The last word in luxury is wooing the most marquee ethnic wear chain in India. L Capital Asia, the private equity arm of the world’s biggest luxury conglomerate, LVMH Group, is in discussion with Fabindia, to acquire a minority stake in the retailer.
Fabindia, one of India’s most profitable retail companies, has been looking to raise Rs 200 crore to fund its expansion and existing operations through a round of fresh equity investments and by buying out the eight per cent stake held by the existing investor, Wolfensohn Capital Partners, which has been keen on exiting.
It was in 2007 that the fund, owned by former World Bank president James Wolfensohn, acquired about eight per cent stake in Fabindia for Rs 50 crore. Today the company is believed to be valued between Rs 1,000 and Rs 1,200 crore. The promoters, led by William Bissell and his family, own 50 per cent stake in Fabindia.
Fabindia refused to disclose more. “We have not finalised anything regarding our PE fundraising,” is all Bissell would say. Sanjay Gujral, Managing Director (India) of L Capital Asia, when contacted, said, “As a matter of policy, we do not comment on speculations.” Sanjiv Kapur, Managing Director, Wolfensohn India, also refused to comment.
The 50-year Fabindia has 140 stores across the country that mainly sells textile-based products. The first Fabindia outlet was set up in 1960 by American John Bissell to provide a platform for weavers and artisans in India to market their products. Four decades later, his son William Bissell took over the charge as Managing Director of the company.
William has led the transformational journey for Fabindia. Till mid-to late 1990s, retail was a small part of Fabindia’s business. But over the years, the company has changed its colours completely from an export house into a national retail brand.
It is now the country’s leading ethnic wear chain promoting the diverse craft traditions. More importantly, it has also successfully diversified over the last few years into furnitures, spices, condiments, home furnishings, clothes, fashion and others accessories. Furniture alone is a Rs 100-crore business for them.
With 140 stores and a staff of over 400 people across 10 cities, sustaining this growth momemtum has been a challenge.
The operations have become global too, with acquisitions and expansions in Dubai, US, UK, Rome and Nepal. As an exporter, Fabindia also covers 28 countries worldwide.
The new sources of capital therefore became essential. Ever since the company made its fund raising plans evident, last summer, there has been at least 10-15 top PE names from Temasek to Sequoia, KKR, New Silk Route, Bain Capital, Carlyle and PremjiInvest keen to strike a deal. But retail sector analysts say L Capital could well be the most strategically placed.
The $635-million Asia focused fund invests in select brands in the growing emerging markets, including those in China and India. They are typically consumer centric, across personal care and well-being, personal equipment, home & family equipment and niche retail.
L Capital Asia, backed by $31 billion LVMH group, has already made its India debut by picking up 25.5 per cent stake in Sanjay Kapoor-promoted Genesis Luxury Fashion Pvt Ltd last year. Genesis Luxury franchises leading Italian and British luxury labels such as Canali, Paul Smith, Bottega Veneta, Jimmy Choo, Etro, and the international brand Tumi. Its parent company Genesis Colors owns luxury fashion labels like Satya Paul and Bwitch!
According to experts, possibility of FDI in multi-brand retail will also boost the potential of PE deals in retail clothing space. Last year witnessed a few major deals such as Franklin Templeton Private Equity’s buyout of 13.51 per cent stake in Kimaya Fashions Ltd and Vishal Retail sell-out to private equity firm TPG and Shriram Group for Rs 70 crore.
Aditya Birla Group is also reportedly considering sale of minority stake in Madura Fashion & Lifestyle, formerly Madura Garments, to PE players. Madura has well known brands such as Louis Philippe, Van Heusen, Allen Solly and Peter England.