May 9, 2011
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LVMH-backed fund hunts for emerging Asian brands

May 9, 2011

May 8 - A $650-million private equity fund backed by the world's top luxury retailer LVMH is on the prowl for emerging Asian brands in the hope of transforming them into global names.

The fund will look at China, India and Southeast Asia, where promising labels would benefit from an extra push

The L Capital Asia fund has so far spent a total of $90 million on minority stakes in two Singaporean fashion companies and a Hong Kong-listed watch and jewellery company.

It is in advanced talks with a fashion-related firm from China and another from India and hopes to make an announcement about the investments in the next few months,said Ravi Thakran, the fund's managing partner.

Unlike its parent group LVMH, which concentrates on the top tier of the luxury sector, he said the fund focuses exclusively on promising Asian labels looking for a big breakthrough, particularly in the Chinese and Indian markets.

"The primary engine not only for Asia-Pacific, but for the whole world today, is this twin propeller of China and India," Thakran said.

"So we are looking for those smart entrepreneurs who have a great product, very differentiated DNA, something very different in their category."

He said the fund will look at China, India and Southeast Asia, where promising labels would benefit from an extra push from a partner such as LVMH.

Paris-listed LVMH is one of the world's most successful luxury retailers, with a portfolio of brands that includes Louis Vuitton, Parfums Christian Dior and Guerlain perfumes alongside Moet and Chandon and Dom Perignon champagnes.

In 2010 it posted record sales of 20.3 billion euros ($30 billion) and a profit of 3.03 billion euros, as demand for its high-end products rose among Asia's growing ranks of affluent and brand-conscious consumers.

L Capital does not just offer money, Thakran said -- the fund also brings parent company LVMH's experience and expertise in developing little-known companies into household names.

The demographics of the massive Chinese and Indian markets make them natural magnets for almost any company, analysts said.

"They have this propensity to upgrade their lifestyles as well, and this applies to fashion and lifestyle," said Vishnu Varathan, a Singapore-based economist with the Capital Economics consultancy.

Singaporean designer Wykidd Song, whose creations have been sold at Harrods in London and Barneys in New York, said investor interest would boost the Asian fashion industry.

"It's a great motivational factor," said Song, who launched his own men's wear label called WYKIDD in February.

Brokerage firm CLSA predicts Chinese consumers will be the largest luxury goods buyers by 2020, accounting for 44 percent of worldwide sales.

L Capital's Thakran said the sector one tier below the top luxury market will grow faster because their prices appeal to a larger consumer base.

"The top end is growing but the lower end is even bigger and will grow more," Thakran said.

Ladies shoe and handbag retailer Charles and Keith, one of two Singaporean companies that L Capital Asia has invested in, said the partnership ties in with its ambitions.

"The only reason why I feel we can come together is both companies share very similar values," said Charles Wong, the chief executive of Charles and Keith, already popular in Southeast Asia for its European-inspired designs at affordable prices.

"We are very hungry to learn, and we are very hungry to grow."

L Capital Asia has also invested in Singapore's Sincere Watch and a Hong Kong-listed company, Emperor Watch and Jewellery.

Thakran said LVMH can turn "rough diamonds" into star brands.

"The key thing is we use the DNA (of LVMH), the knowledge to connect and the experience of building luxury brands, bring them to the aspirational play in Asia, and help them (companies) grow faster more profitably," he said.

He said LVMH contributed less than 10 percent of the $650 million raised by the fund, with the bulk coming from US and Asian investors keen to tap into Asian luxury consumption.

by Bernice Han

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