Q&A: L Capital Asia's Ravi Thakran

Q: L Capital Europe was created in 2001. What was behind the decision to come to Asia?

A: Prior to 2000, LVMH was present in Asia but it was primarily focused on Japan, Korea, Taiwan and a few other cities like Hong Kong and Singapore. It was only from 2000 that the group really focused on emerging Asia and it is now the largest region in the world, accounting for than 40% of total revenue this year. By 2010, with our brands on top in almost every sector we deal in, it was the perfect time to start the kind of platform we have. L Capital Asia differs from most private equity firms in that we are focused on certain sectors in which we have a deep knowledge. We bring a very granular value-add to portfolio companies, drawing on our own expertise and relying on LVMH's resources for additional help.

Q: What is the nature of the relationship between L Capital Asia and LVMH?

A: We are a subsidiary of the listed company but we work at arm's length from it, operating as an independent platform. LVMH is focused on luxury while L Capital Asia is focused on the layers below that - the aspirational, affordable and alternative segments. While LVMH looks at large global assets, we look at regional national companies and smaller ticket sizes. L Capital Asia has a lot of knowledge and LVMH is interested in that - our portfolio companies are in tier two, tier three and tier four cities; LVMH isn't there today but it may be there tomorrow. Having said that, we are sensitive to our portfolio companies' confidentiality issues and we never share information with LVMH beyond what is shared with other LPs. LVMH contributed less than 10% of our fund and as a sponsor they do receive a share of the carried interest.

Q: What is the makeup of your overall LP base?

A: We have a diversified portfolio of LPs - large investment banks, pension funds, private banks, family offices and various players that are in similar businesses to us in Asia Pacific. We tell them, "Domestic consumption and the emergence of Asia's middle class is a renaissance-like revolution." It is one of the biggest engines for global growth and we offer access to the best companies catering to that market.

Q: L Capital Asia's $650 million debut fund was raised in 2010. How much is deployed and are you thinking about a successor vehicle?

A: About 70% of the fund will most likely be committed by the end of the year. Half has been deployed in China, 20% in India and the rest in Southeast Asia. We plan to start looking at a successor vehicle early next year.

Q: You have invested in 11 companies in the region. Have these been predominantly minority deals?

A: We typically look for minority stakes because we believe the entrepreneur should remain in the driving seat. In China a lot of company owners are first generation - they are hungry to grow, don't want to give up control, but are willing to give a minority stake to a partner like us. Having said that, we are not opposed to taking majority interests.

Q: The portfolio includes two Indian fashion companies, Genesis Luxury and Fabindia. What are you doing with them?

A: Genesis sells own-brand products and also represents foreign brands. We are helping them to expand the portfolio with better quality brands - for example, we recently acquired the exclusive India rights for Armani. We are also taking them into new segments, having obtained distribution licenses for 16-17 beauty brands. Then there is recruitment, helping the company negotiate better rental and media contracts, improving supply chains and inventory management, and contributing to own-brand designs. Fabindia sources ethnic products with contemporary designs from 50,000 artisans across India and sells them to urban customers. We are helping with store and product design but also looking at international expansion.

Q: How big can these companies become?

A: In five years Genesis should be more than four times its current size and we want to take the company public. L Capital Asia only invested just over a year ago but we have already been approached by two of the largest listed companies in India about selling the asset.

Q: What is your approach for portfolio companies in more developed markets, such as Emperor Watch &Jewelry?

A: When we invested it was primarily a Hong Kong company but we are trying to get them entrenched in China and Southeast Asia. We have turned it into a more robust company overall. If you look at the 1881 store in Hong Kong it is number one in the world for sales of Rolex and Patek Philippe. Similarly, we have helped them to source diamonds directly from diamond polishers in India, which means better prices and product selection. They used to go via a broker in Hong Kong who was buying from Antwerp. We are also helping them create a jade-inspired jewelry collection. Chinese women tend to favor jade above diamonds but we have yet to see a really contemporary, beautifully-designed range of jade jewelry.

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• Topics
• GPs
• Consumer
• L Capital Asia
• GPs
• Asia
• China
• India
• Southeast Asia
• Consumer