Tatas in talks to buy stake in Fabindia’s apparel line

The Tata group is understood to be in talks with the promoters and shareholders of Fabindia for a stake or outright buy of the ethnic apparel business, sources said.

Talks are still going on, but sources indicate that the acquisition will likely value it lower than the $2.5 billion pegged by the clothing company’s aborted initial public offering.

The deal, if it goes through, could be the largest in the segment, after Aditya Birla Fashion Retail’s acquisition of a controlling stake in TCNS Clothing last year.

For the Tatas, this will be a strategic addition to their portfolio in the ethnic wear space. Retail arm Trent sells apparel under Westside, Zudio and Utsa brandnames. Also, the ethos of Fabindia, that makes its products from traditional techniques, and hand-woven fabrics that are sustainably sourced, resonates with that of the Tata group.

Fabindia needs funds, not only to pare debt but also for expanding capacity and to refresh its clothing line.

Fabindia, which predominantly sells premium ethnic apparel, has been making losses over the last three years. It reported a revenue of ₹1,668 crore in FY23, up 21 per cent from year ago, according to data from Tracxn. However, expenses rose by a fifth to ₹1,730 crore. It ended FY23 with negative cash balances, according to the cash flow statement data.

Once a favourite among women of all ages, it has been ceding ground to new entrants as it has failed to follow fashion trends and design clothes that would appeal to younger consumers. Its clothes are also seen as overpriced compared to alternatives such as Global Desi.

Fabindia has over 300 stores and apart from apparel also sells furnishings, furniture and lifestyle accessories.