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Grasim in talks to buy Van Heusen, Louis Phillipe brands - Views on News from Equitymaster
 
 
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  • Dec 17, 1999

    Grasim in talks to buy Van Heusen, Louis Phillipe brands

    The Aditya Birla group flagship Grasim is in talks with Viyella plc (UK) to acquire Van Heusen, Louis Phillipe and Allen Solly clothing brands in India.

    These three labels together claim a 40% share in the premium segment of the branded market. In India these brands are controlled by Madura Garments, a division of Madura Coats.

    The sale of the brands if it were to go through would be suicidal for Madura Coats. The garments division contributes almost 25% of the Rs.11 bn turnover and approx. 50% of the pre–tax profit. It has been growing at 40% per annum.

    The other division that contributes to the profit is the threads division. This division has been hit by higher excise incidence of 17.25% on threads as against 16% for fabrics. The only other player in the organised sector is Vardhman Spinning. The unorganised sector, which has been successful in evading excise duty almost 50% of the market.

    The third division: the fabric division is having a tough time. It is supposedly a loss making division. It had a labour problem in the current year, which has been resolved with an interim relief to the workers. The bulk of Madura Coats’ labour force of 12,000 workers is in this division.

    Perhaps the only benefit to Madura Coats could be that they would launch new products in the lower segments. The three brands, which remain, viz. Peter England, Byford and SanFrisco (for trousers) have been immensely successful. The company could be looking at a strategy to concentrate on the middle and lower segments.

    As far as Grasim goes, the company would benefit immensely since these are established brands. The company has not been able to make an impact in the branded segment despite having the ‘Wall Street’ brand and having access to 200 exclusive outlets and about 13,000 multi–brand outlets. It could easily refurbish the brands and re–launch them.

    The most important development would however be: a dramatic change in image. This move would bring instantly–recognisable, top–of–the–shelf brands into a group whose focus has been on commodities.

     

     

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