Tata Group is in talks with promoters and shareholders of Fabindia for a potential stake acquisition or outright purchase of the ethnic apparel business, the Hindu BusinessLine reported citing sources.
The ongoing talks suggest that the acquisition may value Fabindia at an amount lower than the $2.5 billion initially estimated during the clothing company’s failed initial public offering (IPO), the report added.
Potential Record Deal
Should the deal materialize, it could mark a significant move within the sector, potentially becoming one of the largest transactions following Aditya Birla Fashion Retail’s acquisition of a controlling interest in TCNS Clothing last year.
For the Tata Group, this move represents a strategic addition to the portfolio, particularly in the ethnic wear sector. Their retail arm, Trent, boasts brands such as Westside, Zudio, and Utsa.
Both the Tata Group and Trent declined to comment on the matter, the report said. A spokesperson for Fabindia denied the existence of any ongoing discussions, it added. Livemint could not independently verify the report.
Financial Needs and Market Dynamics
Fabindia seeks capital not only to reduce debt but also to expand its capacity and rejuvenate its clothing line, as per the report. The company’s failed IPO aimed to offer an exit opportunity to investors such as Premji Invest and Bajaj Holdings.
Earlier this year, Fabindia sold its subsidiary Organic India to Tata Consumer Products (TCP) for an enterprise value of ₹1,900 crore. This move followed the cancellation of its ₹4,000-crore IPO due to uncertain market conditions in the previous year.
Despite reporting a revenue increase of 21 per cent to ₹1,668 crore in FY23, Fabindia has faced losses over the past three years. Rising expenses, amounting to ₹1,730 crore, resulted in negative cash balances by the end of FY23, as per Tracxn data.
Fabindia has struggled to maintain its market share against newer competitors, as per the report. It added that a failure to adapt to evolving fashion trends and perceived overpricing compared to alternatives like Global Desi have contributed to challenges.
