jeans is scouting for buyers for its India unit as investors in the global parent, that sponsors the Formula One Red Bull Racing team, look to monetize part of their holding, people directly briefed on the matter said.
The Barcelona-headquartered branded apparel group is seeking Rs 2000 crore for its 100% stake in the Indian arm, these people said.
The sale is expected to attract interest primarily from financial investors such as private equity funds, though large local branded apparel manufacturers such as Aditya Birla Group and Arvind Brands have also been approached.
“The Indian business is an integral part of the global growth strategy for the Pepe Jeans brand, and the group has in fact acquired a 100% stake in the local business over time,” Kavindra Mishra, managing director, Pepe Jeans India, said in an emailed response to ET’s queries.
“While we are in the preliminary stages of evaluating some options to raise capital to pursue our growth plans, rumours around a sale of the business are baseless,” Mishra said.
The global parent, which counts amongst its investors L Catterton Asia (formerly L Capital and part of the luxury LVMH group), Lebanese billionaire and former Prime Minister Najib Mikati and Spanish businessman Carlos Ortega, appointed the investment banking arm of Kotak Group to facilitate the sale, according to sources directly aware of the matter.
Pepe Jeans has an existing joint venture with Aditya Birla Group for retailing the Hackett brand of premium clothing in India. The brand is owned by Pepe Jeans group internationally.
Arvind Brands which retails a diverse set of denim brands, including Lee, Flying Machine and Wrangler, may also evaluate the opportunity though sources familiar with the group’s thinking indicated that they found the ask price “expensive” and believed the brand may not add value to its existing portfolio.
Pepe Jeans retails its branded apparel wear through 1000 multi-brand outlets in India and over 200 franchise stores. It recently received approval for single brand retail trade allowing it to open its own exclusive stores in the country.
A spokesperson for Aditya Birla Group declined to comment when contacted. Arvind Brands didn’t respond to ET’s emailed queries till press-time.
The global parent went through a rejig of its ownership two years ago after LVMH group appointed Morgan Stanley to find new partners to invest in the business. The company eventually roped in Mikati’s M1 Group as an investor.
The brand was founded by Indian-origin siblings Arun, Nitin and Milan Shah in London in the 1970’s who began selling the jeans at a weekend stall.
The Indian arm has revenues of about Rs 500 crore, and reported operating profits of Rs 100 crore, according to sources. The business is considered to be performing extremely well, according to various industry analysts.
“Valuations for branded apparel manufacturers mirror those of FMCG companies as is amply demonstrated by multiples at which some of the listed apparel players trade,” said Navroz Mahudawala, managing director at investment banking boutique Candle Partners.
“We are seeing huge interest from financial investors because there are limited number of standalone players that are listed and there is an opportunity to acquire such assets and exit through an IPO at a later stage,” he said.
A group of investors led by Barclays pumped in around Rs 300 crore in a Future Lifestyle and Fashions arm last year which holds the Lee Cooper brand of denim wear. The investment valued the brand, which had nearly half of Pepe Jean’s operating profits, at Rs 1000 crore.
Source: Economic Times