India's Liverpool Retail acquires stake in Momento Apparels

An Indian company has acquired 33 per cent stake in a Nepali garment company.

The Ahmedabad-based Liverpool Retail entered into the INRs 200-million deal with Momento Apparels -- owned by former president of Federation of Nepalese Chambers of Commerce and Industry (FNCCI) Chandi Raj Dhakal -- as part of its backward integration plan. "During the two-year downturn, we focus on restructuring," Liverpool Retail managing director Kailash Gupta said, adding that demand for garments is expected to increase by three to four times. "Yarn and fabric consumption has already increased by 50 per cent. Middle class is now more brand-conscious and has seen a rise in disposal income," he added.

Indian garment companies import from Bangladesh and Nepal as these are known for low-cost production centres. "Importing from Nepal does not attract government duties, and hence acquiring a stake in a Nepali company is a strategic move," according to an Ahmedabad-based market analyst.

The nine-year-old company which has two casual wear brands — Liverpool and Barcelona — plans to offload 25 per cent stake in the company to raise INRs 1500 million through an IPO in the next two months.

It was also in talks to raise funds from private equity player Shapoorjee Chandobhoy Finvest Pvt Ltd (SCFPL), where it plans to dilute two to three per cent of its equity to raise INRs 150 million.

Liverpool is also planning to revive its housing business. The group has a listed housing finance entity — Vax Housing Finance Corporation Ltd but has limited activity in this space. Company sources said talks were on with Japanese firm TBI Group for preferential allotment.

A source said Vax Housing Finance may allot preferential shares worth INRs 150 million, of which shares worth INRs 75 million may be to TBI.

Listed in 1996, Vax Housing Finance was inactive all these years. It now plans to start a low-cost housing project at Narol in Ahmedabad. The 150-apartment project would cost INRs 400 million and come up on a land belonging to the group.

While the project would be developed by a developer, the finance would be provided by Vax Housing Finance.

For its IPO, the company has appointed Chartered Capital and Investment Ltd as merchant banker and negotiations are underway for appointing lead managers. Liverpool intends to use the fund for expansion and backward integration. It plans to increase its presence in tire-II and tire-III cities. Currently, it has a presence in 200 cities, out of which 100 outlets are in Gujarat. The other outlets are in Rajasthan, Madhya Pradesh and Uttar Pradesh.