RIL set to part with ‘Only Vimal’ brand

Co Looks To Divest Non-Core Textile Business Mumbai: Reliance Industries (RIL) chairman Mukesh Ambani may let go of the textile business, including the storied "Only Vimal" brand and the Naroda facility, which was the first manufacturing asset built by his father Dhirubhai Ambani four decades ago.      Textile business contributes less than a percent of the RIL's total revenues and the return on investments has not kept pace with RIL's strategy of minimum 20% return. Three senior Reliance officials separately confirmed that the group was exploring all strategic options, including a sale of the textile operations. RIL spokesperson, however, declined to comment.      Investment bank NM Rothschild was advising RIL on the sale of the legacy business. "Only Vimal" is essentially a vertical branded fabric maker, which competes with tier-II rivals like OCM and Siyaram's. OCM is controlled by American investor Wilbur Ross, known for restructuring failed companies and could be a potential suitor, said industry sources.      In 2005, Mukesh Ambani retained textiles, along with cash spewing businesses like refining, petrochemicals and oil & gas, when the Reliance Empire was divided between the two brothers after death of their father Dhirubhai. Vimal brand was named after Dhirubhai's nephew Vimal Ambani, son of Dhirubhai's elder brother Ramniklal, who still serves as the oldest member on the RIL board. The brand got popular as "Only Vimal" after some retailers started selling only Vimal fabrics because of the fat margins and credits Dhirubhai offered them.      "RIL was dragging on with this tired business, which has no scalability and hence was out of focus. Mukesh retained it because of the emotional attachment, but business is a ruthless game of making money with no emotions attached," investment advisor S P Tulsian said. Echoing similar feelings, a banker said, "As I know Reliance, they will not be in a business which fetches them less than 20% return and textile definitely do not fit into this strategy. They can make more money by investment activities." Shares of RIL on BSE closed down 2.5% to Rs 719 in a firm Mumbai market on Thursday.      India Inc is currently undertaking one of the biggest asset sales as companies look to divest non-core businesses amid sluggish growth and tough economic outlook. RIL sold its bankrupt German textiles unit Trevira for an undisclosed amount in 2009, five years after acquiring it. In 2008, RIL acquired Recron Malaysia, an integrated polyester unit having downstream textile operations like spun yarn and fabric production. But it is not known whether the company would sell this unit as well. Textile business contributes to less than Rs 2,000 crore to RIL revenues of Rs 2,58,651 crore.      "I don't think they will completely exit the textile business. I think the plan is to get a large strategic investor who would take care of the textile business leaving RIL to focus on its core businesses," said a source, adding that the structure may be in lines with Reliance Retail JV with global players.  LETTING GO OF A LEGACY  t In 1966, the late Dhirubhai Ambani started the Naroda plant and launched the Vimal brand, named after his elder brother Ramaniklal's son  t In the '70s, the Naroda plant was given the 'excellent even by the standards of developed countries' tag by the World Bank  t The Vimal brand today contributes less than 1% to RIL's total revenues of around Rs 2.6 lakh crore  t In 2009, RIL sold its bankrupt German textiles unit Trevira for an undisclosed sum, 5 years after buying it for Rs 440 cr t In 2008, RIL acquired Recron Malaysia — it is not yet known if the company is looking to sell it as well