L Capital’s fashion-forward India play

Now the PE investor may be looking to up its hold by an additional 14.5%, a sure sign of its commitment to a market where consumers love their luxury.

The initial 25.5% stake will be executed in two tranches. L Capital did not disclose the price tag, though domestic media estimates that it paid INR1 billion ($22.7 million). The additional 14.5% will reportedly be purchased in the next one to three years, worth another INR600 million to INR1 billion, sources close to the deal told The Economic Times.

Genesis operates 125 stores and owns the distribution rights in India for brands including Just Cavalli, Bottega Veneta and Jimmy Choo, as well as local labels such as Satya Paul, Deepika Gehani and lingerie brand Bwitch. This is not the first time the company received private equity funding: in 2008, Genesis was backed by Sequoia Capital, Mayfield Fund and Silicon Valley Bank, and then Henderson Equity Partners took a 12% stake for $17 million a year later.

Even with these past investments, the endorsement of LVMH is significant given the group’s clout in the luxury fashion industry. Sanjay Kapoor, managing director at Genesis, said that L Capital’s funding would be used to broaden distribution and retail networks and incorporate new brands into its portfolio.

L Capital is not the only fund to be ramping up its focus on the segment. Also last week, Franklin Templeton announced it would buy a 20% stake Mumbai-based retailer Kimaya Fashions for about INR600 million. Late last year Accel Partners and Helion Venture Partners invested in membership-only fashion web portal Exclusively.in.

Though high-profile fashion deals are few and far between, attention from private equity is unlikely to abate. Speaking at a conference in March, Laxman Narasimhan, a director at research firm McKinsey & Co., said India will account for 8-10% of the world’s luxury goods market by 2015. The market is expected to balloon to $30 billion as the number of local households participating double to 9 million from its current 4.5 million.

For L Capital, leveraging luxury opportunities across Asia relies on identifying assets that have growth potential rather than those that are already recognized global names. The private equity firm plans to invest $200 million of its $650 million fund – which focuses on China, India and Southeast Asia – in 2011. To date, there have been five deals and approximately $90 million was invested in three assets last year:

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• Topics
• Consumer
• South Asia
• Abax Global Capital