In 2014, private equity deals in India crossed the $15 billion-mark. After hitting a three-year low of $8.85 billion deals in 2012, private-equity investments were at a seven-year high. That’s when the story of a luggage company that was the target of a takeover bid by one of the top three global PE firms started to unfold.
The PE firm in question had $80 billion in assets and the company being targeted was the luggage company, Safari Industries. Initial discussions were cordial. According to the PE firm’s initial term-sheet, it would invest Rs.50 crore in the company and another Rs.20 crore would be brought in by the promoter-MD, Sudhir Jatia. However, soon after the term-sheet was issued, the firm revealed its true intentions. For a PE firm of this size, a Rs.50-crore investment was not a meaningful allocation. It wanted an investment vehicle that it could use to acquire luggage-making companies worldwide. It wanted the promoter to run the show as a minority shareholder. Delisting Safari from the Indian bourses and relisting it on NYSE was the eventual plan.
Unsurprisingly, Jatia declined the terms. After serving as MD of India’s largest luggage-maker —VIP Industries and 22 years overall in the luggage industry, Jatia bought majority stake in Safari Industries to continue doing what he does best. Becoming a marginal stakeholder in the same business was not an acceptable proposition, especially when the business was showing signs of a turnaround.
Safari’s topline had grown from Rs.67 crore in FY12 to Rs.166 crore in FY14, compounding annually at 35%, after Jatia took over in September 2011. Jatia says that reaching this scale didn’t require anything special, but just following basics like reaching out to dealers. The earlier management didn’t push the products as much because they were in ‘sell’ mode. However, the bottomline didn’t move much. It just crawled into the black in FY14 from being marginally in the red for the previous two years.
In those initial years, profit was not a major concer