Reliance UK Enters Joint Venture With Superdry Plc For Intellectual Property Rights For £40 Million In India, Sri Lanka, And Bangladesh

Superdry Plc, a UK-based clothing company, has officially inked a joint venture agreement with Reliance Brands Holding UK, led by Mukesh Ambani, for the sale of its intellectual property assets in India, Sri Lanka, and Bangladesh.

The strategic partnership, valued at approximately £40 million, was announced in a statement on Wednesday.

The joint venture entity will be co-owned by Reliance Retail Ventures’ RBUK and Superdry, with ownership shares of 76% and 24%, respectively; notably, RBUK has been Superdry’s exclusive franchise partner in India since 2012.

Under the agreement, Superdry will continue to supply finished goods to Reliance at standardized commercial terms.

The sale of intellectual property rights in the South Asian region is set at £40 million, resulting in Superdry receiving gross cash proceeds of around £30.4 million (approximately £28.3 million net of fees and taxes).

Reliance Retail Ventures Limited (RRVL), the retail arm of Reliance, presently operates a network of approximately 18,000 stores in India, offering access to over 50 luxury fashion brands.

Superdry sees significant growth potential in the Indian market due to the country’s expanding economy, a rising population of affluent shoppers, and increasing apparel consumption rates.

Superdry believes that RBUK, as the leading fashion retail operator in India, is best positioned to maximize this opportunity with its majority ownership stake in intellectual property.

Superdry, a London-listed fashion retailer, has been facing challenges, and the company’s founder and CEO, Julian Dunkerton, has been actively seeking funds amid a significant downturn in its trading performance.

Earlier in August, Superdry secured a £25 million secondary lending facility with Hilco Capital in addition to an existing asset-based lending deal with Bantry Bay Capital, worth up to £80 million.

The Cheltenham-based company also raised £12m from a share sale priced at 76.3p-per-share in May.

Investors in that equity-raise have lost a large chunk of their money on paper, with the stock trading at around 41.8p on Tuesday afternoon.

The Financial Struggle
Superdry had previously warned of sales growth falling short of expectations due to factors such as the cost of living crisis impacting spending, reduced footfall, and unfavorable weather conditions affecting demand for its spring-summer collection.

However, despite these challenges, the brand remains in good health and has positive momentum, as stated by Julian Dunkerton, who owns roughly a quarter of the company, has occasionally been linked with attempts to take Superdry private.

The company he co-founded in 2003 has experienced a tumultuous journey, including his ousting and eventual return as CEO.

Superdry recently reported a significant loss of nearly £150 million for the year ending April 29, compared to a profit of £22.4 million the previous year.

To address liquidity challenges and strengthen its balance sheet, the company secured a £25 million loan from Hilco at an interest rate of 10.5% plus the Bank of England base rate, in addition to the £80 million facility from Bantry Bay Capital.

At the same time, the challenging trading environment has persisted, with Superdry reporting an 18.4% decline in sales during its first financial quarter ending in July.

The company attributed lower demand for its spring-summer collection to adverse weather conditions and cautious stock levels from wholesale partners due to tightened consumer spending.

Dunkerton acknowledged the ongoing difficulties in the consumer environment but expressed confidence in the company’s actions to ensure its long-term health and momentum despite external challenges.

To address the issues, Superdry has undertaken cost-cutting measures, including head office redundancies, and entered into strategic agreements, such as the sale of brand rights in certain Asia Pacific countries.

Additionally, the company incurred a £43 million exceptional charge related to a reevaluation of future store growth assumptions, considering the volatile trading environment and the cost of living crisis.

The Last Bit, The Reliance UK and Superdry joint venture for intellectual property in South Asia is undoubtedly a push in the right direction for the struggling fashion brand.

As Superdry faces the challenges of a rapidly changing market, this partnership offers the brand a lifeline for recovery and growth; Reliance’s extensive reach and Superdry’s iconic brand, the collaboration promises to unlock new opportunities in India, Sri Lanka, and Bangladesh.