After years of turmoil, the sun has set on a 180-year-old Scottish fabric brand that became a household name in India over the last two decades. On May 14, the factory that produced fabric under the Reid & Taylor brand was shut down, reportedly rendering 1,400 workers jobless.
“I have made the best possible efforts to run the company as a going concern for over 14 months since the commencement of liquidation but regret to inform that now I have no other option than to discontinue the business operations,” said Ravi Sankar Devarakonda, the liquidator who was appointed by the National Company Law Tribunal. This came after years of back and forth to save debt-laden S Kumar’s Nationwide, the parent company of RTIL Limited.
In a notice of discharge to employees, Devarakonda said, the company had no sale orders on hand and continued to incur losses. In addition, the electricity supply to the factory had been discontinued due to non-payment of dues, and the unit did not have any cash flows to run day-to-day operations.
The closure brings an end to RTIL’s 22-year journey, which had some star-studded highs and many gloomy lows.
Good old days
The history of the Reid & Taylor brand goes back to Scotland in the 1830s, when a man named Alexander Reid used a locally available variety of wool to create a cloth that quickly gained popularity with the elite classes. He was soon joined by financer Joseph Taylor, and the brand was named after the duo.
In 1997, Indian textile and apparel maker S Kumar’s Nationwide, also known as SKNL,acquired the Dumfriesshire-based company. Soon after, SKNL set up a plant in Mysuru in the Southern state of Karnataka to manufacture fabric under the Reid & Taylor brand, which it claimed was the finest cloth available in the country. Another facility in Bengaluru made apparel, including formal and casual daywear suits, jackets, trousers, shirts, and ties, that were sold under the brand.
During its early years in India, the brand was promoted by Hollywood star Pierce Brosnan, with James Bond-themed ad campaigns.
In 2003, SKNL made an attempt to make Reid & Taylor a household name in India by hiring Bollywood superstar Amitabh Bachchan as the brand’s ambassador. This was a “bang that grabbed eyeballs,” said brand strategy consultant Harish Bijoor.
“The association with a Bollywood icon has translated into higher reach and stronger pull for the brand from the non-metro cities,” as per company’s website. “High brand saliency and the positive affirmation from consumers has influenced demand in the domestic market and the neighbouring countries.”
But this partnership also became one of the possible reasons for SKNL and Reid & Taylor’s downfall. According to Bijoor, SKNL spent so much money on roping in celebrities that it “ran out of financial options to sustain its business.”
In 2008, SKNL spun off Reid & Taylor into a separate wholly-owned subsidiary called Reid & Taylor India, and sold a 25.4% stake in it to Singapore’s sovereign wealth fund GIC for Rs 900 crore. The deal valued RTIL at Rs 3,540 crore, which was higher than the parent company, SKNL, which had a valuation of Rs 2,240 crore, according to The Economic Times newspaper.
At its peak, in the financial year ending March 2012, SKNL posted a profit of Rs 470.84 crore. But soon after, it fell into a debt trap and promoters started pledging the company’s shares with financial institutions to raise fresh funds.
Pile of problems
RTIL failed because its parent could not execute its lofty plans. For instance, in 2011, SKNL planned an ambitious Rs 1,000 crore initial public offer for RTIL but the plan was shelved due to unfavourable market conditions. The failed IPO meant RTIL had to stall its plans to open 15 flagship and 160 exclusive stores.
“The company drew up plans thinking funds will come but that did not happen. When you are highly leveraged, the interest burden will suffocate you,” a former SKNL executive told Business Standard newspaper in 2015.
By the end of 2012, the financial institutions who held stake pledged by the promoters started selling off their shares in SKNL amid fears that the company was doomed. In December that year, IDBI Bank invoked 14.57% of its stake that promoters had pledged with it and sold 3.66% in the market.
Their fears were right. By March 2013, SKNL had an outstanding debt of Rs 4,484 crore and had started defaulting on repayment commitments. Within a year, a bunch of creditors, including ICICI Bank, moved the Bombay high court seeking winding up of SKNL.
By 2018, SKNL had defaulted on over Rs 5,000 crore of loans, and the company’s promoter, Nitin Kasliwal, was declared a wilful defaulter by most lenders.
The Reid & Taylor brand went into oblivion as RTIL was dragged to insolvency court, and in December 2018, a committee of creditors decided to liquidate it.
A 200-member workers union, Reid & Taylor India Ltd Employee Welfare Association, made a last-ditch attempt to save the company in January 2019 by bringing in a potential investor. But it failed to provide enough financial guarantee. In February 2019, the National Company Law Tribunal ordered the liquidation of RTIL.
“What happened with Reid & Taylor shows how branding is a clear calculation and once your product is built, you should calculate whether your company will be able to spend in future or will be able to deliver what has been promised,” said Bijoor. “If not, then sustainability is not only difficult but impossible.”
This article first appeared on Quartz.