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TPG plans to sell Vishal Mega Mart in a Rs 1,500 crore deal

Storied American private equity investor TPG has kicked off a process to sell India’s sixth-largest wholesale and retail chain, Vishal Mega Mart, in a deal that could value the company at over Rs 1,500 crore. TPG has appointed Kotak Mahindra Capital as a financial adviser to help in the sale of the asset it acquired seven years ago.

TPG owns the wholesale unit of Vishal Mega Mart, while the front-end stores are run by Chennai-based Shriram Group. Vishal Mega Mart operates over 350 stores in the country and had clocked consolidated sales of Rs 3,000 crore in fiscal 2016.

Vishal Mega Mart’s annual earnings before ebitda was Rs 70 crores. TPG is expecting Vishal Mega Mart to be valued at about Rs 1,500 crore, giving it a multiple of 20 times its ebidta. Avenue Supermarts, currently, trades at a valuation of 85 times its fiscal 2017 ebidta. But Vishal Mega Mart, which has struggled on profitability front, is unlikely to attract similar valuation multiples. As per reports, the Vishal Mega Mart deal could fetch between 20-25 times of ebitda putting it in Rs 1,500-2,000-crore valuation bracket.

The wholesale and retail segment in India has been witnessing consolidation as players look to push up scale and efficiency. Last week, Future Retail announced the buyout of HyperCity, a chain of 19 big-format stores, for Rs 655 crore, to increase its presence in the country. Some time ago, Radhakishan Damani, founder of D-Mart supermarkets, took control of Bombay Stores, a chain of department outlets.