The A V Birla group has concluded the deal with Coats Viyella plc of the UK at Rs 236.23 crore. With that, from 1 January 2000, Indian  Rayon will own the rights to six Coats Viyella brands -- Louis Philippe, Van Heusen, Allen Solly, Byford, Peter England and San Frisco.()

The deal has been structured in such a way that Indian Rayon will acquire Madura Garments as a going concern with all employees, brand licences, and distribution and manufacturing networks for Rs 189.23 crore, along with the brand rights for India.

Simultaneously, in a separate transaction, Aditya Vikram Birla Trading House, an overseas company of the Aditya Birla group, has bought the exclusive brand rights for the South Asian and the Middle East countries from Coats Viyella for $10.8 million (Rs 47 crore).

Looking or leadership Says Kumar Mangalam Birla, chairman of the Aditya Birla group, "We believe the acquisition of Madura Garments will greatly enhance value for Indian Rayon shareholders. The apparels business has been identified as one in which in which we wanted to have a leadership position through a focused entry into the high-value, ready-to-wear segment. This acquisition as well as the acquisition of certain overseas brand rights has catapulted the group to the top of the league in the branded apparels market."

Indian Rayon will probably finance this acquisition mainly through its current cash surplus and internal accruals. But, according to Adesh Gupta, the company's chief financial officer, "In view of the growth opportunities and current low interest rate scenario, the company may consider raising market borrowings to augment internal resources."

All of Madura Garments' employees, except its president George Zacharias, will be transferred, with the business, to Indian Rayon. They have been assured continuity of service on existing terms and conditions. Zacharias is moving on to a London-based responsibility with Coats Viyella.()

Vikram Rao, group executive president, fabrics and apparel business, at Indian Rayon, will manage the operations of Madura Garments for the time being, till a president is selected either from Indian Rayon or from outside. Mr Rao was, at one time, president of Madura Coats’ apparel fabrics division. He says that the acquired division will continue to operate under the name of Madura Garments and will continue to enjoy a great degree of operational freedom.

Madura Garments will become a division of Indian Rayon, which already has a Rs 300-crore textile business that includes India’s only linen brand, Jayshree Linen. Madura Garments has had sales of about Rs 250 crore in 1999, and has recorded sales growth of 40 per cent for the last five years. It has a national distribution network that includes 100 exclusive showrooms and 3,000 retail outlets.

Dramatic change For the Kumar Mangalam Birla-led Rs 20,000-crore Aditya Birla group, this deal marks a dramatic change in image. It will bring in instantly recognisable top-of-the-line brands into a group whose focus has till now been on commodities. ()

The three labels, Allen Solly, Louis Philippe, and Van Heusen together claim a 40 per cent share of the premium branded menswear market. The Peter England shirt brand, launched in 1997, has been an instant success and is said to be the country’s largest selling mid-priced shirt brand today.

For the Aditya Birla group, these acquisitions make eminent sense. One of the big players in the textile business, it has, so far, not been able to make an impact in the branded segment of the premium menswear market. Its own Wall Street brand is not in the premium segment. Branded garments have been an important part of the growth plans. But the group didn't have any significant presence in this market. Building its own brands would have taken a considerable amount of time as well as money. Hence a brand acquisition was the obvious answer.

Incidentally, this is the fifth acquisition by the Aditya Birla group in the last two years. Indian Rayon has also gone through a major restructuring exercise in recent times. Its cement division was transferred to group flagship, Grasim Industries.

also see : Why Madura Coats sold garments?
Click here for brand details
click here to see A V Birla group product portfolio