Checking out of 24Seven: Godfrey sees exit valuation of Rs 700-1,000 cr

This report has been updated
Godfrey Phillips India (GPI), the owner of the convenience store chain 24Seven, expects a valuation ranging from Rs 700 crore to Rs 1,000 crore for its exit from the business.

In a statement to Business Standard, Samir Modi, executive director of GPI and founder-president of 24Seven, said, “The GPI board has decided to exit the business, and the process is underway. We expect a valuation at 1.2-1.5 times our revenues.”

He further said: "I wear two hats, one is of executive director of GPI, and the other of the founder of 24Seven. I personally wouldn’t want to let go of this, as I have 1,600 employees who work for 24Seven.”

The business boasts annual revenues exceeding Rs 600 crore.

Modi has shifted focus to expanding his skincare and make-up venture, Colorbar, propelling it into international markets, including the Commonwealth of Independent States (CIS) countries, the US, Mexico, Canada, and West Asia.

His vision is to establish Colorbar among the top 10 global brands. Currently, the brand claims the third-largest market share in the country’s cosmetics sector.

With over 157 stores across Delhi, the National Capital Region, and Punjab, the retail chain operates 80 company-owned stores, with the remainder operating under a franchise model.

Modi acknowledges the challenge of low margins and escalating real estate rentals in the retail business, which has yet to turn profitable. However, he expresses optimism that with over 1,600 employees, the business will break even within the next two years, making it an attractive investment opportunity. He underscores the strength of the brand name, which he believes any potential buyer can leverage.

Years ago, Modi explored a potential partnership with 7-Eleven, but the US company was not yet prepared to franchise in India. Currently, Reliance holds the franchise for the US chain in India and is among the potential suitors for a deal.

Internally, GPI is managing the negotiations for the sale.

In addition to the retail venture, Modi is expanding his skincare and make-up brand, Colorbar, internationally. Initial expansions are planned in the CIS countries, where the brand is already available in 30 stores, with a target of reaching 200 stores by August.

The next port of call will be the US market, with plans to sell online through PCA Group, a beauty brand aggregator.

Colorbar also intends to establish a presence in West Asia, targeting 50 stores in markets like Dubai and Abu Dhabi within the next three to five years.

Modi stresses the brand’s commitment to quality, with most products manufactured in Italy and Germany. He aims to narrow the price gap with global brands in India while improving margins. Yet he says that in many cases, their products are identical to many of the global brands in quality (they are made at the same factories), but the company sells them at one-fourth of the price in India compared to the global brands.

He is looking at changing the strategy; his aim now is to have products where this price differential vis-à-vis global brands goes down by half and margins in India improve.

“Today our average sale price of cosmetics is Rs 800; our aim is to push it up to Rs 1,500,” says Modi.

He also has 4,000 stores through which his products are merchandised in the country.

Looking ahead, Modi envisions half of Colorbar’s revenue coming from global markets within the next three to four years, with products positioned at price points comparable to MAC Cosmetics.

Changing complexion of business

> Low margins and escalating real estate prices are primary drivers for exiting the 24Seven business

> Expected profitability within the next two years makes it an attractive investment opportunity

> The selling process is managed internally by GPI

> Samir Modi initiates Colorbar’s international expansion, starting with the CIS, US, and West Asia

> Expects 50% of revenue from skincare and cosmetics to originate from the global market.

> Plans to price products competitively with MAC Cosmetics and aims to rank among the top 10 global brands