A retail entrepreneur could be preparing a joint bid with Icelandic investment group Baugur for department store group Debenhams after revealing a 7% stake in the business.

Investment vehicle Milestone Resources Group said late on Monday that it had built up a 7.3% holding in Debenhams.

Reports suggest the business is linked to Mahesh Jagtiana, who owns more than 600 shops in India, Spain and the Middle East through the Landmark Group.

Jagtiana is believed to working with Icelandic investment group Baugur, which has a 13% stake in Debenhams and owns House of Fraser.

Shares in Debenhams jumped 10% to 82.75p on the news, having hit an all-time low yesterday amid fears of poor pre-Christmas trading.

The firm was floated by its private equity owners in 2006, but the share price has halved since then.

Stockbroker Seymour Pierce yesterday downgraded the retailer from 'buy' to 'hold' following a review of the UK retail sector.

Baugur said it July that it had no 'current' plans for bidding for Debenhams.

Takeover Panel rules meant it was then restricted from bidding for six months.

This period expires next week, leaving it free to move on the company.