Celebrity Fashions is planning to invite a strategic investor for its bottoms division which is being hived off as Celebrity Clothing
Celebrity Fashions Ltd (CFL), an Indian garment exporter and manufacturer of trousers, is looking at raising equity funds for its export bottoms division business through a strategic investor. This move will take place immediately after the company completes the restructuring that is underway. A few days back, the company announced that it is going to hive off ‘Indian Terrain’, a men’s apparel brand—currently a division of the company—into an independent entity. CFL’s bottoms division will be merged into its unit Celebrity Clothing Ltd (CCL). The company is looking to sell the promoter’s stake in CCL to a strategic investor.
“We are looking at raising equity funds for our export bottoms division business from a strategic investor who will bring in export business or who will benefit from our production capacity. We are looking at raising the equity funds in three months,” said S Surya Narayanan, executive director, CFL.
The company has signed up SBI Capital Markets Ltd (SBI Caps) for raising equity funds for the export bottoms business and is planning to give maximum 49% stake to a strategic investor. After the de-merger of Indian Terrain and hiving off of the bottoms division, the tops manufacturing and exports division will remain with CFL. The restructuring exercise is being carried out by PricewaterhouseCoopers. The restructuring will bring clearer focus to the whole business.
According to trade reports, the Indian Terrain brand has enjoyed a 20% growth last year. The company is looking to expand aggressively with its Indian Terrain brand and is planning to add 20 more exclusive stores to its existing exclusive 45 outlets. According to the company, 40% of its revenues come from exclusive brand outlets. The new stores will be in Ahmednagar, Tiruchirapalli, Visakhapatnam, Bikaner, Jodhpur and outlets in Sikkim. The company feels that the Indian Terrian brand could grow bigger than the export business of CCL, which currently stands at around Rs200 crore.
After the entry of the potential investor in CCL’s business, the company might list the subsidiary as a separate entity in the stock market. “Listing of CCL can happen in the future which depends on the investor and the growth of the business which may happen after a couple of years from now,” said Mr Narayanan.
Last quarter, (October 2009- December 2009), the company incurred a loss of Rs5.14 crore compared to a loss of Rs37.68 crore in October 2008-December 2008. The loss fell by Rs 32.54 crore, on a quarter-on-quarter basis, with almost the same net sales (Rs66.82 crore in October 2009- December 2009 and Rs65.07 crore in October 2008- December 2008) over the period.
RIL has awarded a five-year drilling contract to a joint venture of Transocean and Pacific Drilling to construct and operate a brand new ultra-deepwater drillship to boost its eastern offshore exploration campaign
Reliance Industries Ltd (RIL) has leased a brand new ultra-deepwater drillship to boost its eastern offshore exploration campaign, reports PTI.
"The newly-built ultra-deepwater drillship ‘Dhirubhai Deepwater KG2’ commenced operations for RIL in India under a five-year drilling contract," Transocean Ltd, which built the rig, said in a statement.
RIL had awarded a five-year drilling contract to a joint venture of Transocean and Pacific Drilling to construct and operate the drillship. RIL will pay $495,000 per day for the Samsung-designed drillship for the first six months and $510,000 per day for the remaining period of the contract.
"The dynamically positioned ‘Dhirubhai Deepwater KG2’, one of the 24 ultra-deepwater floaters in the Transocean fleet, includes the most advanced drilling capabilities in the offshore drilling industry," the statement said.
Transocean is also building an enhanced Enterprise-class drillship, named ‘Discoverer India’, for RIL. Operations are expected to commence during the fourth quarter of 2010.
RIL will pay a day rate of $537,000 for the first six months for ‘Discover India’ and $557,000 for the remaining period of the initial five-year contract. The company can extend the term of the drilling contract to seven or 10 years.
The company currently has four deep-sea drill rigs from Transocean for exploratory and development drilling in its portfolio of blocks that includes gas discovery blocks D6 and NEC-25.
The company had to extend the NFO closure in order to meet its target. But will the Birla AMC incur a loss while running this fund?
Birla Sun Life Mutual Fund (MF) is keen to attract fixed-deposit holders through its Capital Protection (CP) Fund and aims to mop up as much as Rs700 crore. According to sources, the company’s new fund offer (NFO), Birla Capital Protection Fund, had been extended to 10th March from 5th March as it was unable to meet its ambitious target. Birla MF is targeting close to Rs600-Rs700 crore and has so far managed to generate only Rs200 crore.
“The NFO was launched on 5 February 2010 and was scheduled to go on for a month. However, in view of the fewer days on account of holidays and breaks and to ensure convenience for investors, the due date was extended to 10th March. The NFO collection figures can only be verified after the scheme is closed for subscription, and the MIS is generated,” said a spokesperson for Birla MF.
While the fund is aggressively marketing the capital protection product, the irony is that the product will leave a hole in the capital of Birla Asset Management Company (AMC). Industry sources reveal that the company can earn 1.75% per annum in this product over a period of 27 months, which is the duration of the scheme. This means an earning of 3.9%. However, the cost of running the scheme will be much higher. Here is the math.
The processing charge for the issue will be about 0.3%. This leaves the AMC with 3.6% out of the fees. As against this, Birla MF will offer 2.75% as commission to distributors. That leaves it with 0.85%. If the Fund manages to raise, say, Rs500 crore from the scheme, its earnings over the 27 months will be just Rs4.25 crore. However, the Fund has already spent over Rs7 crore in advertisements and other promotional costs. This leaves the fund house with a large loss.
“The advertisement for the NFO had been done extensively with the aim of generating awareness for the Fund. The expense ratio that the Fund intends to charge the investor would be 1.5%,” added the company official. The official, however, declined to divulge any details of the Fund’s target or how the company would recover its advertisement costs.
“The advertisement charges are sometimes deducted from the scheme after some time. The NFO has collected around Rs220 crore,” said an independent financial advisor (IFA).
This would be hard in this kind of a Fund where returns are thin. The Fund will allocate 90% of the money to bonds and 10% to equity. It intends to reduce tax liability by the triple-indexation method.