NEW DELHI: LVMH, the luxury goods group, has set up a new unit charged with investing in "aspirational" brands across Asia.
The remit for L Capital Asia's Indian arm, a $650m private equity (PE) fund owned by LVMH, is to find promising companies in China and India, alongside nations including Indonesia, Malaysia and Thailand.
It has already directed roughly $90m to Sincere Watch, a Singaporean firm, Charles & Keith, a fashion label based in the same country, and Hong Kong's Emperor Watch and Jewellery.
"We've defined in our constitution that we will never buy anything from LVMH nor will we sell to LVMH," Ravi Thakran, L Capital Asia's managing partner, told Reuters.
"We do not want to be perceived at any point in time that we're shifting from the left pocket to the right pocket."
L Capital Asia anticipates spending around $200m this year, and is finalising deals in China and India, having quickly formed a clear idea of the model emerging enterprise.
"We are looking at investing in companies in the lifestyle arena in Asia, primarily from the aspirational segment, meaning people who are moving from mass-produced goods to the next layer up," he said.
"While LVMH focuses on luxury, we focus on aspirational brands, which are at a level below luxury in Asia."
Given the number of organisations willing to provide funding in India and China, Thakran argued knowledge, not financial muscle, would distinguish L Capital Asia from other private equity (PE) firms.
"We bring a lot of value addition such as expertise on branding mix, marketing and advertising, public relations and so on," he said.
"We can tell how to design stores better and how to carry out proper visual merchandising. No PE firm can bring about these factors like we do. We can also teach how to negotiate locations, buy media and build supply chains, logistics and so on. More importantly, we can help people gain access to our global network."
Although India and China should receive a similar outlay, levels of corporate maturity vary greatly in the two nations at present, he added.
"In China, there are already at least ten businesses we might be interested in which are worth $200m to $250m, whereas in India none of the designers have even reached the $100m scale," Thakran said.
The preferences displayed by Chinese and Indian shoppers are also divergent, requiring a nuanced approach in each country.
"In markets such as China and Korea, people have accepted Western concepts," Thakran said.
"One big difference is that Indian consumers are conscious about value for money. If you don't give that, you will have to bang your head against the wall."
Therefore, L Capital intends to avoid super-premium brands in India, which target an extremely limited demographic, and instead tap sectors like ready-to-wear apparel.
The key goal in India could thus be offering resources and business acumen to lift the burden of administration, Thakran predicted.
"If the creative guy is busy sorting out the accounts and logistics, and looking after the retail store, he cannot focus on the creative part," he said.
"If you can bring to them knowhow in these areas and to build that front end, these brands can really unleash their potential."
Data sourced from Reuters, Wall Street Journal, Business Standard; additional content by Warc staff