NRI owned firm takes over German clothing chain store

January 5th, 2009 - 2:29 pm ICT by IANS  

Dusseldorf, Jan 5 (IANS) German business circles were startled when a small NRI-owned textile importing company took over the financially troubled German clothing chain store Wehmeyer that is a household name for the country’s lower and middle-class consumers. The man behind the takeover of Wehmeyer is Rajive Ranjan, Techno Lifestyle GmbH’s managing director, who recently signed a deal for taking over 28 of its stores in the states of North Rhine Westphalia, Rhineland Palatinate and Lower Saxony.

“We did the due diligence after which we signed the contract to take over the assets, including the name and patents of the chain store,” Ranjan said in an interview with IANS at his Willich office.

He said: “We were impressed by Wehmeyer’s concept which offers fashion clothing for the middle class within the medium-price segments, using private labels and popular brands such as Esprit, Lerros.”

Though accustomed to witnessing takeovers of major European and American corporate assets by big Indian conglomerates such as Reliance, Tata, Essar, Mahindra and others, Germany’s business community is now also taking cognizance of takeover bids by smaller and less known Indian companies that are increasingly becoming players in the global mergers and acquisitions game.

“It’s not just the big Indian corporate houses that are now involved in the M&A (mergers and acquisitions) game. Germany’s business circles are sitting up and witnessing that smaller Indian companies are now making a bid to pick up the big corporate nuggets, as illustrated by Techno Lifestyle’s takeover of Wehmeyer,” Martin Neumann, a management consultant who has an office outside of Frankfurt, told IANS.

Neumann described Techno Lifestyle’s takeover as a “precursor” to more such acquisitions by other smaller Indian companies in the future.

Ranjan, who declined to disclose the purchase price or the source of his finance because the terms of the takeover agreement precluded him from doing so, said he would be investing between 15 and 20 million euros within the next two years.

He spoke of “positive synergies” emanating from the takeover for Wehmeyer which would benefit from Techno Lifestyle’s strong business ties in China, Vietnam, and India.

This would help Wehmeyer extend its sourcing outreach to Asia and, in turn, accelerate the “process of verticalization”, by which he meant the elimination of middle men and the possibility of direct dealings with the suppliers.

However, sceptics within the German clothing industry wonder if such a large buyout of 28 stores was a prudent move, particularly when German consumers were tightening their belts with rising unemployment and declining consumption.

Acknowledging that there was a severe economic crisis in Germany, Ranjan said those companies that are strong in “core competency” will survive and grow once the recession is over.

“We know that this will not be an easy Christmas season for us. We knew it before we took over the stores,” he said.

But many German management experts are also curious to see what strategy Ranjan is employing to revive Wehmeyer’s sagging fortunes.

“We have first of all taken over only the profitable stores. We have introduced a system of salary restructuring which is incentive driven for 500 workers. This is a revolutionary thing for German conditions. Thirdly, we are going to be very focused on our customers, mainly in the lower-middle and middle-class consumers.

“Through direct sourcing, we can improve the margins; finally, we will emphasize greater productivity in those areas in which our products are profitable,” said Ranjan and added that he would take over 500 of the 982 workers and also fly over Indian managerial experts to revive Wehmeyer’s fortunes.

“We are going to increase our sourcing from India and we see good potential for Indian exporters to supply us. I hired Delhi-based management consultancy Feedback Ventures to do the due diligence for the takeover,” he said.

He is also toying with the idea of setting up Wehmeyer stores in India itself.

Fashion retailing, as German experts say, has a “bright future” in India.

Asked whether a small entrepreneur could surmount the huge challenges that lay before him, Ranjan said that he may not be an Ambani or a Tata but he was “100 percent convinced” that he was “on the right track”.

India’s small and medium-sized industry, once ignored by Germany, is now being courted by various investment promotion agencies of a number of German states.

Bavaria, for example, is aggressively courting Indian small and medium enterprises (SMEs) after 10 Indian companies made investments in that state last year.

Lower Saxony has opened an office in Mumbai while others such as Rhein-Main Marketing GmbH, based in Frankfurt, participates in a number of Indian trade fairs to attract Indian companies. NRWInvest of North Rhine Westphalia is also keen to attract investments from India.

“You will be hearing more about the small Indian players who were sidelined in the past as the bigger ones entered the global arena,” predicts Neumann.

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