Mid-sized apparel makers are back with fund-raising plans

After a brief lull, mid-sized apparel makers are back to wooing private equity (PE) investors. While apparel makers that own popular brands such as W, Mineral Fashions and Chemistry are seeking fresh funds, Gini & Jony is looking to raise a second round of funding.

According to experts, the mid- and small-sized apparel makers, which are in dire need of expanding into a pan India presence, are knocking the doors of PE investors.  

Saloni Nangia, president at retail consultancy Technopak, said, “There has been a slight slowdown in investments in the apparel space as there are limited brands / businesses, which have reached scale. As brands are slowly reaching the size and scale, and need more capital for expansion, they are coming into the consideration set for PE firms.”

Mumbai-based Mineral Fashions, owned by designer Priyadarshini Rao, plans to open 50 more sale points over the next 18 months, a huge jump from the current figure of five. At present, Mineral’s products are being sold through department stores such as Shopper's Stop, Central and Lifestyle in Mumbai. Jaydeep Shetty, founder of Mineral Fashions, said: “Though consumption is not growing rapidly, we have not yet seen a decline in growth rate. We still focus on brand-conscious youngsters in the range of 25-34 years with a better disposable income.”

Shetty, however, declined to comment on the reports that Kishore Biyani's Future Lifestyle Fashions have picked up a 40 per cent stake in Mineral. Brand Chemistry was launched in 2004 by Sunil Jhangiani-led Esjay International. Chemistry has a pan-India presence through its 40 stores in major cities. “At present, we have sufficient internal funding resources for expansion. But we look for partners with retail efficiency to help us grow faster,” said Jhangiani. He said the company would add 80 more stores over the next two years.

TCNS Clothing Company, which manufactures and markets women's wear under the 'W' brand, had received first round of funding of Rs 60 crore from PE firm Matrix Partners in 2011. At present, W has over 125 stores across the country and it plans to open 50 more stores this year.

“PE investors are looking for efficiently-run business models which are scalable –in terms of product range as well as formats or channels. Fashion has a high element of seasonality. Therefore, skills and systems for sourcing, buying and merchandising, inventory management and discounting also become important,” pointed out Nangia of Technopak.

According to a recent CARE Ratings report, the domestic apparel industry would grow at a compound annual growth rate of eight per cent to Rs 2,74,600 crore in FY16.

“The growth would primarily be driven by the factors like rising disposable income, increased usage of plastic money, leading to impulsive buying among the Indian consumers. Also, the increasing percentage of the youth in the country and the rising mall culture would continue to drive growth of the apparel industry,” the report noted.