Indiabulls Real Estate has decided to write off the entire investment in its retail arm, which it took over from the Piramals during the retail boom in December 2007.
The company had paid Rs 42 crore to take over 64% of Indiabulls Retail Services (earlier known as Piramyd
Retail or PRL). The company had also taken over liabilities worth Rs 120 crore.
In its recent QIP filings with the stock exchanges, Indiabulls Real Estate said it may have to write off its investments in the shares of PRL due to its continued losses. The company said that it may not be able to find a suitable buyer at acceptable terms for its retail arm.
Indiabulls Real Estate owns the retail arm through its wholly-owned subsidiary Indiabulls Wholesale Services.
Indiabulls’ retail foray met the same fate as other players. The company had to close down 38 of its 42 stores. It has blamed wrong store locations and inefficient supply chain management for its losses. The retail arm made a loss of Rs 70 crore for the nine months ended December 2008.
Speaking to ET, Gagan Banga, Director of Indiabulls, said the company will invest another Rs 30 crore-Rs 40 crore for opening new stores in the mega store format known as Happy Store. He said the retail arm’s shares are kept in the books of Indiabulls as “held for sale” for accounting purposes.
The shares of Indiabulls Retail Services ended at Rs 23.22 on Friday, thus giving it a valuation of Rs 50 crore. While taking over PRL, Indiabulls Real Estate had valued the company at Rs 208 crore.
Retail companies have been facing a tough time in recent times due to the ongoing slowdown. While the big boys such as the Future Group, Reliance and Aditya V Birla are consolidating their business, players such as Subhiksha had to bring down the shutters on its 1600 stores.
Source:The Economic Times