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PE funds find ethnic wear firms a perfect fit

The Hindu BusinessLine:  June, 2014

Mumbai: With retail czar Kishore Biyani earning a 22-fold return on his investments in ethnic apparel major Biba, private equity (PE) firms are now eyeing a slew of such companies.

Even as PE firm Everstone Capital picked up a small stake in designer Ritu Kumar’s fashion house last month despite its losses, saree and salwar retailers such as Jashn, Soch and Bawree are set to sew up deals with a new set of PE investors.

“PE funds are enthused after witnessing the kind of money Kishore Biyani made after exiting Biba. Ethnicwear is an established and promising category that is steadily moving towards branded products, and PE firms are seeking opportunities in this category,” said Siddharath Bindra, MD, Biba Apparels.

Relatively unknown

With a sales turnover of Rs 300 crore, the 25-year-old Biba brand was relatively unknown in 2007 when the Kishore Biyani-promoted Future Ventures picked up a 25.8 per cent stake in it. “In 2007, it was the first PE deal to happen in the ethnicwear category. But now, a lot of smaller deals by a host of local companies are taking place,” said Bindra.

Apart from Biba, the other big deals in the ethnicwear category include Fabindia (with L Capital and Premji Invest), TNCS Clothing (with Matrix) and Global Desi (with General Atlantic).

Biba is utilising the Rs 300 crore infused by its new PE partners, Warburg Pincus and Faering Capital, to tap those at the bottom of the pyramid, with its new brand, Rangriti.

Another ethnicwear brand, Seven East, floated by Sanjay Bindra, a former promoter of Biba, is also hoping to attract PE funds if required.

“The valuations in ethnicwear have gone up since the Biba deal It raised the benchmark for the category,” said Sanjay Bindra The company is planning to build a global brand through e-commerce sites.

According to retail consultancy firm Wazir Advisors, the ethnicwear market in India is expected to grow at 12 per cent, and be worth Rs 5-lakh crore by 2018 from Rs 2.5-lakh crore now.