Sequoia-SVB Capital-Mayfield backed Genesis Colors is picking a 49% stake in a joint venture with British luxury goods retailer Burberry to open stores in India. Both Genesis and Burberry are likely to bring in around Rs 16.5 crore each for the stake.
Burberry, a 153-year-old firm that sells apparels besides accessories such as perfumes, eyewear and watches, already has a franchisee agreement with Mumbai-based Media Star that is into marketing and distribution of international newspapers and magazines. Media Star is jointly promoted by Ravi Lalwani and Middle East based NRI business family Jashanmals.
This agreement was signed in early 2005 and gave non-exclusive franchisee rights to Media Star to operate Burberry store in Mumbai. At that time, there were restrictions on direct foreign investment by a foreign retailer in India. Overtime the FDI regulation has been relaxed and now foreign firms can own up to 51% in single brand retail companies in India.
Burberry is looking to pick 51% in a fresh JV with Genesis Colors that owns designer labels such as Satya Paul, to open Burberry stores in India. The JV will open stores in both large and small towns beyond tier I & II cities in the country.
The deal comes after Genesis, which owns luxury fashion labels Satya Paul, Deepika Gehani, Shobhaa De and Bwitch!, raised Rs 80 crore from Henderson Equity Partners last month.
Genesis Colors-led by Sanjay Kapoor, had last year announced Rs 110-crore investment from Sequoia Capital, Mayfield Fund and Silicon Valley Bank in return for a minority stake in the company. One of Genesis’ units Genesis Luxury already represents a host of global luxury brands such as Kenzo, Just Cavalli and Jimmy Choo in India.
Sequoia holds 21.9%, SVB India Capital owns 1.59% and Mayfield owns 7.23% equity stake in Genesis Colors. In addition, they also hold preference shares in Genesis Colors, that clocked revenues of Rs 151 crore with net profit of Rs 25.8 crore in the year ended March’09.
Burberry already has a couple of stores in India located at Mumbai and Bangalore. These are likely to become part of the new venture. The franchisee agreement with Media Star included the clause that if Burberry decides to form a separate JV in India, the franchisee tie-up will be terminated and such a JV will acquire the entire franchisee business of manufacturing and distributing Burberry products.