L Capital Asia eyes bigger deals, mature markets for Fund II

L Capital Asia II reached a first close last week at the hard cap of $950 million after less than six months in the market, already 50% larger than its 2009 vintage predecessor. The final close will include the GP contribution.

The vehicle will follow the same strategy as Fund I, backing 12-14 companies that qualify as aspirational, affordable and alternative mid-market brands. But ticket sizes will be bigger.

"Originally the geographical spread was predominantly Greater China and India, with Southeast Asia as an opportunistic play," Sanjay Gujral, L Capital Asia's regional managing director, told AVCJ.

"But Southeast Asia has become our second focus area after Greater China and we have defocused on India in the near term, although we believe it will bounce back in the long term. We are also looking more at developed Asian markets like Australia, Japan and South Korea where there are companies we can help find new growth in emerging Asia. While China and India are predominantly growth markets, in Southeast Asia and developed Asia there are more buyout opportunities."

There have been no deals in Japan and South Korea in Fund I, while there were two Australian assets. More than 40% of the corpus was deployed in Greater China, around 20% in India, 15% in Australia and the rest in Southeast Asia.

So far, two companies in the 13-strong portfolio have been exited - Southeast Asia-focused Sincere Watch & Jewelry and Hong Kong-based Emperor Watch & Jewellery. The most recent investments were Australian boot maker R.M. Williams and Chinese skincare company Marubi in May and July of this year, respectively.

On the operational side, L Capital Asia's in-house team has expanded to 9 people in the last 18 months, complementing an investment team of 15. The GP now has over 30 people in total, three times more than when it was set up in 2009. "We now have deep bench strength in operations, which gives us greater confidence to look at buyout opportunities," Gujral added.

This was a consideration when increasing the fund size to $950 million compared to $637 million for the debut vehicle. The nature of L Capital Asia's value add is influenced by its sponsor LVMH which offers knowledge, networks and capabilities that can be brought into portfolio companies and applied across a wide spectrum, from product development and inventory management to branding and international expansion.

The GP is also disciplined in where it seeks to do business. Deals tend to fall into one of four core areas: consumer products, including fashion, leather goods and jewelry; beauty and wellness; lifestyle and food and beverage; and select retail and distribution assets. Media and entertainment and hospitality also feature on an opportunistic basis.

"If you look at the themes - lifestyle-consumer and emerging Asia - most investors globally would buy into that, so it clearly aided fundraising," Gujral added. "But more importantly we have stuck to our knitting and delivered on the strategy."

LVMH remains a key LP, contributing around 10% of the corpus of both funds, but the majority of the capital in Fund II comes from global institutional investors, including pension funds, sovereign wealth funds, endowments and family offices. UBS, J.P. Morgan and Capstone Partners served as placement agents.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Fundraising
• Consumer
• North Asia
• Southeast Asia
• South Asia
• Australasia
• Buyouts
• Expansion
• Fundraising
• L Capital Asia
• Asia
• Consumer
• buyout
• Growth capital