Building fashion empires of their own

by Dave


International Herald Tribune

Some insiders believe that Indian brands, which already have a majority share of the country’s luxury market at their fingertips, are more attractive to investors than local designers in other emerging economies.

“Why smaller versions of the European conglomerates?,” asks Akshaya Chauhan, a director of the Fashion Design Council of India, who believes that nascent Indian conglomerates have every reason to dream big and try to match the scale of LVMH one day.

Unlike in Russia, China or Brazil, fashion consumers in India continue to favor traditional or fusion dress over imports. That gives Indian brands an edge over international luxury brands, Chauhan said, adding, “The average discerning consumer will take time before graduating to wear all-Western clothes.”

Anil Chopra, vice president for Lakme, the beauty company that sponsors Lakme Fashion Week, has seen more deep pockets sitting in the front rows of Mumbai’s fashion shows than ever before.

“Over the last two to three years, there has been a high degree of interest from potential investors in the Indian fashion business,” Chopra said. “Some are purely private equity funds, while others have been more strategic in nature, who will bring in expertise in the processes, contacts and so on.”

Mass- and mid-market Indian apparel retailers, like the Pantaloons chain and Reliance Industries, have recently spun off companies dedicated to acquiring new fashion brands. Their respective subsidiaries, Future Brands and Reliance Retail, are reportedly looking for local brands to develop.

Meanwhile, designer brands on the catwalks of New Delhi and Mumbai have already caught the eye of Sanjay Kapoor, managing director of the holding company Genesis Colors. This summer, Genesis was injected with an investment of 1.1 billion rupees , or $24 million, from a private equity consortium led by the U.S. firm Sequoia Capital Fund.

“Mr. Kapoor has invested in local brands, like Satya Paul and home-grown designer Deepika Gehani, with the goal of turning small-scale family businesses into commercial enterprises,” said Bandana Tewari, fashion features editor at Vogue India.

“Yes, we dream of being a smaller version of LVMH or Gucci Group -
on our own scale,” said Gabriel Felzenszwalb, chief executive of
InBrands, a Brazilian group that formed last October as a 50/50 venture
between shareholders of the popular brand Ellus and the PCP investment
fund, managed by UBS Pactual bank.

In less than a year, InBrands has snapped up the two most critically
acclaimed designers in Brazil, acquiring a 70 percent stake in
Alexandre Herchcovitch and a 50 percent stake in Isabela Capeto.

“Our brands have a strong identity – a story, a concept – they don’t
just sell clothes,” said Felzenszwalb, who aims to have $500 million in
revenue in three years’ time.

Another Brazilian group that has revved up its acquisition engines
is Marisol, the manufacturer of the leading children’s wear labels
Lilica Ripilica and Tigor T. Tigre. In 2005, it ventured into the young
adult category by buying Pakaloko and, a year later, the Brazilian
lifestyle and beachwear brand Rosa Chá.

Under Marisol’s umbrella, Rosa Chá opened a flagship in New York this summer, where it also shows during fashion week.

The creation of large retail groups gives “competitive advantages,
like better purchasing power, competitive credit lines and a series of
aggregated services,” said Giuliano Donini, Marisol group president. He
projects the company’s profits will have doubled to about $25 million
by the end of the current fiscal year from $12 million in 2005, when
acquisitions began.

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