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June 9, 2023
By Pavan Lall, Fortune India
Jun 9, 2023
For fashion designer Tarun Tahiliani, getting funding from a corporate house was incidental. It happened through a high-profile customer, none other than Aditya Birla Group chairman Kumar Mangalam Birla. Birla had been a customer of Tahiliani’s Ensemble some three decades ago when he was getting engaged. They stayed in touch over the years and at one stage discussed the need for an Indian fashion brand focused on scale and accessibility. “It came out of a conversation and was a two-year ambling route. I had asked if they were expanding their designer brand footprint, and he (Birla) told me to meet the Aditya Birla Fashion and Retail (ABFRL) CEO for a deeper chat,” recalls Tahiliani.
The result was Tasva, a sub-brand that Tahiliani has a minority stake in. The focus was to zero in on the ethnic space, not lose out on the homegrown touch, yet keep user-friendly clothes in traditional silhouettes at accessible price points that were not haute couture. Launched in December 2021, Tasva primarily caters to the premium occasion-wear segment, and has been growing at a fast pace.
Raising Cash
Tahiliani, who got ₹67 crore funding for a third of his company with an option to further offload up to 20%, isn’t the only one to see corporate finance push capital into his designs and stores. Sabyasachi Mukherjee of Kolkata, who opened a large multi-level store in a heritage-style building early this year in Mumbai, sold a little over half his company to Birla, reportedly for around ₹398 crore. ABFRL has also bought a 51% stake in House of Masaba Lifestyle, the entity that houses apparel, personal care, and accessories businesses under brand ‘Masaba’ owned by designer Masaba Gupta. Besides the Aditya Birla Group, Mukesh Ambani-led Reliance Brands has bought a 52% stake in Ritu Kumar, 51% in Abu Jani Sandeep Khosla, and 40% in Manish Malhotra. Earlier, in 2008, Kishore Biyani’s Future Group took a 23% stake in Anita Dongre, which was later sold to private equity player General Atlantic for ₹150 crore.
“While we are reaching a sense of critical mass in terms of consumer base, luxury is not new to India. Designers have been flogging their wares for decades,” says Devangshu Dutta, founder of Third Eyesight, a consultancy firm focused on consumer goods and modern retail. “What has changed is the size of the target audience.”
According to a recent Knight Frank wealth report, India is set to see a projected 58.4% increase in ultra-high-net-worth individuals, those with a net worth over $30 million, from 12,069 in 2022 to 19,119 in 2027. The domestic apparel market, too, was pegged at $60 billion last year, not far behind the developed world, a McKinsey’s FashionScope report has said.
“Earlier, India was a country that just produced for the world. Today India is also becoming the largest consumer market. International brands are keen to invest in business relationships with India. India will change the game for luxury. Where else will you get a billion people who are of a young age, and will be the future luxury buyers of brands?” says Sabyasachi.
“The economy has expanded beyond bigger cities, which has raised the consumption size” adds Dutta of Third Eyesight.
Corporate Handholding
“Corporate involvement helps scale faster than organically, and a lot of designers are tying up with companies with technical expertise and go-to-market for smaller towns and cities,” says Anita Dongre. “For a designer, having a corporate brings in processes, technical expertise and management know-how, and helps her focus on designing,” she adds. In Sabyasachi’s case, too, a new CEO — Sumati Mattu, as well as a new HR head and COO, were brought on board to prepare for the brand’s expansion.
For Sabyasachi though, it has helped in creating a safety net, especially for his employees, more than anything else. “Right now we have two investors — me and Birla together, so it makes me feel protected. Nothing else has changed. The only thing that has changed is that we have a great HR policy with the Birlas; they will be able to look after my people better, as I have created a beautiful safety net for all my employees.”
Dutta, on the other hand, says that “for large companies in the fashion space such as Aditya Birla, it is a natural step to buy into an established brand with scale since brand recognition combined with capital and organisational structure make for a win-win. The platform of fashion is currently at the right juncture to replicate networks and create scale,” he adds.
Other designers, including Manish Malhotra, who has also received funding from Reliance, say, “corporatisation of fashion houses in India has brought about a safety net for luxury brands, making us push for larger creative forces and expansion in terms of scale, branding and customers.”
Growing Into India
Tahiliani says we have opened 55 Tasva stores and will reach 90 in this financial year. Tasva crossed around ₹60 crore in annual revenue in 2022, and is set to hit ₹200 crore this year, he adds.
Similarly, Dongre, widely regarded as the largest designer and fashion house by revenue, has around 150 stores across brands, and Global Desi, a substantial increase from the 10-15 stores she ran before receiving her first funding. “The added benefit is that such funding helps push into international markets.” While Dongre launched her stores in Dubai and New York a few years ago, Sabyasachi launched a New York-located store in West Village last year.
So, what’s the road ahead?
