Debojyoti Ghosh, Fortune India

April 21, 2021

Billionaire entrepreneur Kumar Mangalam Birla-led retailer Aditya Birla Fashion and Retail Limited (ABFRL) has continued its build-up in the ethnic wear market with its fourth deal since 2019 and second this year. In February, the Mumbai-based fashion retailer picked up a 33.5% stake in fashion designer Tarun Tahiliani’s Goodview Properties—that will own and operate the designer’s eponymous couture label—for ₹67 crore. That was a month after ABFRL acquired a 51% stake in Kolkata-based designer Sabyasachi Mukherjee’s company, Sabyasachi Couture, which sells garments, accessories, and fine jewellery, for ₹398 crore.

ABFRL, which owns fashion brands such as Louis Philippe and Van Heusen, said in a statement that ethnic wear “is a large and growing market with a significant opportunity to build scale” and expects it to be an important category over the next few years.

Experts note the two recent deals come as the luxury industry, including fashion, has been hammered by the pandemic. The year-long shutdown in global travel has slowed over a decade of growth across luxury categories. Indeed, the global fashion industry’s profit is expected to have slumped about 93% in 2020, according to a report by consulting firm McKinsey and The Business of Fashion in December.

“[Luxury] business has been hit hard during the pandemic, like all fashion and retail businesses. And a significant injection of money is needed to maintain the business momentum, and to scale it further,” says Devangshu Dutta, chief executive of retail consultancy Third Eyesight.

In March, Italy’s billionaire Agnelli family—best known as the founders of automaker Fiat—acquired a 24% stake in French luxury shoemaker Christian Louboutin for $642 million. Three months before that it paid $95 million for a controlling stake in Shang Xia Paris, a Chinese luxury goods business founded by French luxury brand Hermès and Chinese designer Jiang Qiong Er.

Many fashion firms have used the Covid-19-induced slowdown to reshape business models, streamline operations, and sharpen their customer propositions, said the report by McKinsey and The Business of Fashion.

And that is exactly what Tahiliani plans to do with his new corporate partner. The duo will create a new entity—80% held by ABFRL and 20% by Tahiliani—to launch a new brand of apparel and accessories in the affordable premium ethnic wear segment, while it also plans to launch a men’s ethnic wear brand.

“Discussions with ABFRL have been in the works for nearly two years. I couldn’t be happier about entering into this partnership. They understand scale and numbers like no one else in the market today. Each of their home-grown brands is a resounding success,” Tahiliani, founder and CEO of Tarun Tahiliani Brand, tells Fortune India. “This collaboration permits me the financial freedom to focus on designing,” he adds.

ABFRL aims to build the new ethnic wear brand into a ₹500-crore business in the next five years, with more than 250 stores across India. The first tranche of stores is expected to open by September. “This new entity with ABFRL currently concentrates only on menswear. In our collective opinion, at present, there is only one branded national player in the Indian ethnic [wear] for men space. In order to scale this up, we need to be in three or four categories of clothing. This will give depth, both in terms of style and sizing to the men who come into the store,” says Tahiliani.

Currently, the top panIndia ethnic wear brand for men is Vedant Fashions’ Manyavar. The Kolkata-based company forayed into women’s wear in 2016 selling lehengas, saris, and the like under the label Mohey,

ABFRL’s previous deals in the segment—both in 2019—were a 51% stake in fashion designers Shantanu & Nikhil’s Finesse International Design for a reported ₹60 crore, and its ₹110-crore acquisition of Jaypore. Both make apparel, footwear, accessories, and other items.

ABFRL’s managing director, Ashish Dikshit, declined to comment for this story. ABFRL had, when announcing the Sabyasachi Couture investment, said it expected that deal to accelerate its strategy to build a comprehensive portfolio of brands across segments, occasions, and geographies.

Experts say ABFRL’s recent investments allow it to tap into the designer’s creative stream and goodwill, while providing the financial and organisational muscle of a large corporate. Albeit one that is not aiming too far upmarket.

“We shouldn’t see the ABFRL [stake] acquisitions as entry into couture, which is a different business from the ready-to-wear market. It is the expansion of these brands into ready-to-wear, tapping into the desirability of the designer brand, while making it accessible and affordable to a larger market is what will be of interest,” says Third Eyesight’s Dutta.

Indeed, Mukherjee, in a press release in late January, noted, “As my brand evolved and matured, I began searching for the right partner in order to ensure continuity and long-term sustainable growth.”

Nonita Kalra, a veteran fashion editor, says that the ABFRL deal shows the growing heft of the [Sabyasachi] brand in the fashion business. “Corporates aren’t sentimental. They are hard-nosed about investments, with careful due-diligence. ABFRL is paying what it is worth and expecting it to grow bigger. They are never going to invest in a stagnant business,” she says.

Experts, though, caution that while corporate partnerships and acquisitions allow a designer-entrepreneur and their investor partners to unlock some of the value being built, it is essential to have clarity about each brand’s design language and target consumer. “With [ABFRL’s] new venture [in men’s ethnic wear with Tahiliani], the key thing to understand is how the company will differentiate it from Shantanu & Nikhil’s positioning and focus, which is also menswear-driven,” says Abneesh Roy, executive vice president, Edelweiss Securities. “The challenge will be ensuring that each brand maintains its distinctive identity, while deriving synergies from the group.”

