CASE STUDY

1. Case Study: Blackstone’s Stake sale in Gokaldas-is it is a value making deal for icici
RNB GLOBAL UNIVERSITY
SUBMITTEDTO: SUBMITTEDBY:
MrsunnyMasand ARHAMBOTHRA
course: Mba3RD (sem)

2. INTRODUCTION
• Blackstone LLP (Blackstone), a leading UK-based private equity firm, sold 10% of its stake in
Gokaldas Exports Limited (GEL) on June 10, 2016, making a loss of Rs.148.80 per share.
• It had purchased the share at Rs. 275 in the year 2007. Analysts believed that the loss-
making deal involving GEL was the result of Blackstone not timing the investment properly.
ICICI Bank Limited acquired the stock of GEL on July 21, 2016, at a price of Rs.113.50 – lower
than the price at which Blackstone had sold the stock a month earlier.
• Considering the performance of GEL and the market prospects, there was mixed response in
the market to ICICI’s purchase of the stock.
The present case study provides information about the global and domestic economic
scenario, the textile industry prospects, and as well as financial and business information of
GEL to analyze the growth prospects and market value of GEL.

3. INDIAN TEXTILE INDUSTRY
The Indian textile industry was the oldest and largest segment of the Indian economy. It
employed around 100 million people directly and indirectly (40 million directly and 60 million
indirectly) and was one of the largest contributors to Indian exports, constituting around 11%
of total exports (as estimated during the fiscal year 2015-16) . The Indian textile industry was
both organized and unorganized. The organized segment was constituted by the spinning,
apparel, and garment segments and was characterized by the application of modern
manufacturing technology and techniques. The unorganized sector comprised handlooms,
handicraft, and sericulture operating on a small scale basis with the application of traditional
methods and procedures. ..

4. POLICY INITIATIVES
For the fiscal year 2015-16, the Indian textile industry contributed US$ 40 billion in the
form of exports and had a 5% share in the Gross Domestic Product and a 14% share in
the overall Index of Industrial Production (IIP) . During the year, the Government of India
(GoI) initiated several measures for the development and promotion of the Indian textile
industry at the domestic and global level and allowed 100% FDI through the automatic
route . For the period April 2000 to March 2016, the textile industry attracted an FDI of
US$ 1.85 billion (Refer to Exhibit-I for Trends in Investments and Partnerships in Indian
Textile Industry)..

5. GOKALDAS EXPORTS LIMITED (GEL)
• Gokaldas Exports Limited (GEL) was incorporated in the year 1978 as a partnership form of organization. It
was converted into a Private Limited Company in the year 1995. GEL went in for a public offering in the year
2005. It had 20 manufacturing units spread across the southern Indian states of Karnataka, Tamil Nadu, and
Andhra Pradesh. GEL’s manufacturing units had the capacity to produce 2.5 million apparels per month, and
the company employed 22,500 people across all the divisions14. The target market for GEL’s primarily
included menswear, womenswear, and the kidswear. Though GEL had a majority share in menswear, it
specialized in the manufacture of womenswear, tops, and outerwear (Refer to Table-I for Target Market
Composition of GEL), a unique competitive advantage of GEL (Refer to Exhibit-III for the competitors of
GEL). Table-I: Target Market Composition of GEL
Target Market Composition
Men 50.3
Women 39.1
Kids 10.3
Others 0.3

6. • During the fiscal year 2015-16, GEL focused on improving its profitability by improving the sales of
women’s tops and jackets (Refer to Exhibit-IV for Major Clients of GEL). Accordingly, the management
altered its product portfolio to meet its financial objectives (Refer to Table-II for Composition of Product
Portfolio of GEL). The revenues from the sale of women’s apparels increased from 38% of the total revenues
in the fiscal year 2014-15 to 50% in the year 2015-16
10Others
Shorts
2924Tops/Shirts
2421Pants
3936Jackets
2015-162014-15Product Category
Table-II: Composition of Product Portfolio of GEL
9 4
4

