Genesis Colors plans Rs650 crore IPO
The Sequoia Capital-backed Genesis Colors will use the funds for expansion and provide an exit opportunity to its investors
Mumbai: Genesis Colors Pvt. Ltd, the Sequoia Capital-backed owner of luxury fashion labels such as Satya Paul, plans to sell shares to the public for the first time to fund expansion and provide an exit opportunity to its investors, said three people aware of the development.
The firm plans to raise as much as Rs.600-650 crore by selling shares through the initial public offering (IPO), said one of the three people cited above, requesting anonymity as he is not authorized to speak to reporters. “The group has been in talks with investment banks such as Edelweiss and Credit Suisse for a while now. Formal mandates are expected to be given out soon and the IPO process is expected to be kick-started shortly,” he said. The IPO could happen early next financial year, he added.
Genesis was founded in 2001 by Sanjay Kapoor, Jyoti Narula and Puneet Nanda, Satya Paul’s son. The group’s brands such as Satya Paul, premium lingerie brand Bwitch and the accessories business are housed under Genesis Colors.
Genesis Luxury Fashion Pvt. Ltd, a subsidiary of Genesis Colors, also distributes premium international brands such as Paul Smith, Bottega Veneta, Jimmy Choo and Armani.
The Genesis group also has joint ventures with British brand Burberry, Italian menswear brand Canali and Villeroy & Boch of Germany for tableware.
In 2008, private equity investors Sequoia Capital and Mayfield put in about Rs.110 crore for a minority stake in Genesis Colors. In 2009, the company raised an additional Rs.80 crore from Henderson Private Equity.
According to data with the Registrar of Companies (RoC), Sequoia Capital is the biggest investor in Genesis Colors, with a stake of about 20%. Henderson Private Equity holds about 13% and Mayfield owns 8.5%.
L Capital Asia, the private equity arm of LVMH Moet Hennessy Louis Vuitton SE, holds about 40% in Genesis Luxury Fashion. In 2011, L Capital invested around Rs.60 crore in Genesis Luxury to acquire a 25% stake. A year later, the fund invested an additional Rs.75 crore.
The proposed IPO will be a mix of new shares and a secondary share sale, said another of the people cited above, also requesting anonymity.
“The private equity investors have been invested in the company for a long time now. Given that the IPO market is doing fairly well, the investors want to make use of the opportunity to exit their investments. All the investors are expected to part exit their stakes through the IPO,” the person said.
In 2013, L Capital was seeking an exit from Genesis Luxury, as the investor was unhappy with the business’s performance, reported The Economic Times.
Genesis also plans to raise primary capital, which will go towards expanding the retail presence of owned and licensed brands and for investment in marketing activities, the person said, adding that the secondary share sale by investors will form the bigger chunk of the IPO.
In May, The Economic Times reported that Genesis Colors had elevated managing director Sanjay Kapoor as the executive chairman of Genesis Group and chief operating officer Nikhil Mehra as chief executive as part of a restructuring at the holding company. The move was aimed at consolidating the business as one entity in preparation for an eventual exit for investors, the report said.
Genesis Colors reported a consolidated revenue of Rs.426.8 crore in 2014-15 and a loss of Rs.8.47 crore, according to data with the RoC. Figures for 2015-16 were not available.
Emails sent to Genesis Colors, Mayfield and Henderson did not elicit any response. Sequoia Capital declined to comment. Emails sent to Sanjay Gujral, regional managing director at L Capital Asia, also went unanswered.
Genesis Colors has a retail network of around 120 single-brand boutiques, multi-brand stores and shops-in-shops across more than 20 cities. Apart from running the stores directly, Genesis has also adopted the franchise model. The company’s businesses span designing, manufacturing, warehousing, distribution and retail.
According to a January report by industry body Assocham, the overall luxury market in India is expected to cross $18.3 billion by 2016, up from $14.7 billion last year, growing at a compound annual growth rate of about 25%.
“Luxury jewellery, electronics, SUV cars and fine dining have grown beyond expectations, while apparel, accessories, wines and spirits have continued their strong growth,” the report said.
“The strong growth in the Indian luxury market is being propelled by rising disposable incomes, increasing brand awareness amongst the Indian youth and purchasing power of the upper-middle class in non-metro cities,” said Manish Begrajka, consumer sector specialist and executive director at advisory firm Euromax Capital.
According to the Assocham report, significant brands that performed well in 2015 included Gucci, Christian Dior, Louis Vuitton and Canali India.