INDIA: US private equity firm buys majority stake in Gokaldas Exports
US private equity firm Blackstone Group has bought a majority stake in India's largest garment manufacturer and exporter, Gokaldas Exports, and has launched an offer for an additional 20% of the company's shares.
According to the terms of the deal, which is worth a total of US$165m and was announced on the Bombay stock exchange today (21 August), Blackstone will acquire an initial 50.1% stake in Bangalore-based Gokaldas from the firm's founders.
Under Indian regulations, this transaction then triggers an open offer by Blackstone for an additional 20% of the outstanding shares.
Gokaldas Exports was incorporated in 1979 and today has around 52,000 employees in 48 manufacturing facilities, with a total production and export capacity of 2.5m garments a month for customers such as Nike, Gap, Tommy Hilfiger and Abercrombie & Fitch.
The founders of Gokaldas Exports will continue to lead the company, with Madanlal Hinduja as chairman, Rajendra Hinduja as managing director, and Dinesh Hinduja as executive director.
"With its global reach and deep relationships, Blackstone is an ideal partner to help us realise our vision of building a global industry leader," said Rajendra Hinduja in a statement.
The purchase is Blackstone's second stake acquisition this year in India, but its first in the textile sector.
Like other private equity firms it is keen to tap into the fact that many Indian textile companies are in a growth phase following the abolition of quotas in 2005 - despite the appreciation of the rupee which has slowed apparel export shipments this year.
Gokaldas is trying to offset the currency effect by moving into more added-value products like tailored suits. Its main revenues currently come from outerwear and bottom wear.
It also sees foreign investment as key to supporting its expansion, both domestically and overseas, as Rajendra Hinduja explains: "With Blackstone's relationships across the world, our customer profile is likely to get a significant impetus, taking the company to a higher growth trajectory."
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