The logic was that once they expand, and have the topline, they could hit capital markets again to fund expansion and retire short-term debt or convert into long-term debt. But before it could materialise, the Lehman Brothers collapse happened. Anticipating its expansion, Vishal had placed orders with suppliers (in apparels, Vishal had to place orders six months in advance). When stores did not come up, deliveries piled up and consumption slowed (industry sources say Vishal was also talking to some private equity investors who withdrew at the last moment). The supply chain got choked and the result is in front of us.
However, recently, Vishal has done its bit in solving this issue. In fact, the results are visible. While sales have shown a growth of 30-40% in the last two months as compared to same month last year, bad inventory levels too have gone down significantly. “We have almost cleared our entire dead, slow-moving, broken, pilferage inventory and now we are operating with an inventory level of just 60 days. We think this is the best STR in the Retail Industry currently,” says Agarwal.
While sales may have started showing green shoots of revival, bleeding bottomlines are still a hug roadblock in front of Vishal Retail to steer clear of its rough path. Moreover, the debt problem remains as big as it was earlier. Although efforts are in progress to save Vishal from becoming another Subhiksha, it really needs a hard-hitting turnaround strategy to live up to its name … and this certainly comes in form of TPG. Reason: Like other retailers, the problems for Vishal Retail remain more or less the same; but unlike most others of its clan, it is not supported by any cash-rich parent.
Vishal Retail’s total debt obligation is about Rs.7.3 billion, of which Rs.1.4 billion is high-cost short-term debt. Even the rate of interest, which the company is paying on this debt, is between 14-16%. So, with an interest coverage ratio of about 1.5 and estimated debt-to-equity of about 2.66, the company certainly faces an uphill task. Agarwal certainly needs the support of a private investor, be it TPG or some other, to really get out of the woods.
However, recently, Vishal has done its bit in solving this issue. In fact, the results are visible. While sales have shown a growth of 30-40% in the last two months as compared to same month last year, bad inventory levels too have gone down significantly. “We have almost cleared our entire dead, slow-moving, broken, pilferage inventory and now we are operating with an inventory level of just 60 days. We think this is the best STR in the Retail Industry currently,” says Agarwal.
While sales may have started showing green shoots of revival, bleeding bottomlines are still a hug roadblock in front of Vishal Retail to steer clear of its rough path. Moreover, the debt problem remains as big as it was earlier. Although efforts are in progress to save Vishal from becoming another Subhiksha, it really needs a hard-hitting turnaround strategy to live up to its name … and this certainly comes in form of TPG. Reason: Like other retailers, the problems for Vishal Retail remain more or less the same; but unlike most others of its clan, it is not supported by any cash-rich parent.
Vishal Retail’s total debt obligation is about Rs.7.3 billion, of which Rs.1.4 billion is high-cost short-term debt. Even the rate of interest, which the company is paying on this debt, is between 14-16%. So, with an interest coverage ratio of about 1.5 and estimated debt-to-equity of about 2.66, the company certainly faces an uphill task. Agarwal certainly needs the support of a private investor, be it TPG or some other, to really get out of the woods.
Read these article :-
No comments:
Post a Comment