L Capital looks to deploy $250 mn of its $1-bn Asia PE fund in India

L Capital Asiais understood to be looking at as many as four significant opportunities to invest in the near future

L Capital Asia, the private equity (PE) fund sponsored by the LVMH Group and Groupe Arnault, is understood to be looking to deploy as much as $250 million from its recently-raised $1-billion fund, in India. The fund, which focuses on investing in aspirational brands in the growing emerging Asian market, is understood to be looking at as much as four significant opportunities to invest in the near future, according to investment bankers.

LVMH possesses a portfolio of 60 globally-renowned prestigious brands, including Moët Hennessy and Louis Vuitton, and is active in five sectors - wines & spirits, fashion & leather goods, perfumes & cosmetics, watches & jewellery, and selective retailing.

The latest development comes hardly a few weeks after L Capital Asia beefed up its team in India by appointing retail industry veteran Bijou Kurien on its strategic advisory board. While the market is abuzz with the kind of transactions L Capital would be making, Kurien said he wouldn't put a number to the quantum of investment that L Capital would be making. He said the company is willing to commit to India based on opportunities.

However, senior investment bankers told Business Standard there is a "soft target" of around $250 million, which is based on the quality of deals and not a fixed number. L Capital has so far invested $113 million in India across Fabindia, PVR Cinemas and Genesis Fashions from its first fund, which had a corpus of $635 million.

L Capital sees India as slightly less-developed relative to China's economy, but still a key rival in terms of size and growth. L Capital Asia will be looking at key investment opportunities including developing selective retail and distribution concepts that are yet to mature in India and by facilitating companies to penetrate the domestic consumer base. While L Capital will be gunning for aspirational brands, it will also target to align with brands that offer superior value with a premium to conventional offerings, but affordable to mass market consumers.

Investment bankers told Business Standard that the management of L Capital takes active interest in the portfolio companies and will get involved to drive the brand value further. "PVR Cinemas is a great example of how it has been breaking away and there will be further clear distinguishing factors, which will push it further," said a senior banker.

L Capital will be looking to tap on the sharp uptick in the consumption of luxury goods consumption in India, which grew at a healthy rate of 30 per cent to touch $8.5 billion in calendar year 2013 and is expected to stride forward to reach $14 billion by 2016. According to KPMG, the growth of the Indian luxury market is driven by an ever-increasing base of ultra high-net worth households, which is likely to grow at a compounded annual growth rate of 27 per cent through 2017-18.

"The luxury space was once defined and limited by the preferences of these ultra HNHs (high-net worth households), including only the most elite and bespoke products and services. However, in recent times, rising income levels and aspirations have led to a growing segment of potential luxury buyers beyond traditional luxury shoppers. These consumers are typically upper middle class aspirers looking to ascend the 'consumption ladder'. An increasing proportion of luxury demand is likely to come from this segment, which belongs to a larger group likely to experience the highest income increase in India," KPMG said in its recent report.

It added that players have responded to this potential by launching entry-level luxury brands to help these consumers trade up. "They have also customised the shopping experience and their services significantly to cater to such buyers, who often experience luxury for the first time. This presents a significant opportunity for players to establish a long-term connect with the consumer and gain a first-mover advantage," the KPMG report noted.