Blog: Leonie BarrieIndia’s buyout trend

Leonie Barrie | 22 August 2007

Yesterday’s buyout of a 70.1% stake in Gokaldas Exports by US private equity firm Blackstone is seen as a watershed event in India’s garment industry. And it’s significant in more ways than one.

This is just the second buyout of a major Indian enterprise by a global turnaround fund – the first was the acquisition last October by investor WL Ross & Co of textile producer OCM India for US$37m – and while one might be an anomaly, two’s the beginning of a trend.

Foreign investors are clearly waking up to the potential of the country’s garment sector – but whether this is on the domestic front (worth an estimated $20-30bn) or in exports (around $10bn a year) remains to be seen. Even though Gokaldas is best known for its export strength, it now says it plans to re-enter the retail sector in India and abroad.

For exporters, there are well-documented problems such as the appreciation of the rupee and a slowdown in shipments to the US, as well as infrastructure and legislative restrictions closer to home.

Observers also believe that buyouts are now set to gather momentum in the country, and that a wave of consolidation could follow as the smaller players sell out. Not only are there too many manufacturing companies for the scale of India’s exports, but retail customers increasingly prefer to deal with fewer, but larger, suppliers.

US private equity firm buys majority stake in Gokaldas Exports


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