Nirula's divestment stalls as suitors find price unpalatable

Following the sharp decline in valuation of retail businesses, the divestment of Nirula’s, the New Delhi-based fast-food chain, has hit a major roadblock due to substantial differences over its worth.

A Malaysian buyout fund, Navis Capital Partners, has put the company on the block and has appointed NM Rothschild to advise it on a possible sale.

Quite a few potential suitors have walked away, saying the asking price is too high to justify the transaction in the current scenario. Navis had acquired a majority stake in the company for an enterprise value of around Rs 115 crore in May 2006.

“While the asking price was around Rs 250 crore, suitors were not willing to go above the previous level of around Rs 120 crore,” said a leading banker who was involved in the discussion on behalf of a buyer.

Sources in Nirula’s said the Malaysian firm was actually asking for upward of Rs 450 crore.

Nirula’s is expected to report an operating profit of Rs 12.5 crore in the current fiscal. Last year, the company reported an operating profit of a mere Rs 70 lakh, against operating losses of Rs 4.2 crore in 2007 fiscal. Nirula’s is targeted to post annual revenues of around Rs 94 crore in the current financial year.