Richa Industries, a Delhi-based mid-sized textile manufacturer engaged in manufacturing of knitting, processing, dyeing & special finishing of fabrics. It has textile manufacturing units based in Gurgaon and Faridabad in the state of Haryana with sales of Rs 300 crore plans to sell its business for around Rs.150 crore for which it is in talks with a clutch of private equity players and a Kolkata-based textile group.
The prospective buyers will get access to one of the largest single manufacturing facility in Haryana with capacity of 72,000 metric tonnes per annum and spread across 13 acres with three lakh square feet of covered area.
Richa also caters to some of the leading brands like H&M, M&S, IZod, Kenneth Cole, CK Mens, Chicos, Classic Polo, operates in knitting, processing, dyeing and special finishing of fabrics manufacturing processes.
Richa has changed its industry category on the BSE from textiles sector to construction & engineering sector. It recently ventured into pre-engineered buildings (PEB), which is a high margin business and has better prospects in line with growth opportunities due to potential in infrastructure and logistics sector. Some of its clients include Thermax, Wipro, Indiabulls, L&T, Lafarge and DMRC.
In a low margin commoditized business, Richa has managed to grow stably, maintaining high operating margins. It reported erosion in its margins in the years following FY06 due to volatility in textiles business followed by financial markets crash in FY08, said an analyst.
If the deal fructifies, it will add to the increasing list of small ticket deals wherein private equity players have picked up stake in textile and apparel sector. Some of them are Liliput Kidswear (Bain and TPG), Indus League (Future Ventures), Page Industries (Cartica Capital), Biba Apparels (Warburg Pincus, Faering), AND Designs (General Atlantic) among others. Since 2009, PEs have invested around $750 million in the sector.
Shares of Richa Industries closed up 1.5% at Rs 31.2 in a firm Mumbai market on Monday.
Baring and Capital International are among the PEs in the race but the Kolkata-based textile group is the frontrunner, as Sudip Bandyopadhyay-led Destimoney Securities is learnt to have bagged the mandate from Richa Industries to conduct the sale process.
Baring PE had recently picked up significant stake in Vardhman Textiles. It’s is also said to be one of the contenders to pick up stake in Raymonds, apart from funds like KKR, General Atlantic and Temasek.
However, Sandeep Gupta, joint managing director at Richa Industries has refused to comment, neither confirming nor denying the sale process. As the matter of policy of the company they do not disclose any kind of developments beforehand at Richa, as they look forward to enhance the value for the shareholder.
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