“Corporate India has successfully built large-scale fashion businesses and acquired international brands, but has not been able to create a homegrown luxury brand of cultural or social significance. That will change now,” says Sabyasachi. Jewellery is set to be his focus, along with sunglasses, beauty, shoes, and other categories. “Jewellery is a very important category in the country, a great revenue earner,” he says.
“The film industry was corporatised because its potential was discovered, now it is fashion’s time,” adds Manish Malhotra. “Corporatisation lets designers look beyond bridal-wear, occasion-wear, and focus on newer creative strategies as there’s more space and potential for experimentation.”
Tahiliani agrees that compared to overseas, the trend is an expected one. “Most of the brands abroad have seen stellar growth because they have been aligned with corporate houses.” He points to the famous Alexander McQueen, who started in 1992, and was discovered by Isabella “Issie” Blow. The tie-up allowed him to expand his label, open boutiques around the world, and push into the categories of perfume, eyewear, accessories trainer and clothes for men.
Globally, France-based Kering group owns designer labels Gucci, Alexander McQueen, and Balenciaga, among others. LVMH Moët Hennessy Louis Vuitton, commonly known as LVMH, owns Loro Piana, Fendi, Christian Dior, Kenzo and Marc Jacobs.
The question then is, with all the global exposure and corporatisation, will there be a shift in Indian design sensibilities?
“Now you see people wearing bold gowns or black ties for one or two events, but Indians have kept a unique spirit of celebration and culture unlike anywhere else in the world. Bollywood has played a huge part in amplifying this because of the song and dance and colours and events such as Holi and Sangeet,” feels Tahiliani.
The bottomline: Luxury fashion is now more inclusive, and regional customers are the next big target area for brands.
(With inputs from Priya Kumari Rana)
(Published in Fortune India)
admin
April 21, 2021
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).
Devangshu Dutta
October 8, 2009
Here is a summary of the Sustainable Fashion Forum, and some more pictures from the afternoon.
And here is a previous article on sustainability and corporate responsibility.
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September 22, 2008
The Textile and apparel industry is of particular importance to India. It not only provides employment to a broad base of semi-skilled and unskilled labour but also helps to extend the economic bounty to urban and semi urban areas. Though India has a history of thousands of years in global trading of textile, it contributes only 3% to the global exports of textile and clothing.
While the urge to grow exists, there is a huge difference between the current exports of about Rs. 864 billion (US$ 20 billion) and the target of Rs. 2,500 billion (US$ 55 billion) by 2012. To achieve this vision, exports must grow at around 25-35 per cent a year for the next 4 years, depending on how weak or stable the current year is. This growth rate seems difficult considering the fact India has actually grown its exports of textiles and apparel at an annualized growth of a little over 14 per cent from 2003-04 to 2007-08.
Even if the industry looks at increasing the volume of exports to achieve the vision, the ports do not have the handling capacity considering that they currently operate at 91 to 92 % of available capacity.
Hence, incremental thinking will not help to achieve the vision.
Our key concern is the value “lost” by the industry. Being the low cost supplier does not necessarily translate into greater market share. The Indian Industry must look at enhancing the value delivered rather than competing on the cost platform. Indeed, India compares poorly to other countries on the value captured per employee. (For instance, if the export value captured per employee in India was as much as Turkey, India’s exports would be close to China’s exports of US$ 161 billion.)
One major concern that needs to be addressed is that India’s exports are still weighted in favour of raw materials and intermediate products, rather than finished products. Apparel exports account for only 41% of India’s textile exports in 2007-08. India’s product mix also needs to be aligned to global market needs, rather than only focussing on “traditional strengths” – this includes enhancing the share of non-cotton products in the basket.
Another area that is neglected is the inherent competitive capability of developing new products. The industry needs to develop and nurture these skill sets to create a sustained competitive advantage in the global scenario. India already provides buyers with value in terms of product development and design, which needs focus and further strengthening.
Further, India’s domestic industry, and its skill at understanding market needs, creating and merchandising product, can also play a valuable role in the industry’s growth.
The competitive advantage offered by being able to influence the development of a product is immense. And given that sourcing lead times are shorter in unpredictable times, a supply base that has been involved with the buyer right from the development stage of the product is most likely to get the final order. Third Eyesight proposes a four dimensional model: Define, Design, Develop and Deliver so as to achieve the industry-wide development, of projecting India as a valuable supplier, and sustaining its value needs.
By creating an ecosystem focused on design and product development, India can create and capture the billions of dollars worth of value that is being lost to other countries.
This is an extract from Third Eyesight’s report presented at the FICCI 3rd Annual Textile And Garment conference in Mumbai. The report was released by the Minister of Textiles, Government of India. To download the full report prepared by Third Eyesight, please click here.
To discuss how we can help you with your specific business needs, please get in touch with us via email (please send it to services [at] thirdeyesight [dot] in) or via this form: CONNECT.
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August 10, 2008
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