Gitanjali Gems may acquire another US company

Gitanjali Gems is betting big on the US retail market. After taking over Samuels Jewellers in December 2006, the firm is now close to acquiring another leading jewellery retailer for around $100 million. Sources close to the deal said the due diligence process is almost complete, and the company is going ahead with the transaction.

“It’s one of the leading jewellery retailers having over 100 outlets across the country. The deal will be completed in two months,” said sources. The company is being advised by Keynote, a Mumbai-based boutique investment bank. Gitanjali shares rose marginally to close at Rs 361 on Thursday.

The Mumbai-based company has also lined up plans to raise capital for its proposed acquisition and domestic expansion. The firm wants to raise $100 million through a global depository receipt (GDR) issue. It has also proposed to issue 10 million convertible equity warrants on preferential basis to the promoters and raise around Rs 320 crore. An extraordinary general meeting (EGM) has been called on November 3 to consider the fund-raising plans.

Last December, the company acquired 97% stake in Samuels Jewellers Inc, operating 97 stores spread across 18 states, for Rs 100 crore. It further infused another Rs 100 crore as working capital. The acquisition was financed through internal accruals and proceeds from the $110-million foreign currency convertible bonds (FCCBs) issue. Sources said Gitanjali is currently in the process of turning around the loss-making US retailer, and is expected to achieve break even by 2007 end.

The company’s other plans include a proposed foray into the luxury retail market through its new venture Luxury Connexions (Lx) and luxury malls. The group plans to invest Rs 100 crore over the next three years for establishing luxury malls across India and acquiring international brands which would be sold through Lx outlets. Sources said these would be positioned to facilitate and promote the growing luxury retail market in India vis-a-vis international brands.

The plans include setting up luxury malls in eight cities, beginning with Hyderabad and subsequently moving to Mumbai, Bangalore, Delhi, Kolkata, Ludhiana, Chandigarh and Chennai. The luxury malls would house global brands, restaurants, spas, international jewellery brands, connected wedding stores encompassing designer products finely bundled with personalised services to suit the growing needs of India’s upper middle class.