Diversified business conglomerate Videocon Industries Ltd, which had plans to sell a 40 per cent stake in its electronics and durables retail chain Next by November, has tweaked the plan in the wake of the government's decision to allow 51 per cent foreign direct investment (FDI) in multi-brand retail.
The company is now planning to sell a 26 per cent stake in the chain initially and then eventually let the buyer own a majority stake (51 per cent), Venugopal Dhoot, the company chairman, said. Videocon is looking to raise $100 million (Rs 530 crore) from divesting the 26 per cent stake, Dhoot said.
Earlier, the company had said it wanted to conclude the 40 per cent stake sale deal by Diwali (November 13). Now, Videocon plans to seal the deal by December.
"When the buyers get 40 per cent, they would be sleeping partners. Since the government has allowed 51 per cent (FDI) in multi brand retail, we would sell a 26 per cent stake first and then give them rights to go up to 51 per cent," Dhoot said.
The government, earlier this month, announced a host of reform measures, including allowing FDI in multi-brand retail and civil aviation, in a bid to spur sagging economic growth and improve investor confidence.
Morgan Stanley, Videocon's US-based banker, has got interests from two US retailers and two European firms to buy the stake, Dhoot added. "We are looking at foreign retailers with deep pockets who would grow the business and enlarge the markets for eight of our existing brands."
Videocon's leading brands include Videocon, Sansui,Kenwood, Electrolux and Kelvinator. Next has 700-odd stores and had reported a profit of Rs 26 crore and a revenue of Rs 2,000 crore in 2011. The group is looking at a profit of Rs 50 crore in 2012, Dhoot said.
Though Next is the largest player in the durable retailing, Tata-run durable retailer Croma, which has 85 stores, saw a revenue of Rs 1,972 crore in 2011-12. Regarding this, Dhoot said: "We are basically opened stores in small towns and we are going slow on expansion to remain profitable," he added.