When fashionscandal.com posted as early as on the 4th of October, 2013 that L-Capital that has 40% stake in Genesis Luxury is planning to exit, the news was vehemently denied by Genesis Luxury. You can read the post here: http://www.fashionscandal.com/?p=15030
Now the story on L-Capital snapping ties with Genesis Luxury proves itself as news of Genesis and Sahara Group’s talk last week floated in. Sahara Group wants to foray into Luxury Business and has had talks with Genesis Luxury, which valued its business at Rs. 400 crores. The second factor that proves the strained ties between Genesis Luxury and L-Capital is the fact that LVMH has moved the Sephora business to DLF Retail from Genesis Luxury.
But I only wish that the Genesis tying-up with Sahara Group is a wise decision on Sanjay Kapoor’s part. Sahara Group has lots of skeletons in their closet and their business dealings are rarely professional. There are rumours that Subrata Roy and his family will settle abroad and run their empire from outside India. Yes Sahara Group is in an investing spree. They are getting into Defence business with Pipavav, looking to foray into Casino business and Cruise Liners based out of Macedonia and yes, Luxury Retail too is in the plans.
Genesis Luxury is one of the largest players of the luxury business in India and are the franchisee of multiple international luxury brands in India. L-Capital, the Private Equity (PE) arm of LVMH that had invested close to 40% in Genesis Luxury has demanded that its founder either buys out its 40 per cent stake or should sell the luxury brands marketing firm completely.
The reasons behind L-Capital walking out of Genesis Luxury is primarily the performance of the company. Genesis Luxury made Rs 72 lakh profit for the year ending March 2012 on a revenue of Rs 92 crores. L-Capital also had doubts on the way the financial accounts were handled by Genesis Luxury. Ravi Thakran of L-Capital wanted the accounts of Genesis Luxury be audited by top audit firms like KPMG or Ernst & Young but this recommendation wasn’t paid heed to by Sanjay Kapoor, the man behind Genesis Luxury.
Genesis Colors, the parent company of Genesis Luxury incurred a loss of Rs. 6.75 Crores in the year ending March 2012. Now with L-Capital pulling out its 40% stake in Genesis Luxury, it’s going to be a tough task for Kapoor to keep the company afloat.
The Italian luxe label – Prada had been ignoring the emerging economies while other brands in its league moved in much earlier. Prada’s absence in India is rather conspicuous but anyway – better late than never. Sellers of luxury products are seeking to move out of developed markets that have been hit by global economic uncertainty and find new buyers in emerging economies and Prada is amongst them.
But then coming late has its bag of problems. As per sources what is majorly bothering Prada is the availability of retail space. DLF Emporio in Delhi has 100% occupancy and there is absolutely no scope of prime location on the ground floor where Prada would ideally like to be. Even Palladium has no availability of prime store space in the mall.
Though the Government of India has allowed 100% Foreign Direct Investment in single-brand retail, the luxury labels are still preferring to go with an Indian partner. No names are officially disclosed as in who all are in talks with Prada but the signals are very much hinting at Genesis Luxury and Reliance Brands. Both are in talks with Prada.
Prada has a lot of promise in India as it is a label that is well known and they brand offers a whole range of menswear, womenswear, bags and accessories. It also has a sister brand for womenswear – Miu-Miu. But let’s wait and watch if and when Prada make its Indian entry.
The Private Equity (PE) arm of Paris-based LVMH Moet Hennessy Louis Vuitton – L Capital with Ravi Thakran at the helm of affairs gave a lot of hope to the Indian Fashion Fraternity to see ‘corporatisation’ of Indian Fashion Industry. Ravi Thakran being an Indian led the Desi fash-frat to unjustifiably believe that L Capital with a corpus fund of $ 650 Million would really see some huge investment in Indian Designer Labels. But as I mentioned – it was an‘unjustifiable’ expectation.
L Capital heavily invested in Genesis Luxury and took 25.5% stake in the company. Here I must say that Sanjay Kapoor of Genesis Luxury who is a former banker must have used his financial expertise to secure that huge chunk of investment from L Capital. Other brand where L Capital picked up stakes was Fabindia – L Capital holds 8% stake.
Finally L Capital turned its focus to the niche segment of Indian designer-wear. The reports of L Capital investing in Rohit Bal and Sabyasachi Mukherjee and in multi-designer retail chain – Evoluzione still stands unconfirmed. The talks are in final stages is what we still hear. This news sparked off various unconfirmed reports that Sabyasachi’s brand has been valued much higher than that of Rohit Bal’s and why Evoluzione and why not Ensemble. Ravi Thakran and Rohit Bal are old friends and when Thakran was heading Omega Watches, he sponsored a grand show of Bal’s at the American Ambassador’s (The Lundquists!) residence where Shahrukh Khan was the show-stopper. Murmurs of L Capital investing in Rohit Bal because Thakran and Bal are buddies had been floating but I personally discount it as gossip as PE firm of L Capital’s stature don’t do business on the basis of friendship. Gossip on why Evoluzione and why not Ensemble has many conspiracy theories.
But it’s high time L Capital comes out with a status report on what’s happening with the investments in Rohit Bal, Sabysachi Mukherjee and Evoluzione. Also how significant is the news that L Capital is planning to replicate the LVMH model in India? This is what I am reading - “Along with consolidating their separate labels under a single corporate structure, each of them will get a chance to scale up and reach domestic as well as global markets. L Capital plans to invest close to Rs 200 crores in the venture, which is being planned as a company that will own significant minority stakes in the design houses of these well-known designers and will forge a joint venture with Evoluzione for back-end distribution business. Gradually, more known designers will be brought on board to expand the business horizons.” Well if this happens I feel it is something the Indian designers always needed and it will definitely be an impetus to the desi designers. If LVMH-type structure comes up in India, it would definitely assist in consolidating and projecting Indian fashion to the world, besides helping brands with marketing, retailing and identifying suitable real estate to increase scale, pare costs, improve operating efficiency and boost profits.
The world’s biggest luxury conglomerate - LVMH buying a stake in a non-luxury homespun label built by the Bissels – Fabindia is not that many would had thought of. But then the L Capital Asia – the Private Equity arm of LVMH formed with a corpus fund of $640 million to invest in local brands primarily in China and India has done just that – taken up 8% stake in Fabindia.