Reliance Brands buys 40% stake in Genesis Luxury from L Catterton
Reliance Brands, owned by Reliance Industries Limited, has bought out L Catterton Asia’s 40% stake in Genesis Luxury, the Economic Times reported citing several anonymous sources.
The acquisition of the stake in Genesis Luxury, which is one of India’s leading luxury groups, is likely to give Reliance an upper hand in India’s booming luxury market.
L Catterton was one of the early investors in Genesis Luxury and had picked up the 40% stake in the firm over a period of six years for a total of Rs 135 crore (approximately $21.3 million).
The new deal is estimated to be around Rs 250-Rs 300 crore (approximately $39.3 million-$47.1 million), one of the sources told the ET, and it would give L Catterton tremendous returns in the range of Rs 115-165 crore (approx $18.1 million-$26 million).
The stake sale also ends the only direct competition Reliance had in the form of Genesis Luxury and will give the firm complete dominance in India’s luxury goods market.
With sales of luxury goods growing faster in India than anywhere else in the world in the last few years, the move by Reliance makes perfect business sense.
An annual sector trends report from the Confederation of Indian Industry (CII) and research agency Kantar stated that the Indian luxury market grew from $14.7 billion (Rs 96,751 crores) to a whopping $18.6 billion (Rs 1,18,498 crores) last year, at a growth rate of 25 per cent year-on-year.
"This has come as a bolt from the blue for Sanjay Kapoor and his investors from Genesis Luxury. The documentation has been completed," an official directly involved, told ET on condition of anonymity.
"Genesis has to deal with a behemoth like Reliance as L Capital would have transferred all their rights in the company as well along with their significant economic interests. This is arguably the first time that a PE investor in India has dumped his minority stake to a fierce rival of their investee company, thereby opening the floodgates for many such potential transactions in similar cases where the junior financial partner and the majority shareholder are seen warring."
Genesis Luxury currently holds the India licenses to retail leading luxury brands like Burberry, Canali, Paul Smith, Armani, Just Cavalli, and Jimmy Choo amongst others, while Reliance is rapidly scaling up its portfolio and has Bally, Steve Madden, Thomas Pink, Brooks Brothers, Diesel and Super Dry.
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