Retailigence

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Esprit gears up to take 51% in JV with Madura

Posted by superstar23 on November 2, 2008

BANGALORE: Fashion giant Esprit Holdings may assume direct charge of its Indian operations. The $5-billion group may take 51% stake in a joint venture with Madura Garments, part of the AV Birla Group, which manages Esprit’s retail stores through a licensing agreement in India.

Sources said Esprit, listed on Hang Seng and London Stock Exchange, has been discussing the possibility of 51:49 JV with the AV Birla Group company for sometime, and a breakthrough could be in the offing. If the deal goes through, this will be the first instance of AV Birla Group inking an equity deal with an international player in the fashion and retail space.

Indian regulations allow maximum 51% foreign direct investment (FDI) in single-brand retail, and Esprit’s decision will be one of the most significant moves after the government opened up specialty retail to overseas investors. When contacted, Aditya Birla Group business director (textile and apparel) Vikram Rao said: “There is no agreement on a joint venture.” Esprit, with over 40 doors, has significant retail spread at the super-premium end of the domestic apparel market and has set an ambitious target of opening up to 150 doors in the country by 2010. Esprit and Madura have cordial ties and the formation of a JV is unlikely to impact the existing operational management.

It is believed that the employees working for Esprit’s brand management and retail operations will be part of the proposed JV. Esprit entered into a licensing agreement with Madura in 2005, and reported over Rs 75-crore revenue from local operations in FY08. With government opening up FDI norms, several foreign brands that came through licensing agreements are expected to crossover to the equity route to navigate their businesses better in a growth market like India, a sectoral expert said.

Esprit’s product range includes menswear, womenswear, kidswear, innerwear and accessories. The company had announced plans to extend its offerings to sportswear, home furnishings and footwear in a bid to become a complete lifestyle brand.

Source:- economictimes.indiatimes.com

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