Business

Fabindia investors ask tough questions, want thorough probe

L Capital, one of the biggest investors in Fabindia, has asked the ethnic wear retailer to thoroughly probe the matter of a CCTV camera pointing towards a trial room at its store in Candolim, Goa. Union Human Resource Development Minister Smriti Irani had on Friday detected this camera while shopping at the store and complained about it.

“If such a thing has happened, it is totally illegal. We do not want them to brush things under the carpet. The truth has to come out,” said a senior L Capital executive who did not wish to be named.

The executive said the issue would be discussed during a business meeting with Fabindia next week. “We will figure out what has happened.”

L Capital, the private equity arm of luxury goods giant Louis Vuitton Moët Hennesy (LVMH), had in 2012 bought an eight per cent stake in Fabindia, for Rs 150 crore, in a secondary-market transaction. It had purchased the stake from venture capital fund Wolfensohn Capital Partners, which had in 2007 picked it up from the retailer for around $ 10 million (about Rs 62.5 crore by the current exchange rate).

“It is of concern to us but we do not want to pass any judgement on the basis of what has been reported. Even the top management does not have complete information and is investigating the matter,” the executive said.

A detailed email sent to L Capital and Fabindia did not elicit any response. Another sent to Premji Invest also remained unanswered. Premji Invest, floated by Wipro Chairman Azim Premji, holds a seven per cent stake in the apparel chain.

The Goa police had on Friday arrested four employees of the store who were subsequently granted bail. Meanwhile, an employee at a Fabindia store in Maharashtra’s Kolhapur was arrested on Saturday for allegedly filming a woman customer using his phone, news agency PTI reported.

After the alleged rape by an Uber taxi driver in Delhi last year, another incident against women might force private equity investors to strengthen corporate governance at portfolio companies, say experts.

Aakash Choubey, partner, Khaitan & Co, says: “This seems to be more of an operational issue than a question on Fabindia’s governance. However, Fabindia’s existing private equity investors might be concerned about reputational damage this incident could create in the short term.”

The ban of taxi aggregators after the Uber incident in Delhi had put PE investors, which had together invested about Rs 2,000 crore in the Indian taxi service space, in two minds.