After W’s success, more mid-sized apparel firms look to woo PE funds

Esjay International, which owns womenswear brand Chemistry, and Soch Apparels have hired bankers to raise funds in the range of Rs50-100 crore


Photo: Hemant Mishra/Mint
Photo: Hemant Mishra/Mint

Mumbai: Several mid-sized apparel makers have initiated talks with private equity firms to raise funds, encouraged by successful fund-raising by womenswear brand W.

Esjay International Pvt. Ltd, which owns women’s apparel brand Chemistry, and Soch Apparels Pvt. Ltd have hired bankers to raise funds in the range of Rs50-100 crore, two people familiar with the development said on condition of anonymity.

Their previous attempts to raise funds were unsuccessful because of differences on valuations.

Esjay International is in discussions with private equity investors to raise about Rs50 crore by diluting about 15-20% in the company, said one of the two people cited above. Esjay posted a revenue of Rs65 crore in the year ended 31 March.

“We have initiated early discussions with investors for fund-raising and the proposed fund will be used to set up more outlets for the Chemistry brand,” said Dipen Sethia, chief financial officer of Esjay International, without disclosing details. Chemistry, which runs 38 stores across the country, plans to add 10-12 more every year, Sethia added.

The Chemistry brand was introduced in 2004 by Sunil Jhangiani-led Esjay International. Jhangiani, whose family owns Esjay, failed to raise money in 2013 because of a disagreement with investors over the firm’s valuation.

“We will raise money only if we get the expected valuation,” said Sethia.

Bengaluru-based Soch Apparels Pvt. Ltd, the owner of womenswear brand Soch, also plans to raise funds from investors, said the second of the two unnamed people cited earlier. Boutique investment bank o3 Capital is helping Soch find investors.

“We have actually mandated o3 Capital a long time ago, but due to our ability to grow without the need for funding, we have chosen not to approach the market. Funds have always had casual talks with us over the years but we are not in any active talks with any at this moment,” said Vinay Chatlani, managing director and chief executive of MD Retail India Pvt. Ltd, the parent company of Soch Apparels. A spokesperson for o3 Capital declined to comment.

Dixcy Textiles Pvt. Ltd, the owner of the Dixcy Scott underwear brand, is planning to raise about Rs300 crore from private equity investors, and is in the process of hiring investment bank Avendus Capital Pvt. Ltd to advise it on the transaction, Mint had reported on Tuesday.

The size of the Indian women’s apparel market will reach $20 billion in 2020, from $13 billion last year, growing at an annual average pace of 10%, according to estimates by Avendus Capital. The branded portion of this market, approximately 17% in 2015, is expected to exceed 38% in the next 10 years, it said.

In August, US-based private equity firm TA Associates Management Lp invested $140 million for a minority stake in TCNS Clothing Co. Pvt. Ltd, a leading women’s apparel platform that sells popular fashion brand W. Existing investor Matrix Partners India sold its entire 20% stake in the transaction. Matrix had invested about Rs100 crore in TCNS Clothing since 2011. Delhi-based TCNS Clothing owns three brands—W, Aurelia and Wishful.

“A good apparel company will need to have a world-class and stable team, institutionalized product design capability and a capital-efficient business model—which translates into high gross margins, profitable store operations and high inventory turns,” said Rajat Agarwal, vice-president at Matrix Partners India.

The size of the Indian apparel market was $41 billion in 2014 and is expected to grow at 9% annually over the coming decade, according to consulting firm Technopak Advisors. Womenswear accounted for 38% of the overall apparel and textile market in India, the firm said.

Sponsored Links by Revcontent