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Niche players in the luxury retail sector are attracting private equity behemoths like never before. As credit squeeze tightens, companies see merit in going in for private equity (PE) as they not only fund expansions but also help these brands to leverage on a PE's global portfolio.
For PE companies, it is a means of making quick bucks on the funds they have invested, say analysts. “The Committee of Secretaries has given a nod to the opening up of multi-brand retail. This will certainly fuel investments in the coming years. For PE companies, this is the right time to stay invested as global markets are witnessing a downturn.” Take a look at retailers who have attracted PE infusion in the last few months. Kimaya Fashions has bagged Rs 60-crore funding from Franklin Templeton Private Equity Strategy after diluting about 20 per cent stake. PE fund L Capital Asia, sponsored by luxury goods conglomerate Moët Hennessy Louis Vuitton (LMVH), has bought 25.5 per cent stake in Genesis Luxury Fashion. While Avigo Capital Partners, a Delhi-based PE firm, has invested in denim-maker Spykar Lifestyles.
“There is an increasing feeling that India is a strong contender for being the next fashion capital of the world. By leveraging the formidable platform that Kimaya has, the current development will provide impetus to the Indian designer wear industry,” said Mr Pradeep Hirani, Chairman, Kimaya Fashions.
Mr Harshendu Bindal, President, Franklin Templeton said, “Strong economic growth over the last decade and the rise in disposable income has led to increased demand for luxury goods among affluent Indians. Despite the growth, penetration of luxury goods remains low.”
Private equity fund L Capital Asia, which invested in Genesis Colors, said the deal, to be done in two tranches, may see the PE fund hike its stake and ultimately invest $25-100 million. L Capital is expected to provide Genesis with access to cheaper media-buying rates, while Genesis is expected to leverage LMVH group's expertise in inventory and working capital management.
The Reliance Brands President and CEO, Mr Darshan Mehta, said recently that, “The company is close to making an investment as a PE player in a fashion brand, where we see opportunity to work together and expand its presence.”
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