Global private equity (PE) giant Blackstone has been facing hurdles in some of its ventures in India. One such venture is Gokaldas Exports, one of India’s largest and most well-known publicly held apparel exporters.
Since it spent Rs 660 crore in acquiring 70 per cent stake in Bangalore-based Gokaldas Exports in August 2007, Blackstone has been trying to stem Gokaldas’ losses, albeit without much success. In the past year, since Blackstone took control of the company’s management following the promoters leaving their operational roles after the mandatory lock-in period, the global PE fund has been trying to improve Gokaldas’ financial management. At the end of 2011-12, Gokaldas managed to record operating profit. However, in the quarter ended June, the company recorded a net loss of Rs 23.6 crore, a 76 per cent annual rise. Revenue dropped seven per cent to Rs 226 crore.
The company has identified key focus areas to improve its performance. “At the top of the agenda is increasing the focus on the Indian retail market and tapping into its aggressive growth, even as we plan to capture the share of the China business,” said a senior Gokaldas management official. The 11 per cent share from Asian markets in FY11 rose to 20 per cent at the end of FY12, and is expected to improve further. The share from the North American market dropped to 39 per cent by the end of FY12, against 47 per cent by end of FY11. Also, the share from Europe dropped two per cent to 35 per cent.
“Our key markets continue to be the US and Europe. At the same time, the share of sales to the domestic retail sector is growing significantly. It presents an opportunity for us, as the Indian retail market continues to reshape itself from an unorganised to an organised structure,” the official said. The adverse global economic scenario has hit the company severely, with the Euro zone crisis taking a toll. “With Greece, Italy and now Spain reaching precarious stages, the situation is likely to worsen. Against this backdrop, the global apparel industry has also been impacted, with large brands facing demand contraction, as well as price depreciation,” the official added.
The company has more than 25 operating units across Karnataka, Tamil Nadu and Andhra Pradesh. These manufacture about 2.5 million garments a month.
Gokaldas aims to focus on increasing revenue by increasing the share of business with existing customers, roping in new customers, foraying into new product categories such as swim wear, work wear, sleeping bags, and driving efficiencies in operations and financial management. “There has been a shift towards jackets and outerwear products in FY12, signifying a move towards value-added garments. We continue to offer a wide range of products to meet customer needs, and continuously build upon capabilities to cater to the changing market requirements,” the company stated. It is understood in the second quarter, the company’s order book has improved.