Indian retail giants including Reliance Retail and Aditya Birla Fashion have acquired at least 10 fashion designer brands over the past months in a bid to attract high-end customers who have hitherto preferred to shop at multinational luxury retail outlets.

Mukesh Ambani-backed Reliance Industries Ltd has acquired a stake in brands owned by designers including Rahul Mishra, Ritu Kumar, AK-OK and Manish Malhotra. Kumar Mangalam Birla-led Aditya Birla Fashion and Retail (ABFRL) has taken equity in designer brands including Shantanu and Nikhil, Tarun Tahiliani Sabyasachi and Masaba.

“Well, better late than never. It was about time that Indian designers, like international designers, caught the attention of the venture capitalists, conglomerates, and other retail giants,” said Sunil Sethi, President, Fashion Designer Council of India.

According to Arvind Singhal, Chairman & Managing Director, Technopak, said: “There are only four designers in India with a successful level of business. These include Riutu Kumar, Manish Malhotra, Sabyasachi Mukherjee and Anita Dongre.”

He said that over the past four decades, each of these players have been able to crack a niche for themselves. For example, he explained, Malhotra was able to crack the niche segment of Bollywood movies whereas Mukherjee was able to cater to the big fat Indian bridal segment. 

Covid-19 impact

Another industry player said that the reason why these deals were happening was that “The Indian designers were deeply impacted because of the Covid-19 pandemic. With Covid hitting the Indian fashion and retail market, the brands which had good value and brand recall were up for being acquired at a lesser value.”

Besides this, the conglomerates have understood the power of affluent India. Singhal explained that over the next decade or so, India will see a lot of first generation rich young Indians. 

Emerging affluent class

“These Indians may not belong to the Tata, Birla or Ambani family. These will be people who are founders of young and successful start-ups, or earn a hefty package or have ESOPs in their kitty. Their spending capacity is what is being tapped by these players,” he said. 

According to Ashish Dikshit, Managing Director, ABFRL the acquisitions are aimed at a new generation of young and digitally native consumers who actively seek brands that are colourful, vivid and digital.

Along with this, according to experts, Indian designer brands haven’t been able to make a presence for themselves in the international market. As the international consumers have the buying capability and appetite, the companies can mint by taking these brands on an international scale.

According to Sanchit Vir Gogia, Chief Analyst, Founder & CEO, Greyhound Research, these companies could also cross sell, upsell and create a separate line of products by these designers which are more accessible to other segments of consumers other than the luxury segment.

What is in it for the Indian designers?

Both Reliance and ABFRL Group have supply chain, production, factory infrastructure, and logistics capabilities that these designers could benefit from, according to Sethi. 

“While these segments can be taken care of by the acquiring companies, designers can focus on what they do best-creating good quality designs.”

According to Gogia, Indian designers weren’t able to tap the international markets due to lack of scale and expansion possibility. With the brands being acquired by bigger players, these designer brands could match the international level of parity in quality. 

“In India too, it is difficult for the Indian designers to scale unless there is a solid investor backing,” said Singhal and Sethi. Both of them gave an example of IPO-bound Manyavar which rose to fame out of nowhere.

Is it a good investment?

According to a industry player, which has the distribution for over 25 fashion brands in India, it isn’t good business economics to acquire designer brands in India because of its limited reach and weak balance sheet. 

Another industry expert too agreed, and said that it was nothing but peer pressure from both ends, and “presentation of a bouquet of brands to stakeholders. Today the shareholders might ignore the revenues these brands are generating, however, 12 months down the line, there will be scrutiny.”