Eyes on you

Ask Siddharth Bindra what the potential in the women’s ethnic wear market is. “We are considered the market leader and account for just 1.5% of the market. That’s how large it is,” he says, with a mix of dismay and optimism. Biba Apparels, the Rs 310-crore company that was started by his mother, Meena, in 1988, is today one of the biggest names in the ethnic wear (read: salwar kameez and kurtis) segment and it’s not only customers who are flocking to it. Recently, private equity firms Warburg Pincus and Faering Capital, a fund promoted by Aditya Parekh and Sameer Shroff, put in Rs 300 crore for a 30% stake in the company, the largest ever in the space. 

There’s growing interest in the Indian ethnic and designer wear segments, and with good reason. According to Technopak, the overall market for women’s wear is Rs 78,500 crore, of which ethnic wear alone brings in 75%. “Barely 15% is organised and that is the big story. If the overall category is growing by 8-10%, the organised segment is growing by at least twice that number,” says Bindra, whose brand is now available in 132 outlets and 200 large department stores.

It is this growth that Kishore Biyani spotted in 2007, prompting him to take a 25.8% stake in Biba and acquire 22.86% the following year in ethnic and designer wear company AND Designs, which owns brands like AND, Global Desi and Anita Dongre. “The maturity cycle in this industry is at least 7-8 years. If you want to make healthy returns, you must be patient,” says Biyani. That virtue seems to have paid off, since he has pocketed a cool Rs 450 crore by exiting these two investments, with General Atlantic said to have picked up Future Group’s holding in AND. While the exact breakup is not available, in an investor update, group company Future Lifestyle says that the profit from the sale of the Biba stake was Rs 190 crore. 

In 2011, Franklin Templeton private equity invested Rs 60 crore for a 20% stake in designer wear brand Kimaya Fashions, which today has a topline of Rs 75 crore. Kimaya chairman Pradeep Hirani says the advent of private equity in the sector points to its growth potential. “In this segment, India is the second-fastest growing market after Hong Kong,” he says.

There’s no reason why private equity interest will fade anytime soon. Mukesh Sawlani, director, AND Designs, says rising incomes and aspiration on the demand side and the availability of quality real estate on the supply side make the ethnic wear market an attractive investment opportunity. “There will be higher levels of penetration in tier 2,3 and 4 cities in future,” predicts Sawlani, whose Rs 275-crore company operates over 100 stores.

“It comes down to domestic consumption, of which apparels is a key component. When most players don’t have the scale for the capital markets, PE is a good partner for them,” sums up Siddhartha Nigam, partner and leader (consumer and retail), Grant Thornton.