PE players like L Capital Asia, Franklin Templeton PE and Future Ventures to invest in luxury apparel segment

NEW DELHI: Rising consumer spend on luxury couture is leading to a sharp spike in private equity investment in the apparel sector. Investors have put in $98 million of risk capital into high-end luxury apparel firms this year, up from a meagre $4 million invested in the sector last year.

More global fashion houses are seeking to partner with Indian firms. Waiting in the wings is Spanish luxe chain Massimo Dutti which is looking to sew up a joint venture with the Tata Group's retail firm Trent.

L Capital, the PE arm of luxury brand LVMH, plans to showcase ethnic haute couture through a joint venture with Genesis Luxury to promote work of leading Indian designers such as Sabyasachi Mukherjee, Rohit Bal and Tarun Tahiliani in addition to bringing international brands.

"There is immense opportunity for investors going forward as India stands out with its local consumption story," said Ravi Thakran, managing partner at L Capital Asia, an equity investment division of the world's largest luxury conglomerate LVMH Group and Groupe Arnault.

So far this calendar year, as many as six PE transactions were sealed in luxury clothing while only one such deal was closed last year as per data collated by research firm Venture Intelligence.

In July, L Capital Asia acquired a 25.5% stake in Genesis Luxury for about 100 crore and has plans to pick up an additional 14.5% stake in the company in the coming months.

Investors say they expect this sector to offer lucrative returns. "Affordable luxury has come into focus with a percentage change in the upper class over the last couple of years. Although returns are a function of ongoing valuations, growth in the sector at the moment is for real," said Rahul Bhasin, managing partner at Baring Private Equity Partners.

With Europe and America facing anaemic growth, private equity players investing in retail are now looking for the opportunity in Asia.

"India is a strong contender to be the next fashion capital of the world as fashion conscious consumers are not shying away from spending money on high-end quality products," said Pradeep Hirani, chairman, Kimaya Fashions.

With disposable income going up in the metros and mini metros, a larger chunk of the monthly expenditure now goes into clothing. That apart, consumers are moving away from the unbranded market to a more organised branded segment with designer wear brands offering aspirational value as well.

"Fund managers have realised the immense potential of investing at this stage, as they know this industry will only expand and that too at a fast pace," Hirani added.

PE firms are focusing on a host of niche sectors such as beauty, wellness and fitness as India's domestic consumption expands rapidly.


Among PE deals sealed in the luxury fashion wear segment Franklin Templeton Private Equity Strategy in July acquired a 20% stake Kimaya Fashions for about 60 crore while Biba Apparels raised $4 million from Future Ventures in April. Ludhiana-based apparel retailer Monte Carlo is looking to raise about 300 crore through a mix of PE placement and public issue.

In 2008, Genesis Colors had raised 110 crore from three investors--Sequoia Capital Fund, Mayfield Fund and Silicon Valley Bank.

Inditex Group of Spain, one of the worlds largest fashion distributors, is gearing up to promote Massimo Dutti stores in India through a joint venture with Trent, the retailing arm of the Tata Group. Emails sent to both the groups remained unanswered but a person with direct knowledge of the development said the company plans to open at least three-four stores in the first year of operations.

Massimo Dutti offers collections from easy-going casual wear to high-end fashion across 542 stores in 50 countries, while Trent owns and manages a number of retail chains in India, including Westside, one of India's largest and fastest-growing chain of lifestyle retail stores and Star Bazaar, a hypermarket chain.

"The rise in disposable incomes has led to increased demand for luxury goods amongst affluent Indians, said Harshendu Bindal, President at Franklin Templeton.