ABFRL has stitched up some unique deals; it now has to ensure they don’t unravel.

(The story originally appeared in Fortune India‘s April 2021 issue).

Written By zenger.news

CHENNAI, India — American tech mogul Jeff Bezos, who owns Amazon, had one billionaire to fight in the Indian e-commerce space — Mukesh Ambani, who owns Reliance Industries. Now, another — Gautam Adani, who owns the Adani Group — has put a leg into India’s highly competitive e-commerce market, which is expected to grow to $200 billion by 2026.

Walmart-owned, and one of India’s largest e-commerce firms, Flipkart has inked a deal with multinational conglomerate Adani Group to build one of its largest fulfillment centers in the financial capital Mumbai.

The fulfillment center, a distribution facility where inventory is stored, so online orders can be picked, packed, and processed, is expected to boost Flipkart’s supply chain capabilities in a tightly contested three-pronged e-commerce race.

Flipkart and Adani Group have not disclosed the financial terms of the agreement. Adani Logistics, a unit of Adani Ports & Special Economic Zone Ltd, will build a 534,000 square foot fulfillment center and lease it to Flipkart to meet the “growing demand for e-commerce in India’s western region”.

“This broad-ranging partnership across our logistics and data center businesses is a unique business model, and we see this as a great opportunity to serve Flipkart’s physical as well as digital infrastructure needs,” Karan Adani, chief executive officer of Adani Ports and Special Economic Zone, said in a joint statement on April 12.

The facility, which can house 10 million inventory units and is roughly the size of nine football fields, is expected to be operational in the third quarter of 2022.

Based in India’s tech capital Bengaluru, Flipkart will also develop its third data center at AdaniConneX Pvt Ltd in the south Indian city of Chennai to store data locally. AdaniConneX is a recently formed joint venture between U.S. EdgeConneX and Adani Enterprises, the flagship company of Adani Group, to provide data center solutions.

The deal will indirectly pit billionaire Adani against India’s richest man Ambani and Bezos.

“The big thing for all e-commerce companies and companies like Adani is having real estate in the right location and offer services and facilities on top of that,” Ashutosh Sharma, vice-president and research director at Forrester Research, India, told Zenger News.

“Having warehouses and distribution centers built closer to import hubs such as Mumbai, Vishakapatnam, and Chennai is a huge advantage. Adani already has a huge presence in these ports and the real estate in those coastal cities. It allows them to handle the shipment, and companies like Flipkart need this kind of capability,” Sharma said.

Flipkart has not disclosed the number of its fulfillment centers in India, but industry estimates vary between 50 and 60. Rival Amazon India said it has 60 such centers across 15 states as of July 2020.

As Amazon and Reliance Industries invest in scaling up their warehousing facilities, Flipkart is following suit and has been steadily investing in its logistics and supply chain capabilities for a while.

In December 2019, it led the $60-million investment round in last-mile delivery start-up Shadowfax. The same month, Flipkart and its parent Walmart participated in a $15-million investment round for fresh produce supply start-up Ninjacart and again invested $30 million in the start-up in October 2020, as per data from the company research platform Tracxn.

Flipkart has also invested in freight service provider BlackBuck.

“An e-commerce business is not limited to simply developing a website and selling goods online, but it depends heavily on efficient supply chain management,” Karan Chechi, director at TechSci Research, told Zenger News.

“The expansion of the facility in one of the most demanded Indian cities is expected to help Flipkart gain a competitive edge over the other existing e-commerce players in the country.”

Amazon and Reliance Retail, part of Reliance Industries, have also pumped money into their e-commerce operations.

Image of an Amazon warehouse unit. (Matt Cardy/Getty Images) The latter bought Future Group’s Retail unit for $3.4 billion and is involved in a legal battle with Amazon India, who is opposing the deal. With the deal, Reliance also acquired Future Retail’s vast logistics and warehousing business.

Last year, Reliance bought a minority stake in lingerie retailer Zivame for an undisclosed amount. Amazon Technologies acquired retail tech start-up Perpule in March this year for $14.7 million.

The nationwide lockdown last year in India due to the pandemic saw e-commerce firms ramping up their warehouse facilities to meet a surge in demand as most of the country was confined to their homes.

“At present, the pan-India footprint of e-commerce warehousing is 4.6 million square meters (49 million square feet), and more than half of it is occupied by a single player, Amazon,” according to a report from real estate consultancy Knight Frank.

Flipkart is in second place with around 15 percent share, while the total occupancy of the top two e-commerce players is about 70-75 percent, the report notes.

The Indian warehousing market is expected to grow at a compound annual growth rate of 9.8 percent to reach $19.53 billion by 2025, as per a Research & Markets release.

Flipkart’s parent Walmart entered the Indian market in 2007 with its business-to-business (B2B) joint venture with Bharti Enterprises, another multinational conglomerate.

“If you look at it from Walmart’s perspective, they had partnerships from the beginning before they entered the market,” Devangshu Dutta, chief executive officer of retail and e-commerce consulting firm Third Eyesight, told Zenger News.

“If you look at the current environment, Adani or Reliance is a good partner to have. Flipkart’s deal is for logistics and data, and it’s not like 100 percent of their fortunes are tied to Adani. It probably provides some cushion against the market pressures that might happen,” Dutta said.

Source: jacksonvillefreepress