Apparel: The Ethnic Boom

Thanks to the online and offline retail boom, the Indian ethnic wear market has doubled its sales in the last three years. Sensing an inviting opportunity, a slew of private equity firms have made big bets on known brands expecting healthy returns. A bulk of the

Rs 2,000-crore-plus PE investments was made in the last two to three years, and more PE deals are in the pipeline, say industry insiders.

So what led to the surge in PE funding in the ethnic wear segment?

From designer to value, ethnic wear is today a part of every woman’s wardrobe, explains Ankur Bisen, Senior Vice-President, Retail and Consumers Products, Technopak. But only the branded ethnic women’s wear space has seen private equity funding, says Prashant Agarwal of Wazir Advisors, adding that the investors are mostly looking at exiting these investments after five years with as much as three times the return.

The size of the ethnic wear industry today is estimated at Rs 70,000 crore, 70 per cent of which is dominated by unorganised players. But all that will change soon with growth in the number of organised players, online shopping and brick and mortar designer outlets. Fashion brands including BIBA, TCNS Clothing, Fabindia, Soch, House of Anita Dongre (Bridal) and Ritu Kumar are doing robust business. These brands are growing at a CAGR of 30 per cent plus compared to the single digit growth of unorganised businesses.

Great Deals
From a topline of Rs 47 crore in 2007, BIBA’s business grew five times at 30 per cent CAGR to Rs 210 crore. The brand started with a single standalone store in Mumbai in 2004, and  today, it has 232 stores in 103 cities, apart from a presence in all the major retail chains in the country such as Shopper’s Stop, Lifestyle, Pantaloons and Central. In the next two to three years, the brand plans to open 150 to 200 stores. BIBA also sells online through Jabong, Myntra, Flipkart, Amazon and its own e-commerce portal. Its fast-paced but steady growth is one of the main reasons BIBA first attracted private equity funding from Future Ventures in 2007. In 2013, it allowed the VC a profitable exit, which brought in investors such as Warburg Pincus and Faering Capital, who together invested Rs 300 crore in BIBA Apparels. “Our investment reflects our recognition of the company’s quality management team led by Siddharth Bindra. Over the last two decades, BIBA has built a leading women’s ethnic wear brand in an industry that continues to demonstrate positive growth trends,” says Vishal Mahadevia, managing director and co-head India of Warburg Pincus.

“BIBA holds 1 or 1.5 per cent of the market share in the organised segment. Our focus is to achieve 5 per cent in the next three to four years. We are expecting a lot of developments in the branded apparel section in the next few years, and I believe the implementation of GST will accelerate it further,” says BIBA MD Siddharth Bindra.

In 2016, global PE fund TA Associates invested $140 million for a minority stake in TCNS Clothing, a women’s ethnic wear company that started in 2002 with a single store. The company added brand Wishful in 2006 and Aurelia in 2009. Today, it has 400 exclusive stores, and is planning to add 100 stores a year across brands. Says TCNS MD Anant Daga: “As of FY17 end, we have crossed Rs 1,000 crore in consumer sales. We are present across all sales channels and are leading brands in each of them. Standalone stores continue to be the highest revenue generator for us.”

Within ethnic wear, as per Technopak reports, designer wear category is also booming. It is expected to cross $1 billion by 2020 growing at 20 to 25 per cent. Designer Ritu Kumar says, “Our growth is well above the market growth rate for the last five years. The customer movement towards branded apparel and their discernment of what good quality is have helped us.”

Kumar currently has around 60 stores across tier-1 and -2 cities. “Including our online business, large format retail and shop-in-shop, we are looking to have over 100 touch points this year,” she says. PE firm Everstone invested Rs 100 crore in the Ritu Kumar label for around 35 per cent stake. Everstone group MD Deep Mishra says he was confident that Ritu Kumar will continue to grow strongly in the modern ethnic wear category.

Another eminent designer wear brand, The House of Anita Dongre received an investment of Rs 150 crore from General Atlantic in 2013.  “Our plan is to expand globally by opening stores across international markets,” says founder Anita Dongre.

Despite the women ethnic wear industry doing extremely well, there’s still immense scope for the established brands to become more successful in the coming years compared to new players who want to enter the sector now.