Pantaloon buys into Indus League

Picks up ICICI Ventures' 68.29% stake for Rs 24.09 cr.

Pantaloon Industries has acquired a majority stake in the Rs 85 crore Bangalore-based Indus League Clothing. The company has bought out venture capital firm ICICI Ventures' entire 68.29 per cent stake in the company for Rs 24.09 crore.

Indus League, which promotes the Indigo Nation and Sculler's labels, said the management structure and control would not change for now. Pantaloon's acquisition is subject to shareholders' approval.

ICICI Ventures may have exited Pantaloon at a loss, attributed to the accumulated losses of Indus League. When it first picked up a stake in the company in 1999-2000 for an undisclosed sum, it had valued it at Rs 50 crore.

However, according to the current deal, Indus League's valuation will be just around Rs 35 crore. ICICI Ventures' loss or gain could not be ascertained as it had increased its stake in the company in several tranches over the years.

The current valuation, when compared to the ColorPlus-Raymond deal, shows that Pantaloon could have acquired majority stakes relatively cheap. Raymond had paid about 1.1 times the ColorPlus turnover.

While Sriram Srinivasan, managing director, said the management would remain unchanged, he also announced the first changes in operations. Pantaloon's Pantaloon Knowledge Network will partner Indus League in areas spanning brand-marketing, advertising, sourcing and production.

Pantaloon buys 68% in Indus Also, this tie-up can up Indus League's brand promotion efforts, which pale when compared with leaders Madura Garments and Arvind Brands.

Indus League was promoted by eight clothing industry professionals led by Srinivasan, the former president of Madura Garments, becoming the first Indian clothing company to be funded by venture capital when launched in April 1999.

In the first round, Draper International and Dalmia Cements had invested. The founders contribution was by way of sweat equity, then.

"This alliance will give our brands access to dedicated large format retail spaces at all Pantaloon and Central concept stores. It will unlock synergies in retail space, production facilities, marketing, design, fabric sourcing and supply chain," Srinivasan said.

"Financial Investors played a role in the early growth of the company. Now it is the strategic investors who will add value in taking the company into the next orbit of retail expansion and national presence."

As the tie-up is expected to service the expansion needs, there will be no rationalisation of either the production facilities or exclusive outlets.

Leaning on this tie-up Indus League plans to grow existing labels into lifestyle brands and simultaneously launch several brands across categories, thereby signalling the company's intention to enter high growth areas as kid's wear, innerwear, sportswear and possibly home textiles. Pantaloon's production facilities are concentrated on trousers, shirts and jeans.

Also, this tie-up will give access to the North and Eastern regions. Currently Indus League has a strong presence only in the south and west. Besides, the two firms hope to benefit from economies of scale in sourcing from mills and quick lead times.