Blackstone-backed Gokaldas closes in on export contracts
Indian apparel manufacturer Gokaldas Exports, a portfolio company of The Blackstone Group, is expected to land supply contracts from Wal-Mart and nine niche European fashion houses. The move is seen as part of a wider trend under which Western buyers are switching their sourcing requirements from China to other Asian nations for cost reasons.
An executive at Gokaldas told The Times of India that Wal-Mart would place a six billion-piece annual order, making it one of the Bangalore-based firm's biggest clients. Other brands in talks with Gokaldas include German outdoor and leisure clothier Jack Wolfskin and US-based Sports Authority and Tailor Vintage. Blackstone bought Jack Wolfskin from Barclays Private Equity and Quadriga Capital for $995 million in July.
China's apparel exports are worth $90 billion a year but rising labor costs, renminbi appreciation, high inflation and a scaling back of export subsidies have prompted some global retailers to look elsewhere. India, which exports $13 billion a year in apparel, hopes to benefit, although it faces stiff competition from the likes of Bangladesh and Vietnam.
Gokaldas has revenues of INR11.4 billion and employees 34,000 people on 320 production lines across 32 factories in India. Alongside rivals Shahi and Orient Craft, it is one of few domestic apparel manufacturers that have achieved real scale. Gokaldas relies on eight clients for 80% of its revenue, and Gap and Nike alone accounted for almost 50% when Blackstone bought the company for $171 million in 2007.
Gokaldas increased its exposure to India's retail market in recent years and it is in this area that there is some crossover with Blackstone's other investments in the country. Earlier this year, the private equity firm took a 2% stake in Indian travel gear retailer VIP Industries for INR360-400 million and was reported to have the option to increase its holding to 5%.
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