7. Table-III: Apparel Exports to US markets
(US$ in Millions)
Country FY2014 FY2015 YoY Growth
FY2015 (%)
Market Share
FY2014 (%)
Market Share
FY2015 (%)
China 29,794 30,541 2.5 36.4 35.9
Vietnam 9,269 10,564 14.0 11.3 12.4
Bangladesh 4,834 5,401 11.7 5.9 6.3
Indonesia 4,833 4,938 2.2 5.9 5.8
India 3,401 3,665 7.8 4.2 4.3
Total 81,781 85,165 4.1 100.0 100.0

8. Major Competitors of GEL
Company
Market Price of the
Stock (Rs.)
Market Capitalization
(Rs. In million.)
Page Industries Ltd. 12,939.60 144,326.70
KPR Mill Ltd. 567.40 42,762.50
Ashapura Intimates Fashion Ltd. 416.70 8,112.00
Indian Terrain Fashions Ltd. 146.50 5,460.20
Maxwell Industries Ltd. 48.50 3,204.70
Nandani Creation Ltd. 41.00 120.90
Samtex Fashions Ltd. 10.05 748.70
Celebrity Fashions Ltd. 8.80 366.60
Integra Garments And Textiles Ltd. 3.20 116.30
Anshu's Clothing Ltd. 2.34 29.20
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tResearchandTechnology.Expirydate2-Sep-2021
tactinfo@thecasecentre.org

9. Exhibit-IV
Major Clients of GEL
 Abercrombie & Fitch
 Adidas
 All Saints
 American Eagle
 Arvind Brands
 Banana Republic
 Benetton
 Camel Active
 Chicos
 Columbia
 Diesel
 Decathlon
 DKNY
 Esprit
 Gap
 Grasim Bhiwani
 Guess
 H & M
 Hollister Hurley
 Jock Wolf Skin
 Land's End
 Lee
 Marks and Spencer
 Mexx
 Macy's
 Nike
 Northface
 Old Navy
 Puma
 Reebok
 Reid and Taylor

10. ECONOMIC SCENARIO
• According to an economic survey conducted by the International Monetary Fund (IMF), during the
fiscal year 2015-16, India emerged as the fastest growing economy in the world. It was estimated
that the Gross Domestic Product of the country would grow by 7% to 8% during the fiscal years
2016-17, 2017-18, and 2018-1918.
• The newly launched initiatives of the Government of India like Make in India, Digital India, and
the stable implementation of the monetary policy by the Reserve Bank of India resulted in the
improvement of the economic fundamentals of the Indian economy during the fiscal year 2015-16
(Refer to Exhibit-VII for Trends in Key Economic of Indian Economy).

11. INCREASING ICICI’S STAKE OR VALUE?
• ICICI Bank Limited (ICICI) had been consistently betting on investing in GEL stock since 2014.
By the end of the third quarter of the fiscal year 2014-15, ICICI had a stake of around 10% in
GEL21. On June 23, 2016, ICICI brought down its stake to 7% by selling a part of its investments in
GEL22, and Blackstone held a stake of around 47.52%

12. Trends in Investments and Partnerships in Indian Textile Industry
• The following are some of the recent trends observed in the Indian textile industry.
 Trident Group, a leading home textile manufacturer (terry towel, home textile, yarn and paper) in India,
associated with a leading French firm Lagarder Active Group for the launch of French style home textiles in India
under the brand name of Elle Décor.
 Raymond Group had a Memorandum of Understanding with the Government of Maharashtra for setting up of a
manufacturing unit in the District of Amaravathi in Maharashtra at an investment of Rs. 14000 million ($US
208.76 million).
 Reliance Industries Limited (RIL) associated with China-based Shandog Ruyi Science and Technology Group
Company (Ruyi) to promote research in the textile industry by leveraging on RIL’s textile business and
distribution network and Ruyi’s start-of-the-art technology and its global reach.
 Dupont associated with Reliance Industries Limited and Vipul Sarees to manufacture and produce
environmentally friendly women’s ethnic wear (Indian sarees) using its renewable fiber Sorona.
 India Post and Snapdeal associated to provide an online and a systematic offline platform to artisans and weavers
from Varanasi to promote their products.
• The Indian subsidiary of Welspun Group, Welspun India Limited, launched a state-of-the-art spinning manufacturing
unit at Anjar, Gujarat