Good Morning Ishan

Vishal Retail gets a month to reach settlement deal

(Resolution crucial for retailer to sell its assets to US equity firm TPG Capital, Chennai-based Shriram Group)

Vshal Retail Ltd on Wednesday got a month's time from the month's time from the Delhi high court to reach a settlement with unsecured lenders who have filed separate winding-up petitions against the troubled discount retailer.

Neeraj Kaul, the lawyer rep- resenting Vishal Retail, sought time from the court to reach a settlement with the creditors, including Singapore's DBS Bank Ltd, London-based Bar- clays Bank Plc and Germany's Deutsche Bank AG. Rupinder Singh Suri, the lawyer appearing on behalf of DBS Bank, said his client had no objection.

Justice P.K. Bhasin gave the parties one month's time for a settlement and asked them to file a reply by 7 January.

A settlement of the dispute is crucial for Vishal Retail to transfer its assets to US-based private equity firm TPG Capital and the Chennai-based Shriram Group.

The company, whose board in September approved a `100 crore sale of assets and transfer of some liabilities to TPG and Shriram, has been barred by court orders from disposing of its assets until it resolves the row, stalling an agreement with the prospective buyers.

Vishal Retail's main lenders including State Bank of India, HDFC Bank Ltd and ING Vysya Bank Ltd late last year agreed to a corporate debt restructuring (CDR) of the retailer after its debt had ballooned to `730 crore.

While the largest chunk of the firm's total debt is owed to creditors that are part of the CDR, `265 crore is owed to the unsecured lenders.

Banks involved in the CDR exercise have given their consent for TPG and Shriram Group to take over the assets of Vishal Retail.

“Everything has been done but some paperwork (re- mains),“ a person close to the proposed deal between Vishal Retail and TPG-Shriram Group said about the prospects of an agreement.

The dispute with unsecured creditors “is not a stumbling block, as far as I can tell”,the person said on condition of anonymity. “It is a delay, I would think”.

In May, the Delhi court stayed Vishal Retail from selling its assets until 25 November, the next date of hearing.

However, on 25 November, Justice Sanjiv Khanna expressed his inability to hear the case citing personal reasons.

Vishal Retail told the Bombay Stock Exchange last month that it was exploring ways to reach a settlement with its un- secured lenders.

A deal with TPG Capital and Shriram Group would be on a so-called slump sale basis that would involve the transfer of its business to the buyers for a lump-sum consideration, without assigning values to individual assets and liabilities.

It wouldn't involve the transfer of shares in the company.

Vishal Retail became a victim of the 2008-09 economic slowdown that left organized retailers laden with heavy debt and inventory as sales shrank.

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THOUGHT of the Day

Management is efficiency in climbing the ladder of success; leadership determines whether the ladder is leaning against the right wall.
- Stephen R. Covey

Corporate Interview

(India growth story is real; we see it as a primary market)

Other than industry involvement, Microsoft Corp. says it is heavily into education in India through information technology (IT) literacy, skill development in schools and academic licensing. Orlando Ayala, chairman, emerging markets, spoke in an interview about the company's eagerness to join India's unique identification project and innovations in the country. Edited excerpts:

What is your involvement in education through Microsoft's Unlimited Potential programme?

We believe that foundation of society begins with opportunity for education for every human being. We not only understand education is critical, but also how education is important for innovation and creating new ideas. The virtuous cycle of society is education to innovation to jobs and opportunities. We attach concrete programmes to these three elements in India and all over. In education, we have one of the strongest programmes called Partners in Learning, locally called Shiksha, to promote IT literacy and enhance classroom environment through ICT (information and communication technologies). We have reached out to almost 25 million students and half a million teachers across the education system. The idea is to provide them with tools, software, and skills and capability training. That is one of the important aspects of our education effort in India.

Then we have the programme called Imagine Cup, where students get an opportunity to provide solutions through local innovations. There are two more programmes called Dream Spark and Bizspark that promote entrepreneurship and help start- ups.

You have been involved in ICT in education and skill building. What is the achievement so far and what is the plan?

Twenty-five million students have benefited and it's not a small number. If you link it with the number of students in the whole of India, then there is still a long way to go. Perhaps 100 million students that you aspire to (teach via IT literacy). We are not just doing it in the education side, there are other programmes that we are doing with the Indian army. We are targeting 100,000 military personnel. We have also have MoUs (memorandums of understanding) with seven states--Tamil Nadu, Gujarat, Madhya Pradesh, Meghalaya, Andhra Pradesh, Maharashtra and Bihar--for improving employability of students in 11th and 12th standards. These are not business agreements. We want people to get access to tools and skills. We don't get any revenue from this though we have our education business, which is more consumer driven.

The unique identification (UID) Project is important in India. Are you eager to or negotiating to be a part of this project?

Absolutely, we are very eager to partner in any of those projects where we can enable the citizen in a broad way. And of course, digital ID is very important project in every single country. It's not easy to implement. Microsoft has all the tools to engage in projects like that.
So this is critical for the country and Microsoft can offer good solutions.

Microsoft has opened a technologies lab in the Indian Institute of Technology, Madras. Any plans for other such arrangements?

I don't have anything to announce. But our relationship with first class institutions like IIT Madras is a critical part of our strategy in every country. I can tell you about the innovation labs. The opportunity to have innovation labs around cloud computing is what we are looking into.

Providing free license software in educational institutions looks more like a strategy to build a large pool of customers in India in the long run. While giving away free software right now, are you building business for the future?

We are not the only one in the academic licensing space.
All the software companies do this. You say we are creating consumers. Sure, down the road they will use it if they like it. But the issue is providing access, sometimes free and some- times heavily discounted.

For Microsoft, India is largely a resource base than a primary market. Do you agree?

Business from India has some exciting projections for our future. As reported in The Economist, India is going to outpace China in growth. I think this is very real and we believe in it. We do see India as a primary market. That's why we have all these investments in R&D (research and development) labs. We don't have such things in any other part of the world.

IB Glossary

1. Absolute advantage

A country has an absolute advantage when it is more efficient than any other country at producing a product.

2. Balance of payments accounts

National accounts that track both payments to and receipts from foreigners.

3. Bill of lading

A document issued to an exporter by a common carrier transporting merchandise.

4. Common market

A group of countries committed to the pursuit of a common external trade policy.

Diversified portfolio of ITC-

1. Cigarettes & cigar-

Insignia, India Kings, Classic, Gold Flake, Silk Cut, Navy Cut, Scissors, Capstan, Berkeley, Bristol and Flake.