India's apparel sector catches the eye of PE investors

While the investment story in India is still weak, M&A activity in the apparel space is stronger when compared to other consumption sectors. CNBC-TV18's Farah Bookwala gets you a highlight of deals in the pipeline and tells you why investors are buying into this space despite a weak demand environment.India's apparel sector is emerging as the very fabric of the India story, especially when it comes to investment. Many experts credit retail king Kishore Biyani for a revival in M&A activity in the space, beginning three months ago, when his Future Group divested stake in brands like 'BIBA' and 'AND', raking in returns of 24-times its initial investment. CNBC-TV18 learns that several mid-sized apparel companies are now knocking on the doors of investors to fund their expansion plans and are receiving a warm welcome. Some of the deals that are currently in the making are: - PE giant Carlyle is in advanced stages of picking up a 35 percent stake in menswear brand 'Mufti'. - Women's ethnic wear brands 'Jashn' and 'Bawree' are in early stage talks with private equity players.- Another ethnic wear brand, 'Soch', is in the process of appointing an investment bank to scout for investors.- Women's formal wear brand, 'Chemistry', is looking to raise 40-50 crore rupees and has signed the termsheet with a PE fund.- Biyani's Future Ventures, is inches away from buying a 60 percent stake in denim brand Spykar, and is also reportedly acquiring brands like Coupon and Giovani.Kishore Biyani, CEO, Future Group says: "The fashion space is seeing an explosion. More and more fashion is being consumed now, with consumers making purchases with higher frequency. And brands are playing an important role. Whichever brands have been in the market and have been able to weather 2-3 business cycles, they are off for a leap. We are seeing the rise of 1,000-crore brands now. And within 3-4 years, there will be at least ten, 500-crore brands."Others say this interest is also being fuelled by the lack of palatable investment options in other consumption sub-sectors -- such as the eating out sector -- and the relative ease of investing in apparel companies. Anil Talreja, Director, Deloitte Haskins & Sells says: “In case of apparel, it is slightly more flexible. You don’t have regulated market like in the food space. Since there is enough freedom for companies to actually negotiate around deals, that is why there are more deals, or at least discussion on M&A side in this sub-sector.” But even this enthusiasm is necessarily tempered. Experts say that small transactions may well continue to come in but the apparel space is unlikely to see blockbuster deals until macro-economic conditions improve, and the government offers clarity on policy matters.