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September 9, 2011
Sapna Agarwal, MINT (A Wall Street Journal Partner
9 September 2011, Mumbai
Tommy Hilfiger Group has bought out the Murjani Group’s 50% stake in the latter’s joint venture (JV) with clothes maker Arvind Ltd for an undisclosed sum, as part of a global strategy of consolidating its operations and having a more direct role in its various markets.
The US company has also bought the Murjani Group’s licence for Tommy Hilfiger trademarks in India, ending the Mumbai firm’s six-year association with the brand.
Mohan Murjani, chairman of the Murjani Group, launched Tommy Hilfiger in India in 2004, sub-licensing its clothes, footwear and handbags to the JV Arvind Murjani Brands Pvt. Ltd. It sub-licensed other products of the brand to other local retailers. The reconfigured JV, yet to be named, will now hold all Tommy Hilfiger sub-licenses for accessories and apparel.
“The transaction allows us to integrate India into our global platform for design and sourcing, ensuring consistency of the brand, while providing dedicated regional expertise where needed,” Fred Gehring, chief executive of Tommy Hilfiger Group, said in a statement on Thursday. The move is in line with actions the group, a subsidiary of PVH Corp. that owns the Calvin Klein, Van Heusen and Arrow brands, has implemented in other markets.
“We believe this will pave (the) way for a phase of accelerated growth for a brand that is really loved by Indian consumers,” said Jayesh Shah, chief financial officer at Arvind. “As far as specific plans of the JV are concerned, like management, it will be discussed over the next one week.”
Tommy Hilfiger products are distributed in India through a network of more than 80 outlets across 30 cities. The brand did an estimated retail business of Rs.250 crore, of which 50% was contributed from accessories, as of March, a Murjani Group executive said on condition of anonymity.
In 2009, the Murjani Group exited the luxury market when it parted ways with Gucci. It still holds licences for Calvin Klein and French Connection, which are premium brands, a rung lower than luxury brands. The company did not reply to an email sent on Thursday morning.
The new alignment with Tommy Hilfiger is Arvind’s second JV with a foreign company. It has a 40:60 JV with VF Corp., which owns the Wrangler and Lee brands.
It’s going to offer a far better situation for Arvind because now it will deal directly with the principal (Tommy Hilfiger); and with the kind of bandwidth the former (Arvind) enjoys, we may see more investment into the brand now for growth and expansion,said Harminder Sahni, managing director, Wazir Advisors, a management consultancy.
Brands such as Nike, United Colors of Benetton and Wrangler and Lee entered India through licensees in the late 1980s. Nike and Benetton are now subsidiaries of their respective parent companies, whereas VF Corp. is the majority partner in the JV with Arvind.
“Tommy Hilfiger could also follow a similar path in India,” said Devangshu Dutta, chief executive, Third Eyesight, a retail consultancy.
Neelesh Hundekari, principal and head of the luxury and lifestyle practice at A.T. Kearney, said a move from being a licensee to a JV partner requiring large investments signals the companys commitment to the market and its confidence in it.
The premium ready-to-wear market in India was estimated at Rs.33,000 crore as of March 2010 and was growing at 22% a year, he added. Arvind’s stock on BSE ended up 2.96% at Rs.85.20 on Thursday, while the benchmark Sensex rose 0.59% to 17,165.
