French PE firm IndEU to invest in Indian luxury brands

French private equity firm IndEU Capital is raising a fund to make growth-equity investments in Indian luxury brands – both B2B and B2C firms.

IndEU is looking at emerging brands in segments such as consumer products, beauty and wellness, lifestyle retail, e-commerce, lifestyle retail, interior design and premium furniture. In the B2B space, it will look at companies with a competitive advantage and manufacturing know-how inside the luxury industry value chain.

The PE firm would look to back profitable and cash positive firms with at least €20 million revenue (Rs 150 crore). It would take significant minority stake with board representation.

As per its website, it would look to invest €6-8 million ($7-9 million, or around Rs 45-60 crore) in each company. However, Francois Arpels, managing partner of IndEU Capital, told Business Standard that it may invest $1-8 million in its portfolio companies. This would allow it to build a portfolio of around a dozen firms given that it is aiming to raise $70 million (Rs 450 crore) in the India-focused fund.

The Singapore-incorporated fund expects to complete the fundraising process by December.

Arpels told the newspaper that the fund, which has seen participation from family offices and private investors from regions such as western Europe, Southeast Asia and the Middle East, will announce its first investment in the first quarter of 2016.

IndEU would look to back profitable and cash positive firms with at least €20 million revenue (Rs 150 crore).

He added that the fund would have a tenure of seven years with average investment period of four years. Arpels also told Business Standard that it would like to invest in firms that are not already backed by any other PE firm or family office.

Apart from the $70 million offshore fund, IndEU Capital is also mulling to raise a follow-on domestic fund.

An emailed query to the company seeking further details on its plans and how big would be the proposed second fund did not elicit any response by the time of filing this article.

IndEU counts two founders and managing partners – Arpels and Luisa Munaretto.

Arpels has been in the investment banking and luxury products industry for the last two decades.

In 1997, he structured with Morgan Stanley a €250 million leveraged buy-out of his family owned company Van Cleef & Arpels, a firm that was eventually acquired by Richemont Group in 1999.

He has served as managing director at Bryan Garnier & Co leading the branded consumer and luxury goods practice as well as the development of cross-border transactions with India. He has worked with clients such as Auchan, Bel, Bic and L Capital (LVMH).

Previously, he brought into India his own M&A advisory boutique that he founded in 2005.

His partner Luisa has been a PE investor for over 15 years and is a former partner of 21 Investimenti, the private equity vehicle sponsored by the Benetton family. She is also a board member of Jeletl, an online gaming firm.

Another PE firm that chases investments in the luxury market is L Capital Asia, an investment firm backed by global luxury products conglomerate LVMH group. L Capital raised $950 million for its second fund in 2013 but had said it would go slow in India because of broader macro-economic issues and the valuation overhang.

Indeed, it has not made any new investments for the last three years.

L Capital Asia had set up office in India in 2011 and was a fairly aggressive deal maker, closing three transactions (five, if we count investments in subsidiaries) in the first 15-16 months of its operations. Its first investment was Genesis Luxury Fashion, which sells labels like Canali and Jimmy Choo, followed by ethnic-wear chain FabIndia.

In July, it exited its largest investment in the country by selling all its shares in multiplex chain PVR.

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